What is a DEX Aggregator
A DEX aggregator is a platform that searches multiple decentralized exchanges to find the best prices for crypto trades.
The rise of permissionless trading venues known as decentralized exchanges (DEXs) allow users to swap between virtually any cryptocurrency assets. Navigating multiple decentralized exchanges, however, can be cumbersome and inefficient.
This is where a decentralized exchange (DEX) aggregator comes in.
DEX aggregators are decentralized applications that search decentralized exchange trading platforms (like Uniswap, Balancer, and others) to find the best prices for any given trade. DEX aggregators have become pivotal to the world of decentralized finance (DeFi) by providing a single trading platform for users looking to get the best deal on their swaps.
How does a DEX aggregator work?
DEX aggregators search various sources of liquidity to find the best trade route for on-chain assets.
Since liquidity is often fragmented across various sources, different decentralized exchanges may quote different prices for the same asset. DEX aggregators “aggregate” quotes from decentralized exchanges and fulfill user orders at the best available price. Sometimes, DEX aggregators may even route a single trade across multiple decentralized exchanges to reduce price impact and provide better execution.
There are multiple types of DEX aggregators and the last few years have seen ever-more advanced versions of these platforms become available.
Traditional DEX Aggregators
1inch DEX Aggregator
Traditional DEX aggregators such as 1inch have been around for years. Their interfaces look very similar to those of regular decentralized exchanges. A user is presented with a swap module that takes in two cryptocurrencies: a sell token and a buy token. After the user clicks “swap,” the aggregator automatically finds the best liquidity for the trade and executes the transaction on-chain.
Meta DEX Aggregators
DeFi Llama Meta DEX Aggregator
Meta DEX aggregators are a step up from traditional aggregators. As the “meta” name implies, they aggregate DEX aggregators. This leads to better liquidity coverage across more venues, while still providing users with a single interface for their trades.
Intent-Based DEX Aggregators
CoW Swap Intent-Based DEX Aggregator
Intent-based aggregators are the most advanced type of DEX aggregator out there.
They not only aggregate on-chain liquidity across exchanges and other aggregators, they also delegate execution to third parties known as “solvers.” These third parties provide additional sources of liquidity by including private inventory and, in certain cases, even matching trades peer-to-peer. This avoids protocol fees and makes for the most efficient trades in DeFi.
Benefits of Using a DEX Aggregator
DEX aggregators provide a number of benefits, simplifying trading and providing better outcomes for users.
Better Prices: DEX aggregators look across multiple on-chain decentralized exchanges to find the best prices for any given token pair. Since most on-chain trading relies on automated market makers (AMMs), liquidity may be fragmented across various exchanges. As their name suggests, aggregators collect this liquidity in one place, giving traders the best deal for their swaps.
Convenience: By using a DEX aggregator, traders can reliably get good prices for their trades in one place without having to check multiple exchanges.
Price Impact Protection: Fragmented liquidity can sometimes make for shallow pools, meaning large trades experience significant price impact. Aggregators can break up trades across multiple exchanges, reducing price impact and providing better prices.
MEV Protection: In the case of intent-based DEX aggregators, solvers execute trades on behalf of users—protecting them from price exploitation in the form of maximal extractable value (MEV).
Fragmented liquidity often makes finding the best route for trades difficult. DEX aggregators bring this liquidity back together and take the work of finding the best prices off the backs of users.
What is the Best DEX aggregator?
There are a number of DEX aggregators on the market today. By market share, the most popular DEX aggregator is 1inch. However, when it comes to innovation, intent-based protocols like CoW Swap go the furthest.
CoW Swap: The Leading Intent-Based Aggregator
CoW Swap is a leading innovator in the intent-based aggregator space. It’s the second most popular DEX aggregator after 1inch, and a leader among DAO & Safe wallets.
Whales and DAOs (as well as retail users) rely on CoW Swap as their aggregator of choice because CoW Swap does more than just aggregate liquidity. It also provides comprehensive MEV protection and enables price optimizations — such as CoWs — that traditional aggregators can’t. Thanks to its intent-based architecture, CoW Swap supports 22 solvers that compete with each other to find the best prices for each user trade, and even provide price surplus on top.
While other aggregators claim to provide the best prices, CoW Swap’s architecture is built from the ground up to incentivize the best prices and the most surplus for trades, all in an easy-to-use, worry-free interface.
Give CoW Swap a try for yourself at swap.cow.fi.
