A Complete Guide on How to Develop a DeFi Aggregator
As the DeFi market continues to boom and expand, new solutions emerge to simplify user navigation and improve user experiences. One of such recent innovations is the launch of DEX aggregators – platforms that unify numerous DEXs under one roof and allow users to conduct operations on all covered platforms without the need to create separate accounts and wallets.
The convenience of DEX aggregators is indisputable; instead of having multiple accounts and conducting operations on various resources, users can register on one aggregator, getting access to the multitude of liquidity pools and transactions. Besides, user-friendly and simple price comparisons on such aggregators ensure that every user wishing to buy or sell a crypto asset will get the best possible price.
So, how do DEX aggregators utilize the power of blockchain, and what is in them for a regular user? The 4IRE team has compiled this guide for newbies and experienced DEX users to welcome you into the vibrant world of DEX technology. Read on to find a comprehensive definition of this novelty, learn the features of aggregators, their benefits for users, and discover the top 5 aggregators popular across the globe today. Besides, as the name suggests, we cover what it takes to develop your own DeFi solution from scratch to get a fair share of the booming, lucrative market niche.
What Is an Aggregator in Finance?
In traditional finance, central banks and large private banks can function as aggregators, acting as intermediaries between lenders and borrowers. They collect money and assets from lenders, giving them financial guarantees of asset security. After that, they provide loans to interested borrowers, such as individuals or smaller financial institutions, for a fee. A part of that fee is paid as interest to the lender, while some portion of the fee remains within the aggregator as a commission for its services.
What Is a DEX Aggregator?
Aggregators work pretty similarly in the world of DeFi. Still, instead of large banking institutions, the aggregator assumes responsibility for the interoperability of various DEXs included in its covered services list. Users registering on such aggregators can create one account and one wallet to access a broad range of DEXs without registering on each of them and linking their wallets to each exchange separately.
Thus, a DEX aggregator is a platform unifying the use of multiple decentralized exchanges with an all-in-one user account, enabling users to employ various crypto trading and investment strategies to maximize their gains. Besides, using an aggregator solves the problem of cumbersome registrations on various websites and minimizes cross-platform gas fees.
What Is Yield Farming Aggregator?
The concept of yield farming lies at the heart of DeFi aggregator design. Traders and owners of crypto property wishing to earn decent revenue from their assets stake or lend them into the liquidity pool for an interest rate. Depending on the coin’s popularity and demand among borrowers, the interest rate is dynamically recalculated, giving the investors considerable returns. Once the lender decides to stake their coins for yield farming, those coins are blocked on their account, and they can no longer trade or exchange them. If they want to unblock the crypto-funds, they need to liquidate the smart contract and stop receiving revenues from yield farming.
With a DeFi aggregator at hand, traders and investors don’t need to search through numerous DEXs to find the best yield farming terms. By registering on the aggregator’s website, they get a bird’s eye view of all available deals across multiple DEXs, thus staking their coins into the pool with the best interest rates and conditions. The popularity of such all-in-one, aggregate solution for crypto investors has contributed to the rise of revenues collected from DeFi projects globally, with the monthly payments to participants of yield farming initiatives exceeding $25 million.
Advantages of DeFi Aggregators for Users
DEX aggregators have recently emerged in response to the users’ need for better usability and convenience. Thus, experts outline the following benefits of using aggregators instead of standalone DEXs or CEXs:
DEXs have emerged as a solution to excessive control and lack of decentralization that users observed at CEXs. Though many CEXs remain globally popular, with millions of users coming to them for added oversight and protection, most crypto owners want more privacy and decentralization in their operations with assets. DEXs offer a greater degree of decentralization, but because they are only emerging on the blockchain market, there are small liquidity pools on each of them. So, a holder of a substantial sum in crypto assets or the one wishing to buy lots of coins or tokens can move the price considerably or simply be unable to complete the transaction. Thus, pooling several DEXs into one aggregator creates the conditions for better liquidity, thus ensuring that operations occur without liquidity restrictions.
An aspect related to low liquidity is that of slippage. The latter means that you move the price significantly upward or downward once you want to conduct some large-scale operation. Thus, as a result of your transactions, you end up buying or selling assets at a price significantly different from the one you planned. With better liquidity, the price slippage is minimal as even large-scale orders rarely cause dramatic price changes at once.
Again, DEXs are much better than CEXs in terms of privacy and confidentiality. Users don’t store their assets in the on-site wallets, thus retaining full control over their possessions and not risking losing everything as a result of a hacker attack.
