DEX aggregators are a relatively new type of blockchain-based service that allow cryptocurrency traders to benefit from a large variety of financial tools in a single interface, often providing better liquidity and prices on different crypto pairs.
Cryptocurrency exchanges are classified into two main types — centralized and decentralized. DEX aggregators serve as a unified explorer for prices and liquidity offered by decentralized exchanges (DEXs). With the rise in popularity of cryptocurrencies and the growing utilization of decentralized exchanges, DEX aggregators have become a sought-after service.
Decentralized exchanges offer varying pricing, and it is not always easy to find the best deal for the trading pair you are looking into. Not only that, crypto investors are starting to turn more and more to DEXs, as they offer increased security and a better fit with the innate characteristics of a cryptocurrency. However, with the rising interest in crypto, more and more DEXs flood the market, and investors often struggle to find the best possible liquidity and pricing. This is where DEX aggregators come into play. While investors can try and sift through different exchanges with limited success, DEX aggregators rely on complicated algorithms to take into account numerous factors in selecting the best possible provider for a given token swap.
The easiest way to visualize what a DEX aggregator does is to compare it to a search engine. Imagine services like Google Flights, where you get aggregated information from numerous airlines, and you can pick and choose which deal serves you the best. DEX aggregators function in a very similar way. They accumulate data from a wide array of decentralized exchanges and facilitate split trades in order to offer the best possible prices. Not only that, DEX aggregators complete numerous calculations and give users the option to perform split trades in order to achieve the best possible price of a swap. In essence, crypto traders cannot accomplish this result because DEX aggregators perform extremely complicated calculations in a matter of seconds.
Interestingly, the first DEX aggregator was created as a part of a hackathon competition in 2019. Participants in the competition felt that they needed the aggregated information from numerous DEXs, but this was not available as a service yet. So Sergej Kunz and Anton Bukov created the 1inch MVP over the span of 18 hours during the hackathon. Of course, the initial version of the aggregator was not completely functional and polished; however, this was a perfect example of why DEX aggregators were a necessary service.
Since 2019, DEX aggregators have been rising in popularity. Simultaneously, the interest in decentralized finance (DeFi) has been increasing. Cryptocurrencies and blockchain technology completely revolutionized both personal and enterprise finance, and DEX aggregators allow investors to make informed decisions about their trades and coin swaps.