In this post ”What is DEX Aggregator?”, you’d learn about the importance of DEX Aggregators, how DEX aggregators function, DEX aggregators’ importance in DeFi, tokens of collateral, some frequently asked questions and lots more.
What is Dex Aggregator?
DEX aggregators are a new form of blockchain-based service that allows cryptocurrency traders to access a wide range of financial tools from a single dashboard.
About Dex Aggregator
There are two sorts of cryptocurrency exchanges: centralized and decentralized. DEX aggregators act as a centralized explorer for decentralized exchange pricing and liquidity (DEXs). DEX aggregators have become a sought-after service as the popularity of cryptocurrencies has grown, as has the use of decentralized exchanges.
Pricing on decentralized exchanges varies. So it’s not always straightforward to discover the best bargain for the trade pair you’re interested in. Not only that, but DEXs are becoming increasingly popular among crypto investors. Since they provide enhanced security and a better fit with a cryptocurrency’s inherent qualities. However, as interest in cryptocurrency grows, more DEXs enter the market. Therefore making it difficult for investors to locate the greatest liquidity and pricing. DEX aggregators are useful in this situation. While investors can browse through many exchanges with little success, DEX aggregators use intricate algorithms to find the best feasible supplier for a given token swap by taking into account numerous parameters.
DEX Aggregators and Search Engine
Comparing a DEX aggregator to a search engine is the clearest way to understand what it does. Imagine a service like Google Flights, where you can obtain aggregated information from multiple airlines and choose the best offer for you.
DEX aggregators work in a similar manner. They gather information from a variety of decentralized exchanges and support split trades to provide the best possible prices. Furthermore, DEX aggregators do several computations. And then allow customers to execute split trades in order to obtain the best possible swap price. In essence, crypto traders are unable to achieve this conclusion because DEX aggregators execute incredibly complex computations in seconds.
In 2019, the first DEX aggregator was developed as part of a hackathon competition. Participants in the competition thought they needed aggregated data from many DEXs. But this information was not yet available as a service. During the hackathon, Sergej Kunz and Anton Bukov spent 18 hours creating the 1inch MVP. Of course, the first version of the aggregator wasn’t fully functional or polished. But it was a great demonstration of why DEX aggregators were so important.
DEX aggregators have been gaining in prominence since 2019. At the same time, interest in decentralized finance (DeFi) is growing. DEX aggregators enable investors to make educated decisions about their trades and coin swaps. Thanks to cryptocurrency and blockchain technology, which have totally altered both personal and corporate finance.
What Are DEX Aggregators and How Do They Work? 1inch’s Deep Dive
Contributor: DEX aggregators are becoming more popular as DEXes become more popular. What exactly are DEX aggregators?
A decentralized exchange (DEX) is a cryptocurrency exchange that works independently of a central authority or third party. As a result, a user maintains complete control over monies held or exchanged on DEXs, which are more secure than centralized exchanges (CEXs). Ethereum smart contracts are required to run decentralized exchanges, which are built on the Ethereum blockchain. Centralized exchanges, on the other hand, are managed by a third party who collects trading fees.
CEXs aren’t totally based on the blockchain. CEXs are speedier than blockchain-based exchanges. Also they can handle both fiat and crypto transactions.
Importance of DEX Aggregators
The need for DEX aggregators is demonstrated by the birth of the 1inch MVP. At the ETHNewYork hackathon in 2019, Anton Bukov and I produced the 1inch MVP in 18 hours. They did it merely because they required it for personal reasons.
“The initial customers of 1inch were myself and Sergej,” says Anton, the company’s CTO. Manually checking for the best trading prices on all the DEXs — Uniswap, Kyber, and 0x — before placing a transaction was laborious and inefficient. We required an elegant algorithm to scan every DEX for the best trading price and offer an optimal deal instantaneously, just like all crypto consumers.
To get the greatest and most efficient price for a swap, you must search all of the DEXs for the best price. Checking manually is inefficient and does not allow for sophisticated trading routes and paths. As a result, sophisticated DEX aggregator algorithms are critical for reducing swap costs.
DEX aggregators have seen tremendous growth in recent months, on track with DEX volume growth.
How DEX Aggregators Function
DEX aggregators pool liquidity from multiple DEXs, allowing users to achieve higher token swap rates than they could on a single DEX. So DEX aggregators have the capacity to optimize slippage, swap fees, and token pricing. Resulting in a better rate for users when done correctly.
