The Steady Rise of DEX Aggregators and What’s Next
It’s no secret that the crypto-verse moves at blazing speed with many projects finding success in disrupting the disruptors. So while DeFi protocols like yield farms and DEX’s were at a high last year, the flood of multiple similar platforms have prompted the rise of DEX aggregators like 1inch and 0x.
The Steady Rise of DEX Aggregators and What’s Next
Think of DEX aggregators like Google; except instead of displaying a collection of the best links, DEX aggregators collect and display the best DEX’s to store, farm, and exchange money on.
Decoding The Rise of DEX Aggregators
As the decentralized finance segment continues to gain steam despite an overall slump in the crypto space, decentralized exchanges and aggregation services have recently shown sustainable growth.
DEXs’ and aggregators’ share by volume (weekly)
In this chart, each wallet is counted only once
But the question remains: why have DEX aggregators seen such consistent growth? There are three big reasons:
Reason 1: DEX Aggregators Are Cheap
If you’ve kept up with the blockchain space then you know high gas fees are an ever-present issue for Ethereum. It’s a factor that has negatively impacted DeFi protocols like Uniswap and Sushiwap as users often have to pay over $15 to trade or swap a token over the past month.
However, it is in situations like these where DEX aggregators shine. Put simply, DEX aggregators provide users with the best swap/trade rates and take active steps to further reduce gas costs – a factor that has directly influenced the rise of these protocols.
Gas cost by project
The chart displays gas costs incurred by the users of several projects as total gas cost is U.S. dollars divided by the july 2021 swap volume.
Side note, we speak of Ethereum because while other blockchain’s like Solana and Avalanche reduce transaction costs to pennies, most prominent DeFi protocols exist solely on Ethereum.
Reason 2: Exchanges Suffer From A Lack Of Flexibility
DEX’s originally rose to prominence because using centralized exchanges came with a few distinct disadvantages like:
– KYC: Know Your Customer protocols that force users to reveal their identity.
– Geographical limitations: Certain exchanges are not accessible worldwide due to regulations.
– Lack of innovation, features, and flexibility: Centralized Exchanges have no real incentives to implement new financial instruments like staking, yield farming, and more.
– Regulations: Centralized Exchanges have to comply with the rules and regulations of individual countries.
By contrast, DEX’s have no KYC protocols, can be accessed by anyone across the globe, and are continuously innovating to stay ahead of their competitors. However, with regulations looming over DEX’s since September 2021, the flexibility DEX aggregators offer become critical to DeFi’s health. DEX aggregators can react faster to regulations by removing DEX’s that aren’t compliant while introducing innovative financial services from compliant DEX’s. This flexibility ensures users can leverage the best DeFi has to offer – come what may.
Reason 3: Matching Growth Potential With Limitless Options
DEX aggregators are the main beneficiaries of DeFi’s innovations. Through the ability to integrate with any DEX, DEX aggregators can easily keep up with DeFi’s limitless potential while providing low fees and a seamless, all-in-one user experience.
The biggest issue with DEX aggregators is that many are limited to just connecting Ethereum liquidity pools. This constrains the extent of multi-chain accessibility for DEX trading.
A cross-chain liquidity aggregator, FLUID aims to solve this issue by introducing cross-chain liquidity into the exchanges with no counterparty risk, essentially pooling sporadic liquidity onto a single platform.
FLUID incorporates an institutional smart-order routing engine to provide a solution to the DEX issues. Complex algorithms are tasked with finding the best routes to fulfill trade orders across different networks to alleviate any liquidity issues for institutional investors.
This is achieved by aggregating resources from different DEXs across different chains into a larger pool to access. The goal is to provide high throughput and cross-chain liquidity to rescind transactional issues between different DEXs.
A liquidity example of a four cross-chain pool can be, for instance:
BTC pool⇒ ERC20⇒ USD⇒ Polygon
Liquidity is the lifeblood for virtual assets
DEXs will play a significant role in the financial economy of the future.
The first step was eliminating order books and replacing them with liquidity pools. Automated market makers were able to pioneer a dynamic shift in the DeFi market.
With virtual assets slowly evolving into a formidable investment platform, so will the need for steady liquidity in DeFi. FLUID introduces a powerful decentralized liquidity solution ensuring sustained institutional adoption of digital assets.
FLUID is an institutional smart order routing engine and liquidity aggregator that brings high-throughput and cross-chain liquidity to the digital asset exchange space at zero cost and no counterparty risk. With every asset aimed to be tokenized in the future, FLUID is positioned to capitalize on penetrating cross markets, including spot, futures, derivatives, synthetics, STOs, and tokenized assets to provide the railways with interoperable liquidity markets.
FLUID is backed by a professional team consisting of Wall Street bankers and technologists from BlackRock, Bank of America, Jefferies,Goldman Sachs, Merrill Lynch, BNY Mellon, Citibank, Visa, and founders of leading regulated digital asset OTC trading desks, quantitative firms, and popular blockchain companies.