How do DEX aggregators use the power of the blockchain, and what is in them for the average user? The 4IRE team has compiled this guide for newbies and experienced DEX users to welcome you to the vibrant world of DEX technology. Read on for a comprehensive definition of this novelty, learn about aggregator features, to answer: Should you develop a new Defi aggregator?
What is an aggregator in finance?
Decentralized finance, or Defi, is a unique and exciting development of financial applications built using blockchain technology. Defi is part of the decentralization movement that pushes financial products to become transparent, open-access, and unsecured.
Decentralized finance is spread across blockchains like Ethereum and Binance Smart Chain, and within each blockchain is an ecosystem of financial platforms. While these platforms offer huge crypto returns, some of DeFi’s appeal is swaps. Trading crypto at the best rate is challenging when financial information is spread across multiple platforms.
Aggregator in Defi helps bring transactions on decentralized exchanges (DEX) into one place, saving users time and increasing efficiency for better trades.
Advantages of Defi Aggregators for users
Better Liquidity
DEXs have become a solution to the excessive control and lack of decentralization users observed at CEXs. While many CEXs remain popular globally, with millions of users looking to them for additional oversight and protection, most cryptocurrency owners want more privacy and decentralization in the operation of their assets. DEXs offer a greater degree of devolution, but since they only appear on the blockchain market, they each have small liquidity pools. As a result, someone who holds a large number of crypto assets or wishes to buy a large number of coins or tokens may move the price significantly or be unable to complete the transaction. Therefore, pooling multiple DEXs into a single aggregator creates conditions for better liquidity, thus ensuring operation without liquidity constraints.
Better Prices
One aspect associated with low liquidity is slippage. The latter means that you move the price sharply up or down as soon as you want to make some large-scale operations. So you end up buying or selling the asset at a very different price from what you planned because of your transaction. Due to better liquidity, price slippage is minimal, as even large orders rarely cause drastic price changes immediately.
Better Security
Also, DEX is much better than CEX regarding privacy and confidentiality. Users do not store their assets in on-site wallets and thus have complete control over their belongings and do not risk losing everything to a hack.
Better Trading Conditions
The terms usually limit traders operating within a platform. Therefore, they must mostly agree to the current price and not go through the hurdle of signing up on other platforms. With Aggregators, you can always get the best price on multiple DEXs, choose where to trade, and get the best price at any given moment.
What are the pitfalls of Defi aggregators?
A notable disadvantage of Defi aggregators is the gas fees users need to pay for cross-currency transactions. As ETH reaches new all-time highs, user fees rise along with ETH value, sometimes exceeding 150% of standard transaction fees. Some platforms have solved this problem by creating gas tokens or cubes within their media, which cut user fees in half. However, users still need to be careful about transactions, as wrong actions or experiments can cost them a lot of money. Nonetheless, the higher fees are a good trade-off compared to using a separate DEX in exchange for the greater efficiency, convenience, and execution speed users get on the aggregator platform.
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