A Beginner’s Guide to DEX Aggregators

A Beginner’s Guide to DEX Aggregators

In the fast-growing crypto world, DeFi has been one of the major fields that received lots of attention. In our previous post, we discussed the concept of DeFi and how DEXs (decentralized exchanges) like Uniswap benefit the world. This time, we will look into another essential role that drives the growth of the DeFi ecosystem — the DEX aggregator.

What are DEX Aggregators?

DEX aggregator, as the name tells, is a service that collates services from different DEXs and places them on a single but decentralized platform. Users can look across the different pairs and swap, regardless of the original host platform.

DEXs are known to offer a higher degree of privacy and security than centralized exchanges. The ability to retain tokens under one’s own control is a major factor in their rise to popularity in recent years. However, most DEXs face an issue when it comes to liquidity.

Based on pools, DEXs cannot offer the greater order book matching efficiency that centralized exchanges have, especially when it comes to smaller or low-volume tokens. Working instead on AMM models, each DEX will have its own liquidity and due to a higher level of slippage, chances are that the same token will have slightly different prices on different DEXs.

DEX Aggregators’ Workings

This is where DEX aggregators come in. These aggregators are essentially a decentralized service that looks across all the connected DEXs to offer the best price possible to users.

For example, if you want to buy token A using B, you can either head to your choice of DEX and swap with the available going rate, or you could use a DEX aggregator which would look across all DEXs on its network that offers the A/B trading pair. This can also come in handy when you are trying to swap a token that is not listed on your preferred DEX.

The aggregator will then offer its users the best possible price, letting users take advantage and execute their orders.

In short, instead of people looking across different DEXs, finding the best price, and then spending time connecting their wallet– all while the rates may abruptly change and their efforts go to waste– users can use a single point of connection let the aggregator do all the back end searching for them.

Why Have DEX Aggregators Become So Popular?

Sometimes also called liquidity aggregators, these platforms have been booming with a large growth in trading volume since late 2020. Apart from their ability to bring in a plethora of trading opportunities, they offer some unique benefits.

DEXs are not fine-tuned for large volume orders. Because of the way they are configured, executing a large order may cause a significant slippage as the bought asset suddenly drops in volume in the pool against the pair. This can skew the price. Since DEX aggregators can reach across multiple platforms, they can distribute your large order to reduce any excessive slippage.

Since they are decentralized platforms, they offer a larger privacy cover than that is possible through a CEX or even a centralized aggregator. No KYC, no logins, or ID verification.

At the same time, these services are non-custodial. This means the users need to only connect their wallets. The tokens are always in the control of their owners.

Popular Aggregators

While aggregators are increasing in numbers, there are a few platforms that still retain their popularity amongst users. Here are a few of the famous DEX aggregators that DeFi traders prefer to use.

1inch

1inch is perhaps the most famous of all aggregators, which allows its users to search across a whopping 170 different DEXs that are spread over Ethereum, Binance Smart Chain, Polygon, Avalanche, and 3 other networks.

The multichain network has a very user-friendly interface and has garnered more than 1 million users in the span of two years.

Matcha

Matcha is an extensive DEX aggregator developed by 0x. Matcha offers an extensive list of tokens that it can look for on Ethereum, Binance, Polygon Avalanche, Celo, Fantom, and other chains. Along with this, it also has access to its own exclusive private liquidity and other market makers by leveraging OX’s RFQ system.

This enables Matcha to offer unparalleled liquidity at the best competitive price. With transparency on costs by the DEX and having no additional fees of its own, many traders prefer Matcha.

Plasma Finance

Plasma Finance acts a bit more than just an aggregator. Users can leverage its vast range of DEX aggregation, but at the same time, it offers liquidity pools, lending, borrowing, and even cross-chain swaps, all from a single interface.

With its easy fiat on and off-ramp capability, traders can use their bank cards and fiat accounts to buy and sell tokens, allowing them to realize their gains and uses in the real world.

ParaSwap

An aggregator designed for efficient and large trades, ParaSwap can help traders reduce their slippage and at the same time optimize the trades across different DEXs to reduce gas costs.

Actively working across Ethereum, Binance Smart Chain, Avalanche, Fantom, and Polygon, it also has a yield aggregator and offers advanced charts for more than 100 different DeFi protocols.

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DisclaimerThis content is not financial advice and it is not a recommendation to buy or sell any financial instruments, FX trading, cryptocurrency or engage in any trading or other activities. You must not rely on this content for any financial decisions. Acquiring, trading, and otherwise transacting with financial instruments or cryptocurrency involves significant risks.We strongly advise our readers to conduct their own independent research before engaging in any such activities.GMO Trust does not guarantee or imply that any cryptocurrency or activity described in this content is available or legal in any specific reader’s location. It is the reader’s responsibility to know the applicable laws in their country.

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Building Financial-Grade Digital Assets. The World’s First Regulated JPY-Pegged Stablecoin Issuer.