To understand what DEX aggregators are and how they work, it’s first necessary to understand what decentralized exchanges or DEX are. Surely you have read or heard an infinite number of times the word decentralization linked to the world of cryptocurrencies, this is because it is one of its main characteristics, not to be governed or controlled by a single authority.
This is where decentralized exchanges are born, being faithful to this principle, they allow trade to take place directly between the parties, and directly with their funds, without these being deposited in an account managed by a single authority or platform.
But despite the fact that DEX adhere to this ideology, they weren’t the most popular for several years, which meant that they didn’t have the highest liquidity of funds due to the low participation of users, however, this has changed with In recent years, thanks to the technologies that have been added to improve their performance, and that is where DEX aggregators come in.
Why DEX aggregators arise
For those who have a little experience with crypto-asset trading, you will agree that the goal will always be to buy or sell at the best price, and finding the ideal price wasn’t always easy, it could be a strenuous and extensive task, visiting many DEXs, until you find the best price, to get the best profit.
Sometimes it wasn’t always possible, due to the length of the search, which made you late for the correct exchange, with the price you were looking for, gave way to the need for a tool to exist that would allow you to have the best market price, without the need for such a marathon task.
How do DEX aggregators work?
They are highly sophisticated algorithms that allow the users of an exchange to automatically receive the best market price, searched by the algorithm through several DEX, channeling the transaction of its users to ensure that they are trading at the best market price. Trade requests are distributed among several DEXs to find the best available price, thanks to the use of bots that arbitrate that this happens in this way.
DEX aggregators grow in popularity
In just a few years, and thanks to many factors, this exchange model has grown in popularity, thanks to the DeFi boom last summer, and the development of highly effective platforms such as 1inch, which is believed to be the developer of this technology, called Pathfinder which is its API with routing algorithm, which not only helped many users to find better market prices, it also helps to cut gas use in the Ethereum network by up to 40%.
This caused a great stir among users of the most popular chain of smart contracts, noting that it was possible to increase their profits thanks to this tool, and such popularity forced 1inch to take its services to other chains such as BSC, and influencing many other projects that are emerging as multi-chain, as the case of Newdex, a DEX present in EOS and now in BSC that also offers the benefits of a DEX aggregator.
So popular are these types of exchanges becoming, that according to the market analysis site Messari, only in Ethereum, DEX aggregators own 20% of the volume of that network, a very promising percentage, added to the fact that tokens of this type exchanges have also grown more than 200% compared to centralized exchanges, all in less than a year.