A swap agreement split among numerous DEXs, for example, can get a user a better overall pricing than a swap on a single exchange.
The primary goal of a DEX aggregator is to provide a customer with better exchange rates than any one DEX can provide in the shortest amount of time. Protecting users from pricing effect and decreasing the likelihood of failed transactions are two other significant goals.
DEX aggregator integrations are often attractive to DEXs because they can bring in additional users and volume. According to recent research, high-volume traders are increasingly adopting DEX aggregators, while retail users continue to use DEXs directly.
DEX Aggregators and the DeFi Boom
DEX aggregators are a relatively new notion that has emerged as a result of the development in DEXs.
They’ve grown increasingly crucial to users during the recent DeFi boom. As more and more people prioritize better trade pricing.
Pathfinder: A Step-by-Step Guide
1inch, a DEX aggregator, just published version 2 of its protocol, which includes Pathfinder, an API with a new discovery and routing mechanism.
Pathfinder can split swaps over the 21 liquidity protocols it supports. As well as use multiple “market depths” within the same protocol if necessary.
This is how a typical Pathfinder switch path looks like:
What are the Benefits of Using ‘Market Depths’?
The number of open buy and sell orders is used to calculate market depth. Because this is a measure of supply and demand for liquid assets like cryptocurrencies.
The usage of “market depths” is a significant improvement over the previous version of the protocol. The new algorithm takes a more complicated approach than just splitting a swap across several protocols. Even with different “market depths” acting as sort of bridges between source and destination tokens.
This more complicated strategy results in tangible benefits for the user. For example, 1inch offers an exchange rate for 1 sBTC-sUSD that is over 98 percent better than Uniswap’s offer, thanks to enhanced quotes.
Mechanisms of Partial and Dynamic Fill
Pathfinder’s partial and dynamic fill technique is 1inch’s answer for lowering the likelihood of rejected transactions.
Partial fill is enabled by default in Pathfinder, however it can be turned off in the “Advanced options” menu. Using this function, however, is recommended because it can protect customers against price slippage and failed transactions. Though this would be particularly obvious for large swap volumes.
When a user does a swap on 1inch, the transaction is split amongst different protocols in order to provide the user with the rates that were initially displayed in the UI. However, before the swap is completed, the rate on one of the protocols could change, making it less appealing to the user. The term “partial fill” comes into play here. Because the order can only be partially filled, and the route where the rate has changed — or many routes — can be simply cancelled.
As a result, the user receives no notification of a failed transaction. And their unswapped coins are simply returned to their wallet. The user solely pays the switch fee in this situation. Furthermore, customers can save even more money by burning Chi gas tokens, which reduces gas expenditures by 43 percent.
Similarly, the dynamic component may aid in the prevention of unsuccessful transactions. By allowing parts of the swap to switch to a different protocol in the split or path.
For example, Uniswap, SushiSwap, and Balancer are three protocols that the algo splits a swap between. If the Uniswap swap fails, the entire swap will move to SushiSwap and Balancer. And it will still be conducted, giving the user the rate they had previously seen and accepted in the interface.
Pathfinder was created to be a highly adaptable algorithm that could accommodate a wide range of protocols. Uniswap V1, Uniswap V2, Balancer, Curve, Chai, Sushiswap, Kyber, Oasis, Mooniswap, Compound, Aave, Yearn, and Bancor are currently supported by 1inch thanks to Pathfinder.
Pathfinder, on the other hand, was built in such a way that it can handle blockchains other than Ethereum. Support for Binance Smart Chain, an alternative Binance chain, is planned.
In the meantime, the Pathfinder can be enhanced to allow for integration with a centralized exchange. As a result, startups would have entirely new business potential to build on top of the 1inch protocol. They may, for example, develop products that act as a bridge between CEX and DEX.
Tokens of Collateral
The ability to use collateral tokens from lending protocols Aave and Compound as part of the swap path is another significant feature of Pathfinder.
Other tokens are bundled into collateral coins by Aave and Compound. Like as Compound’s USD-pegged coin, cUSD. Users had to go to the loan protocol that created the coins to unpack or pack back into collateral coins. Hence these collateral tokens couldn’t be utilized in swap routes on 1inch before.
Pathfinder may now pack, unpack, or relocate a user’s collateral tokens in a single transaction. Therefore saving them both time and money. Furthermore, because all packing and unpacking is done automatically, users can quickly trade collateral tokens stored in pools.
