Why Aggregators for Decentralized Exchanges?
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Following the DeFi boom, a large number of new Decentralized Finance services have come to the scene. However, the huge growth has triggered calls for complete decentralization of services and rightfully so. If DeFi is to stay true to its blockchain gospel, then trading services have to adopt complete decentralized mechanisms, hence the call for DEXs.
Today, there are a number of DEXs that have been launched to facilitate a more democratic and trustless digital asset exchange. Taking the power from central authorities and giving it back to individuals while also ensuring DeFi services are easily accessible. Among the DEXs are Uniswap, Balancer, Kyber and a host of others.
However, with the growing number of DEXs, and the different modes of transactions and liquidity in each DEX, traders are faced with the task of accessing order books for each DEX to find which suits best for their trading. It is important for traders to know which DEX offers more competitive prices, better swap rates and higher liquidity. Examining one DEX at a time could be extremely time and resource consuming hence the need for DEX aggregators.
What is a DEX Aggregator?
DEX aggregators allow traders to get information on liquidity and swap rates from various DEXs or liquidity sources on one dashboard. This way, traders can get information on competitive prices from these different sources and choose the best option.
Think of how you use the Google Alert tool to aggregate information on say DeFi news. Links to articles on related topics are then automatically sent to your mail in the form of alerts. DeFi aggregators work in a similar pattern. They collect data from various DEXs and liquidity sources to display them on one dashboard for the trader to make better informed decisions on trading. Think of DEX aggregators as the search engine for DEXs and liquidity pools.
Aggregators source liquidity from these various sources to give the trader the best rates available and minimum slippage. Other aggregators currently in the DeFi market include Matcha.xyz, 1inch Swap, ParaSwap, DEX.AG and a host of others.
Why DEX Aggregators?
For traders to get the best of token swap rates, prices and most affordable fees available, having a platform that provides information on the various DEXs is of huge relevance. This way, traders can afford minimum slippages and trade at the most reasonable prices.
Checking for prices manually across each DEX can be frustrating and is certainly not efficient. Thus, developing DEX aggregators is one sure way to minimize costs on swaps and trade efficiently.
In terms of liquidity and user experience, DEX aggregators contribute to the improvement of the overall DEX ecosystem. By allowing traders to access different DEXs and services at once, liquidity is improved. On the other hand, they also improve overall user experience when traders can access more swap pairs in one dashboard. This makes trading and swaps easier, and provides the trader with more choices.
Cross-chain Liquidity Aggregation
The long term goal is to ultimately become the cross-chain aggregator of liquidity sources, to make CDzExchange a high-volume and high-liquidity platform. Creating cross-chain bridges across multiple chains will help unlock capital that can be freely used across DeFi platforms. This will aid in the growth of crypto derivatives markets as well as new capital flows into the respective chains. Hence, cross-chain and liquidity aggregation goes hand in hand.
While aggregators are a new development in the DeFi sector, their relevance cannot be overemphasized. This is why the DeFi sector will experience the creation of more aggregators in the next foreseeable future.
DEXs are a better and more reliable way of trading digital assets, however, with DEX aggregators, the trading experience is enhanced on a whole new level. Aggregators give new definitions to advanced user experience, accessibility and simplicity. This is a development that will facilitate faster growth and scalability of DEXs.
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