A DeFi aggregator brings together trades across various DeFi platforms into one place.
What Is a DeFi Aggregator?
A DeFi aggregator brings together trades across various decentralized finance platforms (DeFi) into one location, saving users time and increasing efficiency for cryptocurrency trades. As the name suggests, DeFi is spread out across different blockchains such as Ethereum and BNB Chain. Within each blockchain is an ecosystem of isolated financial protocols.
While having a wide selection of different protocols is beneficial to diversify investments and getting the best yield rates from crypto lending, efficiency and convenience are hindered since the financial information is spread vastly across multiple protocols. That’s where DeFi aggregators thrive.
DeFi aggregators siphon the very best prices from DEXs, lending services and liquidity pools into one place so that users can optimize their trades. Without an aggregator, users need to go to each platform on an individual basis to compare prices that will generate the best deal for them. Then, the user must manually execute each transaction using smart contracts. While this strategy may be fine for casual crypto trading, it severely limits those looking to implement advanced trading strategies.
Not only do aggregators pull the best prices, but some DeFi aggregators even offer a unique, user-friendly way to analyze and combine other users' trading strategies via a convenient drag-and-drop mechanism. This way, users can create an entirely new strategy of their own using the inspiration of other successful traders. The drag-and-drop mechanism also helps users visualize complex DeFi protocols via blocks that can be built on top of one another.
Aggregators put UX/UI at the forefront, offering a far superior experience to the traditional way of manually interacting with liquidity layers. As a result, this helps users who are not as crypto-savvy as trading experts navigate the world of DeFi with ease.
The potential downside of using a DeFi aggregator is the gas fees. As Ethereum continues to reach new all-time highs and volume increases across the network, gas fees tend to follow this upward trend. Usually, gas fees are higher on aggregators compared to using the individual protocol. However, some aggregators found a solution to this problem via gas tokens or gas cubes developed into platforms that let users save money on gas fees. It’s also important to note that while gas fees may be higher on an aggregator, they act as a sort of “convenience fee” since the optimization and efficiency that comes with an aggregator can outweigh the gas fee.
While DeFi has certainly helped bring millions of new users to the cryptocurrency market, there are still users who are intimidated by the sheer number of protocols to choose from and industry-specific lingo. As a result, many crypto enthusiasts prefer to simply hold cryptocurrencies like Bitcoin (BTC) in a wallet without putting it to better use. With the advent of DeFi aggregators, new entries to the industry can benefit from DeFi without having to understand the technical complexities of trading, coding, blockchain, etc. An aggregator gives power to these new users and helps them make better trading decisions.
In a decentralized economy such as this, it’s still important to centralize some aspects of DeFi for the sake of efficiency. DeFi aggregators bring together the best of both worlds of centralized organization strategies and decentralized finance protocols to create an important tool in this new, exciting industry.
Author:
Hsuan-Ting Chu, the founder and CEO of DINNGO exchange and CEO of Furucombo, is a serial entrepreneur with extensive experience in startups, especially in building new business models in financial fields.
FAQs
A DeFi aggregator brings together trades across various decentralized finance platforms (DeFi) into one location, saving users time and increasing efficiency for cryptocurrency trades. As the name suggests, DeFi is spread out across different blockchains such as Ethereum and BNB Chain.
What is an aggregator in DeFi? ›
A DeFi aggregator is a platform that collects information from different DeFi protocols and incorporates them into a single interface, enabling traders to make smarter decisions. It helps save time for users and increases efficiency for crypto trades.
What does an aggregator do in crypto? ›
DeFi aggregators bring together trades across various decentralized finance platforms into one place. They aim to optimize trades by pulling competitive prices from across the DeFi landscape.
What is the best DeFi aggregator? ›
Paraswap:
Paraswap is a decentralized liquidity aggregator that enables users to swap tokens at the best prices across multiple DEXs. Its efficient aggregation algorithm ensures minimal slippage and low fees, making it a favorite among DeFi traders.
What is an aggregator in trading? ›
Aggregators usually provide two main functions; they allow FX traders to compare price from different liquidity venues such as banks-global market makers or ECNs like Currenex, FXall or Hotspot FX and to have a consolidated view of the market.
What is the purpose of an aggregator? ›
An aggregator is a person, business or technology which brings together (or aggregates) a set of related products, in this case upward or downward regulation capacity in the electricity market.
What is an example of an aggregator? ›
As an example, Uber is a brand of the aggregator model. In Uber, multiple service providers (car taxi) are agreed to provide services under the brand name, Uber.
How do aggregators earn money? ›
How do payment aggregators make money? Supported payment gateway aggregators make money by charging monthly fees, as well as fees for services like instant settlement.
What are two benefits of aggregators? ›
Importance of Aggregators
They serve as a centralized hub for diverse content, making it easy for users to access a variety of information on a particular topic in one place. Content creators benefit from aggregator as their work gets exposure through inclusion in combined results, possibly reaching a bigger audience.
What is the difference between an affiliate and an aggregator? ›
The biggest difference is that Affiliate Aggregators are primarily focused on ensuring links and phrases are monetized and that you are paid for driving traffic through them.
This involves researching the market, understanding user needs and preferences, and identifying the key features and functionalities that the aggregator should provide. Choose the Technology Stack: Once the user requirements have been defined, the next step is to choose the technology stack for the DeFi aggregator.
Why is DeFi so good? ›
Using DeFi allows for: Accessibility: Anyone with an internet connection can access a DeFi platform, and transactions occur without geographic restrictions. Low fees and high interest rates: DeFi enables any two parties to negotiate interest rates directly and lend cryptocurrency or money via DeFi networks.
What is an aggregator in crypto? ›
A crypto data aggregator is any platform that allows you to index and aggregate blockchain data from multiple Web3 ecosystems. These platforms may use DApps, oracles, or APIs to collate data from different Web3 platforms into a single interface.
What is an aggregator in simple terms? ›
noun. a person or thing that aggregates. Digital Technology. a web-based or installed application that aggregates related, frequently updated content from various internet sources and consolidates it in one place for viewing: Compare feed ( def 23 ), RSS.
What is the aggregator rule? ›
An aggregator should have a registered office in India as a company registered under Companies Act, or, a LLP, or a Co-operative Society and has to comply with Information Technology Act, 2000 and rules made thereunder such as Intermediary guidelines.
What is an aggregator in Web3? ›
The Role of DeFi Aggregators in Web3 Growth
By aggregating liquidity from various chains, DeFi aggregators facilitate seamless transactions across multiple protocols, fostering a more interconnected and accessible DeFi ecosystem.
What are aggregators in Fintech? ›
Read 2 min. A fintech aggregator is a technological platform or service that brings together multiple financial technology (fintech) products or services in a single interface, providing users with a comprehensive overview and allowing for easy comparison and selection.
What is aggregator in economics? ›
Aggregation refers to the connection between economic interactions at the micro and the macro levels. The micro level refers to the behaviour of individual economic agents. The macro level refers to the relationships that exist between economy-wide totals, averages or other economic aggregates.