Option with the highest return and the least amount of gas
Finally, Pathfinder gives the user the option of choosing between “Maximum return” and “Lowest gas.” The first option has the switch taking complicated routes in order to obtain the greatest rates for the user. Swaps are done at market rates. Without splits across several exchanges or complex routes, in the “Lowest gas” option. But the customer pays the lowest feasible gas fee.
DEX Aggregators’ Importance in DeFi
DEX Aggregators are one of the newest additions to the booming DeFi industry, allowing traders to access deep liquidity and improved pricing.
While everyone has had a chaotic year in 2020, the decentralized finance (DeFi) market has had an outstanding year. Not only have funds poured into DeFi protocols, but new suggestions to enhance the crypto trading experience have also arisen.
DEX aggregators are one of these breakthroughs.
So EX aggregators and how crypto traders might utilize them to access liquidity are discussed in this article.
DEX stands for decentralized exchange, which is a blockchain-based crypto trading platform that allows users to keep custody of their cash while exchanging one token for another.
Decentralized exchanges (DEXs) offer greater security and anonymity than centralized exchanges. Hence the reason why they have witnessed a surge in popularity in recent years.
The most well-known decentralized trading platform is Uniswap. It runs on the Ethereum network and allows crypto traders to convert ERC20 tokens directly from their Ethereum wallets using a user-friendly web-based interface.
PancakeSwap has emerged as the number one liquidity source for BEP20 tokens on Binance Smart Chain (BSC), Binance Chain’s new smart contract-enabled parallel blockchain. Despite the fact that the dessert-themed automated market maker protocol only began four months ago. It already has over $115 million in pooled liquidity for a variety of cryptoassets.
However, the majority of decentralized exchanges lack sufficient liquidity. Especially for smaller tokens, making it impossible to enter and exit larger positions without significant slippage.
DEX aggregators were created to overcome this problem.
DEX aggregators are financial technologies that allow cryptocurrency traders to access many trading pools from a single interface.
If you wish to buy ETH with BUSD on the Ethereum blockchain, for example, you may use Matcha, an Ethereum-based DEX aggregator, to tap into liquidity on decentralized exchanges like 0x, Uniswap, and Kyber.
You type the crypto trading pair you want to convert into the trading application. The liquidity aggregator then seeks the best possible price for you to execute your order across all available platforms.
While the currently available DEX aggregators differ in certain ways, they all offer a user-friendly interface that requires you to link your wallet and perform a single trade on a web-based application.
DEX aggregators are a long cry from the early days of decentralized trading. This was when clumsy user interfaces and complicated smart contract execution were the norm. Traders may now use a single dashboard to trade across several trading pools for the best pricing and liquidity. All while maintaining total control of their funds and maintaining a high level of anonymity.
Traders’ Favorite DEX Aggregators
DEX aggregators, also known as liquidity aggregators, offer a number of advantages that have made them a popular choice among active traders. In fact, DEX aggregators have grown in popularity to the point where they now account for roughly 20% of all decentralized trade volumes by mid-2020.
Let us now consider the Advantages of Liquidity Aggregators.
For starters, DEX aggregators give traders who wish to trade big amounts of digital tokens access to a larger pool of liquidity.
Due to a lack of liquidity, it may be difficult to convert a substantial holding in a newly released token into a stablecoin on just one decentralized exchange. If you employ a liquidity aggregator, on the other hand, you’ll be more likely to find the liquidity you need to exit your token position without causing too much slippage.
Second, employing a DEX aggregator will usually get you a better execution price than using a single DEX. Traders use aggregators to fill trades at the best possible price across a variety of liquidity pools. Using a liquidity aggregator rather than a single decentralized trading platform makes sense for price-sensitive traders and investors.
Third, DEX aggregators, like “conventional” decentralized exchanges, provide a layer of secrecy to crypto trading that isn’t available on centralized exchanges.
Unlike centralized exchanges, which require users to complete a KYC onboarding procedure, anyone with a crypto wallet and an internet connection can utilize a liquidity aggregator to convert one digital asset for another. There will be no need to verify your identity, and you will not be required to fill any documentation.
Fourth, DEX aggregators are often non-custodial exchange platforms.
Meaning traders have complete control over their funds.
Liquidity aggregators allow you to trade straight from and to your crypto wallet, unlike centralized exchanges, which require you to deposit coins and so give up your private keys for the length they are held on the platform.
Finally, liquidity aggregators enhance the decentralized trading experience by providing user-friendly dashboards that allow millions of digital tokens to be traded in seconds with just a few clicks.
