In an ever-evolving, fast-paced landscape of Decentralized Finance (DeFi), we continue to see innovative solutions reshaping how users interact with financial services. Among these ground-breaking developments, crypto data aggregators have emerged as powerful tools for streamlining and enhancing user experience (UX) in the DeFi ecosystem.
In this blog post, we examine what crypto data aggregators are, how they work, and how you can leverage Analog Watch to create one.
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.
Imagine you have users who want a DEX that can provide them with the best possible price for ETH/USDC but are unsure which platforms currently provide the best offers. In the crypto world, this makes sense because indexing the ETH/USDC price data on a single DEX goes against the fundamental ethos of decentralization and trustlessness of blockchain systems.
Your users will need a platform that generates reliable data, encompassing a comprehensive market coverage. The price point at any specific moment should reflect a refined aggregate of all DEXs rather than just a single DEX. This is where a crypto data aggregator such as DEX aggregator comes in. DEX aggregators can allow users to compute the mean price of tokens across different chains and even optimize slippages.
They could also simplify UX by aggregating liquidity and other essential blockchain parameters across multiple DeFi protocols, allowing users to make informed decisions without having to navigate multiple DeFi-based DApps.
Here are some examples of crypto data aggregators:
- Liquidity aggregators. As the name suggests, these aggregators aggregate liquidity from multiple platforms, such as DEXs. They enable users to get the best possible rates when exchanging/swapping assets. The DEX aggregators (explained earlier are examples of liquidity aggregators.
- Interest rate optimizers. Interest rates can vary significantly across different platforms for users who want to lend or borrow crypto assets. Interest rate optimizers are crypto aggregators that continuously monitor interest rates across different DeFi protocols and present users with a median value. This allows users to choose the best DeFi protocol with the highest returns or favorable borrowing terms.
- Slippage aggregators. Slippage, a term that quantifies the price fluctuation of a trade between order placement and execution, is a major concern in crypto markets. Slippage aggregators can help mitigate the slippage problem by splitting a large transaction into multiple liquidity sources, allowing users to optimize the overall trade execution.
The first component of a crypto aggregator is the actual data source that the platform will use as a basis for collating data. The raw data can emanate from off-chain sources, such as CEXs, and on-chain platforms like DEXs. To utilize on-chain platforms such as DEXs, the initial step would involve indexing the data emitted by the protocol.
Although blockchain networks ensure that their data is decentralized and secure, they also make it difficult to locate and query those data. This is due to the differences in RPC interfaces, data formats, and smart contract environments. Even in instances where you are able to navigate to the blockchain data, retrieving it in a performant, scalable, and detailed manner is extremely hard.
The problem becomes even more complex if you are considering indexing data from DeFi protocols in a multi-chain ecosystem. For example, you may want to build a DEX aggregator that provides users with an accurate price discovery mechanism, enabling them to receive the best possible price for their crypto assets, regardless of the token they trade. To build such a platform, you will need to index data from multiple DEXs, such as Uniswap, SushiSwap, or PancakeSwap.
Once you’ve indexed the data, you’ll need to implement a data aggregation mechanism that is as transparent as possible. For example, in the case of a DEX aggregator, you could implement an aggregated price feeds, that takes a specified asset pair (e.g., ETH/USDC) and aggregates the price of that pair across different DEXs that it trades on for a specified duration.
The data aggregation algorithm could take the price data from multiple DEXs and determine the median (middle) value between them, helping to mitigate outliers and API downtime. You could also leverage a weighted average algorithm to arrive at the middle value with weights assigned to DEXs based on their reputations and reliability.
Analog Watch is a developer-friendly, decentralized protocol that simplifies access to Web3 data. It leverages a unified and comprehensive data model that supports multi-chain indexing, allowing developers to implement a number of solutions. As a DApp developer, you can leverage the model to normalize data from any supported chain into a single representation — also called a View — that is intuitive and easily queryable.
You can think of a View as a custom API for indexing and processing data — retrieved from one or more supported smart contracts — in a manner that fits your specific DApp requirements. From a technical standpoint, the design of the entire protocol is not only intuitive but also decentralized and secure, having been built on top of the Timechain.
Basically, all the data that has been processed and their hashes included on the Timechain, comes to the View in a format that anyone can query and understand. When creating the View, you only need to specify which smart contracts you’d like to receive data from, and the protocol handles the rest. Visit https://watch.internal.analog.one/ to explore some of the published Views.
In addition, you could index data from multiple smart contracts on different chains into a unified database (View), allowing anyone to query it via a single GraphQL endpoint. This way, Analog Watch serves as a front-end for any DApp’s need to access, transform, and index data from any smart contract on a supported blockchain.
If you’re a DApp developer looking for a Web3 data infrastructure platform that enhances developer experience, look no further. Visit our docs to get started and join the technical discussion in the Discord channel. You can also get involved by joining our Launch Partners Program or signing up for the Grants Program.
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