Competition is Heating Up in DEX Aggregation
The meteoric rise of cryptocurrencies post-pandemic has been really phenomenal. The trade volume has increased exponentially, and many retail and institutional investors have jumped into it. The market behaviour has also changed significantly. Previously CEXs or centralized exchanges dominated the market. Although CEXs are still the preferred platforms for new traders due to the availability of fiat gateways, DEXs or decentralized exchanges have gained immense popularity. AMM (Automated Market Maker) based DEXs like Uniswap, Pancakeswap, Sushiswap etc. are competing with top CEXs as per trade volume. The vastness of the DEX environment and price spread has opened up the opportunity for DEX aggregation also. DEX aggregation is generally two types – trading aggregation and information aggregation.
Trading aggregation
1inch Exchange is a leading trading aggregator. The project emerged from an ETH dev conference and got the limelight very soon due to its unique airdrop program. Although it has introduced its own liquidity pools now, the main job is to aggregate trades. The exchange splits orders between many other DEXs and liquidity providers to find the best possible exchange rates. 1inch Exchange currently supports Ethereum, BSC and Polygon. Matcha is another popular Ethereum based trade aggregator; it's based on 0x protocol. The protocol uses “off-chain order relay with on-chain settlement”. Positive Slippage is a problem faced by trade aggregators. Matcha always transfers the positive difference to users as per its protocol. The trade aggregators like 1inch, Matcha currently don’t charge any fees and they also support the placement of limit orders. The users can find different options and judge the best route to make the most profitable trade.
Information aggregation
While you trade, you need to make informed decisions. Real-time data analysis and various information are required to anticipate market movements. There comes the role of information aggregators. DEXTools is one such information aggregator. Their app works on all devices and you can save your data and access it from anywhere. The responsive app gives you live notifications and you can obtain information about many tokens, trade-pairs through real-time graphics. The app has a subscription plan but the basic tier is free. DEXTools has recently partnered with Coinmarketcap. As a result, CoinMarketCap will use the data provided by DEXTools’ API and integrate the platform’s links with all supported trade pairs. DEXGuru is another popular information aggregator. Their app gives you information about DEXs and a lot of tokens. The platform gives you coverage of on-chain markets integrated into one interface delivered in real-time.
The traders love DEX aggregation
DeFi sector is flourishing rapidly. Although the market has become a bit bearish, the momentum of DeFi has remained rock solid. The sky-rocketing TVL growth of DeFi has become possible due to the continuous entry of new investors. The key characteristic of DeFi is that listing and trading are permissionless. These have really changed the game by giving power to the people. While we can consider the change as positive, it also comes with numerous problems. A plethora of tokens exists now on various blockchains. Every single day, a new project comes up. Often a retail investor gets duped by buying the wrong or fake tokens. The price variation of the AMM based DEXs is another issue. Often the liquidity pools are not very liquid to support big trades. The DEX aggregators like 1inch, Matcha, DEXTools and DEXGuru are trying to solve these problems and have secured millions in funding. The traders also love the user experience on these platforms.
What if we get trade aggregation and information aggregation in a single platform? Newdex, a popular EOS DEX, launched its revised Whitepaper V 2.0 recently and it chalked out the plan to adopt DEX aggregation on multiple chains. They aim to embrace multiple chains like Ethereum, Ethereum Layer 2, BSC, HECO and BSC entry is going to happen shortly. The objective is to obtain full-fledged exposure to composability of DEFI, aggregate multiple Swap depths, and integrate features such as order book, K-line, price market, and token information. Mass adoption of DEX trading is bound to happen but we need transparent and easily obtainable data in a presentable format. To perform an efficient swap, one must check prices across different DEXs, liquidity depths while also checking whether he’s trading the right token or not. Manual checking isn’t a viable option and that’s why DEX aggregation has emerged as a successful business model with explosive growth at par with DEX volume growth. DEXs are also interested in integrating with the aggregators as it helps to expand the user base. Competition is heating up in this sector but the investors are going to reap great benefits out of this innovation by saving money and being able to make informed decisions.
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I recently learnt about the purpose of 1inch, a friend of mine was demonstrating arbitrage for a DeFi coin in BSC. Surprisingly it was yielding profit, I don't know how the algorithm works but I'm amazed by this tool. If both of the providers have sufficient liquidity the transfer happens within seconds. However, there is one downside, you give the tool access to your wallet, sometimes if you don't track the transactions it can make you lose some money. (My friend was mentioning he forgot the order and after some time passed transactions happened and he was in loss)
Combination of trade aggregation and information aggregation might yield a decent power. Therefore, Newdex sound perfect! I'm not surprised it comes from the EOS chain :)
Thanks for the article and I hope Newdex will make it work properly.
In fact, it doesn't matter to me whether the stock market is central or not. What is important to me is that the prices are up-to-date, for example, the same coin can have different prices on the exchanges at the same time, and in such cases, some people buy stocks at a low price, send the coin they buy to another exchange and sell it at a high price.
This year, decentralized exchanges have gained a lot of value, I think the exchange interface is effective in this because they are fun and simple. people always gravitate towards simpler