How to Develop a DeFi Aggregator
DeFi aggregators are one of the most recent groundbreaking developments in decentralized finance. According to statistics, more and more users are using aggregators for trading. Having experience in developing similar software products, we decided to share with you tips on how to create a DeFi aggregator.
What is a DeFi aggregator?
DeFi aggregators are one of the most promising types of DeFi projects. According to Messari, approximately 20% of total trading on non-custodial Ethereum exchanges is done using DeFi aggregators. And data from Dune Analytics shows that the number of new aggregator users, daily transactions, and volumes has increased dramatically since the beginning of the year. So, what are DeFi aggregators, and why are they so popular? Let’s figure it out!
Decentralized finance is an ecosystem of various financial instruments based on public blockchains. Unlike centralized finance, DeFi provides more privacy to users while remaining accessible to anyone. Due to openness and transparency, DeFi applications can easily integrate and interact with each other. However, in practice, it turns out that these applications are fragmented and it is quite difficult for users to keep an eye on the DeFi market. That’s when DeFi aggregators came into play.
A DeFi aggregator is a platform that gathers information from various DeFi protocols and integrates them into a single interface, allowing traders to make smarter decisions. Besides, aggregators perform other functions such as connecting liquidity pools, reducing transaction costs, depositing funds into DeFi pools, and more. Users can find an aggregator that suits their needs and get more value from interacting with DeFi.
Here are some examples of DeFi aggregators on the market.
- 1inch and DEX.ag enable users to exchange crypto assets at the most favorable rate.
- InstaDApp allows users to receive loans in DAI, without verification of identity, age, or credit history.
- PlasmaFinance aggregates using decentralized oracle data across major protocols in the sector, allowing users to interact directly with these protocols from a single interface and transfer liquidity between different pools.
You can find many other DeFi aggregators as their number is constantly growing.
Benefits of DeFi aggregators
If you want to know how to create a DeFi aggregator, first you need to study all the benefits of these platforms in order to implement them in your project. DeFi aggregators are useful for both DeFi users and DeFi companies. They regulate user interactions with exchanges, decentralized applications, investment platforms, etc. Aggregators combine multiple protocols into an easily manageable single interface, dramatically improving the user experience. Now users don’t need to open multiple tabs to monitor data from different apps. They are all accessible from a single aggregator interface. This makes it easier for users to choose the most profitable options on the market, minimizing gas fees.
Also, users of decentralized exchanges often face problems due to high slippage when orders are executed at a price that is less favorable than expected. Aggregators help solve this issue. For example, PlasmaFinance aggregates data from different protocols and allows users to see available prices in real-time and swap the best DEXs. 1inch went even further by aggregating liquidity from different DEXs so that whenever a trader swaps, the protocol generates the best cryptocurrency prices from all DEXs to which it’s connected automatically.
Aggregators also help services to find their customers. This is one of the best ways to introduce a new project and increase its liquidity. Basically, aggregators take advantage of one of the main DeFi benefits — interoperability to create a single, competitive marketplace accessible to a wide range of users. Therefore, when developing a DeFi aggregator, you should lay in your product opportunities for both traders and companies.
DeFi aggregator development process
DeFi aggregators work on the basis of smart contracts, like other DeFi products. Smart contracts are a great way to regulate the relationship between users and platforms in an automated way. However, I think you know that they can be vulnerable if created without considering the best security practices. Therefore, first of all, to build your DeFi aggregator, you need to enlist the support of an experienced blockchain development team that knows all the features of working with smart contracts.