Given the broad list of advantages that DEX aggregators provide, it should come as no surprise that several top projects in this field have recently raised millions of dollars in funding and that new market entrants are emerging.
ZeroSwap: A DEX Aggregator for Binance Smart Chain (BSC)
While there are a few DEX aggregators on the Ethereum blockchain, such as 1inch, Matcha, and ParaSwap, ZeroSwap is the frontrunner for the first liquidity aggregator on Binance Smart Chain (BSC).
The ZeroSwap team is working on a decentralized, gas-free multi-chain trading protocol that would aggregate liquidity and allow crypto traders to trade tokens from different blockchains (including Binance Smart Chain) at no cost.
On October 6, ZeroSwap said that, in addition to Ethereum, it has chosen to support Binance Smart Chain due to its “compatibility with Ethereum, its in-production blockchain, and [because it’s] the fast-growing ecosystem.”
Binance Smart Chain, as ZeroSwap points out, is EMV-compatible, has a five-second block time, supports cross-chain conversion, and is integrated into existing Ethereum tools like MetaMask, making it a viable new blockchain for the expanding DeFi business.
ZeroSwap CEO Chandrashekar Ramu commented on ZeroSwap’s ambitions to provide liquidity aggregation during an AMA with Wolf Crypto: “DEX Aggregation is primarily utilized to tackle the liquidity problem. We’ll compile all of the existing protocols and then offer gas-free trading with no transaction fees.”
“We have seen extremely excellent growth on the platform, and many interesting companies are building on Binance Smart Chain, therefore we chose them,” he said of Binance Smart Chain support. Not to mention that they are EVM compatible!”
Trust Wallet: Your Decentralized Trading Hub
From Ethereum to Binance Smart Chain, Trust Wallet is a secure and user-friendly portal for all your decentralized trading needs.
Users can not only convert digital assets directly within the wallet’s in-app DEX, but they can also link to third-party decentralized trading platforms for a variety of blockchains directly via Trust Wallet’s **DApp Browser **while maintaining custody of their funds.
In addition, the non-custodial wallet allows investors to store over 160,000 digital assets securely in one location.
DEX Aggregator 1inch Expands to Fantom Network
According to co-founder Sergej Kunz, Decentralized Exchange (DEX) aggregator 1inch, the layer 1 blockchain technology would provide 1inch consumers with efficient transactions and deeper liquidity.
It will be available on the Fantom Network on Thursday.
Traders will be able to find the best execution across Curve, Saddle, SushiSwap, and other crypto trading venues using Fantom’s low-cost platform.
Ecosystem that is Ethereum compatible. According to Sergej Kunz, co-founder of 1inch Network, this promises more efficient transactions and more liquidity for 1inch’s aggregation and limit order protocol customers.
According to its website, 1inch has processed $177 billion in trading volume across 2.4 million wallets since its launch on Ethereum, Avalanche, Optimism, and other prominent chains. The company’s decision to switch to Fantom was prompted by the network’s increased activity.
1inch representative Pavel Kruglov told CoinDesk through Telegram that Fantom “has achieved substantial traction among users and intense volumes.”
Fantom is the sixth-largest decentralized finance (DeFi) hub, according to DeFi Llama data, with $5.9 billion in total value locked (TVL), a gauge of on-chain activity. According to DeBank data, 1inch is the fourth-largest DEX aggregator.
Last May, 1inch expanded onto the layer 2 protocol Polygon. Kruglov said 1inch aims to support other networks, but he wouldn’t say which ones or when.
Frequently Asked Questions (FAQ)
What is the purpose of a crypto aggregator?
Crypto aggregator is a system that combines Crypto currency trade data from major exchanges such as Bitfinex, Kraken, Gdax, and Poloniex into a single real-time price feed. This ensures crypto-currency liquidity and enables for continuous trading without the need for vacations or days off.
What is a 1x DEX aggregator, and how does it work?
1inch is a cryptocurrency exchange aggregator that uses its 1INCH utility and governance token to scan decentralized exchanges for the best cryptocurrency values for traders. The platform’s decentralized “instant governance” approach is powered by 1INCH, which also supports liquidity mining through token staking.
What is the best DEX aggregator?
The following is a list of the top ten greatest cryptocurrency DEX aggregators in 2022 that everyone should be aware of.
- dYdX. …
- Swapzone. …
- SushiSwap. …
- 1inch Liquidity Protocol. …
- Uniswap (V2) …
- Raydium. …
- Trader Joe.