Decentralized Exchange Aggregators Explained
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Dex aggregators are platforms that consolidate cryptocurrency trades from various exchanges to provide optimal prices and reduced fees through enhanced liquidity pools. They come in two types: on-chain, which are transparent and rely on smart contracts, and off-chain, which are more centralized and opaque. Despite their potential, users should exercise caution due to hacking risks and the early developmental stage of these platforms.
Decentralized Exchange Aggregators Explained
- 2. What are DEX Aggregators? Aggregators are platforms that collect cryptocurrency trades from many decentralized (and centralized) exchanges across different blockchains. They claim to show the best prices and lowest fees in one place. They bring in liquidity pools and raise the number of pairs for traders without needing multiple DEXs. A host of different wallets are supported on these platforms.
- 3. Problems Aggregators Solve Liquidity pools and order books for 鍖nding trades have been scattered. Even one decentralized network or blockchain can have multiple DEXs with their own pool of assets that are not connected. Aggregators bring these connections to one site and even allow swaps between separate networks.
- 4. Types of Aggregators On-Chain: written with smart contracts, public is able to view them (open and transparent). Atomic swaps are possible (either swap or cancel). Off-Chain: controlled by a central authority, code is private, impossible to say if trustworthy. Front running may be possible.
- 5. EVM vs non-EVM Aggregators Aggregators are expanding in number around Ethereum and Ethereum Virtual Machine (EVM) compatible chains such as Arbitrum, Optimism, Fantom, and Avalanche C-Chain since they are easy to connect (Solidity language). Other chains are working to bridge between EVM and non-EVM such as Aurora on Near, Moonbeam on Polkadot and Kava on Cosmos.
- 6. Feature: Split Orders, Lower Gas Some aggregators such as 1Inch can take one trade and split it up through various routes and exchanges to provide the best price and gas fees. This is an amazing routing feature that is becoming more common. I see this evolving to different use cases as well (tokenized real world assets).
- 7. Top 5 DEX Aggregators 1. 1Inch: https://app.1inch.io/ 2. Matcha: https://matcha.xyz/ 3. Paraswap: https://app.paraswap.io/ 4. Rango: https://app.rango.exchange/swap/ 5. Open Ocean: https://app.openocean.鍖nance/
- 8. Aggregator Tokens Some of these platforms have their own cryptocurrency tokens too. They might be used for governance, base pairs for trading, consensus / staking, or yield farming. These coins can be a niche for you to research and invest on their own. Example: 1INCH, go research new ones!
- 9. Challenges for Aggregators Decentralized networks / blockchains are written in different code languages, have different consensus, and ways of making trades. Some might use order books and others use automated market makers (AMMs). The difficulty has been getting them to pass information to each other quickly and safely. All of this is improving every day through developer innovation.
- 10. Caution about Aggregators These are a new type of trading platform. They are in their early stages of development and have not existed long (as of 2024). Many hacks and bugs become possible with complex smart contracts. Make sure their code has been audited before using. Only trade what you are willing to lose. Start with small amounts. Don't be too trusting and do your research on recent hacks.
- 11. Studying DEX Aggregators https://cryptojbro.com/dex-aggregators-explained https://cryptojbro.com/dex-aggregator-list https://de鍖prime.com/exchanges#aggregators https://coingape.com/dex-aggregators/ https://de鍖llama.com/aggregators Links are in description!
- 12. These aren't Interoperability Protocols Interoperability protocols pass messages between various decentralized networks. They allow for different DApps on blockchains to work together. They can be a layer that DEX aggregators work on top of, but they allow for broader uses in addition to trading and swapping. Example: Layer Zero - https://layerzero.network/
- 13. Choosing / Using an Aggregator They have to connect to the chains and tokens that you want to trade! Use a hardware wallet for better security. Check to see if there have been recent hacks to wallets and the aggregator platform or protocol. Start out trading a very small amount to see if it works, how long it takes, the fees, etc.
- 14. The Future of Aggregators These protocols and aggregators evolve. There will be wider pools of liquidity available to traders. More assets such as stablecoins, stocks, bonds, funds, and property will be represented on chain. I see the future as one big decentralized liquidity pool with many access points, low fees and fast trades. Interoperability and payments between major networks will be secure and quick.
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