What are DEX aggregators? How do DEX aggregators improve on chain trading for DeFi traders? In this article we compare 5 top DEX aggregators.
As the name suggests, DEX aggregators bring together the liquidity of a number of different venues into a single UI for a trader. This makes it easier for users to get the best execution on-chain. A single DEX aggregator will pull pricing information from many different sources and send a trade through the best execution route. Often this can mean splitting up the trade into multiple pieces and routing it through various venues on chain. DEX Aggregators also often integrate with market makers via off-chain or private liquidity, providing order books against which users can also execute trades.
While there are a number of aggregators in DeFi, each has different execution mechanisms. Also, they’re not always integrated with the same liquidity sources. This means that while regular users may look at aggregators as the same, for some kinds of trades there will be important differences between the various exchanges.
In this article we look at some of the top DEX aggregators and what makes each one unique.
Blockchains: Ethereum, Fantom, BSC, Polygon, Avalanche, Celo, Optimism, Arbitrum, Gnosis, Klatyn, Aurora
1Inch is the largest DEX aggregator by on-chain volume and one of the first aggregators in decentralized finance. The 1Inch routing system takes advantage of both DEX and private liquidity. This liquidity comes from market makers and lives on the 1Inch order book, not visible on-chain.
1Inch calculates the best execution route for a trade off-chain as well, using a private routing algorithm that queries the integrated DEXs and the private liquidity.
Positive slippage from trades is sent back to 1Inch, incentivizing them to give the best execution to traders.
Blockchains: Ethereum, Fantom, BSC, Polygon, Avalanche, Celo, Optimism, Arbitrum
With 0x smart order routing, trades are split across multiple DEXs in order to get the best order fill for it’s users.
Matcha also allows users to set limit orders that can be filled with Gelato bots.
Blockchains: Ethereum, Fantom, BSC, Polygon, Avalanche, Optimism, Arbitrum
Similar to Matcha, Paraswap is focused on getting the best execution on decentralized exchanges by routing liquidity through the network of integrated protocols. By focusing on expanding integrations, Paraswap has been able to carve out a niche, especially on EVM chains beyond Ethereum mainnet.
Alongside market orders, Paraswap also allows users to set limit orders which leverage Chainlink to for on-chain pricing and trade execution.
RookDAO is a unique case in protocol design that aims to create a more transparent and equal playing field in a dark forest. By leveraging their native token and a bonding mechanism, MEV searchers are allowed to compete for opportunities from the protocol and in turn keep a portion of the profits. Unlike other protocols that allow MEV bots to keep all profit from arbitrage, the RookDAO system passes much of this value back to users, allowing for some of the best trading execution among DEX aggregators.
When trades are added to the RookDAO order book, RookDAO keepers are allowed to search for the best fills, passing profits back to their DAO and their users while keeping some for themselves. This benefits all players in their ecosystem and allows RookDAO trades to outperform in many different conditions.
Last, but not least on our shortlist is CoW Swap, an on-chain protocol and DeFi aggregator that runs a Coincidence of Wants implementation to match DeFi Traders with the best execution on their trades. The Cow Swap system starts when users submit an on chain order. Next, solvers will race to find the best execution route for the trade. Sometimes this will be through on-chain liquidity on various decentralized exchanges, other times it will be from private inventory among market makers who are integrated with the protocol or running their own solvers. The winning solver gets to process the trade and receives the fee along with any profitable spread.
While not directly an aggregator, because solvers are competing for the best execution they are incentivized to pull pricing from all available liquidity sources and process the trade through the best route.
1Inch completes many of the CoW swap trades with their solver, but there are other market makers and liquidity providers running solvers, making CoW Swap one of the most competitive DeFi trading venues for executing large trades.
What is the best DEX aggregator?
The best DEX aggregator will depend on your trade size, where you’re trading and what token pairs. For large transactions on Ethereum mainnet, most aggregators have integrated the main liquidity sources for tokens. This means most aggregators will give similar prices, especially for smaller traders.
For large trades in exotic assets, it could make sense for users to check multiple aggregators to see the routing and prices offered, as not all aggregators are integrated with every DEX.
Do DEX aggregators offer MEV protection?
The easiest way to get MEV protection on-chain is to trade with low slippage amounts. While aggregators don’t enforce this, most of the default settings will keep slippage low when possible. In addition, spreading out trades across different venues allows for better execution and can keep price impact and MEV exposure low.
Both CoW swap and RookDAO promote MEV resistance in their products, so users that are conscious about MEV can also look to these aggregators.
Do DEX Aggregators use on-chain or off-chain liquidity?
In the earlier days of DeFi, private liquidity routing available via aggregators like 1Inch were quite popular. Today, most of the trades going through aggregators are not settled by private liquidity in off-chain order books. Instead, on-chain concentrated liquidity in the form of Uniswap v3 and Curve v2 have made on-chain swaps competitive with quotes from market makers in order books. While liquidity for some coins is still deeper on centralized exchanges, DEXs are quickly catching up and often are superior for large trades.