Better Trading Conditions
Traders conducting operations within one platform are usually limited by the terms present there. So, they mostly need to agree to the current prices rather than go through the hurdles of registering on other platforms. With an aggregator, you always have access to the best price offers on multiple DEXs, choosing where to trade at any given moment and getting the best prices.
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Top 5 DeFi Aggregators List
Now, to illustrate what a good DeFi aggregator should look like, let’s review the top 5 aggregators attracting the largest number of users to date due to their extensive functionality and an appealing set of features.
Matcha boasts of integrating the largest number of DEXs in one place – to date, there are 23 standalone platforms unified here. This impressive effect is achieved by the use of 0x API technology, allowing hassle-free integration of DEXs on various blockchain protocols.
This aggregator compiles current price offers for numerous coins in a single dashboard to let its users get the best price for their assets. It also has a native coin, 1INCH, which gives unique benefits to the platform’s users. The latter can earn 1INCH coins by contributing to the liquidity pool of the aggregator.
Zerion is known in the crypto world for its intuitive, appealing dashboard and the possibility to trade token LP shares and Vault in single transactions. Here, users can stake their USDT and DAI coins to get passive income from their capital. Besides, the aggregator offers the ease of transacting crypto assets due to the integration of numerous popular DEXs, like Curve, Compound, and SushiSwap.
The most appealing part about Zapper is its richness of features. The dashboard of Zapper includes tons of offers from all popular exchanges, always letting you strike a lucrative deal by Zapping In and Out of a position. Besides, it hosts probably the largest database of farming options compiled from top DEXs, including Uniswap, Sushiswap, Curve, and the like.
With a unique, eye-pleasing design and an unusual approach to the use of space, DeFi saver gives much valuable information to users about their assets’ performance and returns. Information is available from MakerDAO, Compound, and Aave, always giving a complete snapshot of various protocols’ current operations.
How to Build a DEX Aggregator?
Once you decide to develop your own DeFi aggregator, it’s critical to understand the phases that your project should pass, from an idea to a market launch. Such platforms have to guarantee complete security to users to be successful and at the same time possess a sleek, intuitive design for better usability. Thus, all phases and project aspects require careful planning with a qualified blockchain development team.
The discovery stage is essential in all large-scale, costly projects as you need to double-check that there is an audience and a demand for such products. Once you research the niche, you see what your competitors have, the pros and cons of their resources, the current gaps in the competitor platforms, and what unique value you can deliver with your project. Based on this, you can determine your project’s specifications and formulate a technical task for developers.
Design is crucial as it allows users to navigate through your aggregator easily and quickly. If your resource is navigable and intuitive, you can attract many more users and build a loyal audience. Complex, cumbersome interfaces usually push users away as they may confuse people, complicating their trading operations.
All DeFi aggregators have smart contracts at their basis, which enables their automated, decentralized functioning. Thus, the task of blockchain developers is to build proper algorithms for the aggregator’s daily operations, including the blockchain platform for the aggregator and interoperability protocols enabling the integration of multiple DEXs on one platform.
Since DeFi aggregators are first of all about money, it’s necessary to test that everything works flawlessly and that total security is guaranteed before welcoming real users. At this stage, testers should examine every aspect of the system to detect and rectify bugs and operational issues. After thorough testing, the product is ready for a market launch.
Key Features a DeFi Yield Aggregator Should Possess
Whatever the design of your DeFi aggregator is, you need to keep the bare minimum of requirements in mind.
- Signup/ sign in tabs – users need to be able to join the platform or enter their personal cabinets to perform operations.
- Dashboard – on any website, a dashboard is its main interface displaying the available features and operations. The simpler it looks, the easier is user navigation.
- Exchange feature – most users come to DeFi aggregators with an intent to exchange their crypto assets for other assets or fiat money. Your platform should provide real-time exchange rates and commissions for the users to make informed decisions and choose the best deal among different DEXs.
- Analytics – traders rely on the historical data and analysis of previous transactions with different assets. So, you should offer analytical information to aid users in their decisions.
- Liquidity pool data – a liquidity pool is a distinctive feature of DEXs, allowing better liquidity of operations for many users. Those who stake their assets into liquidity pools and receive remuneration for such activity need to receive all relevant updates about it.
What is an aggregator platform in simple words?
An aggregator is a resource uniting several websites of a similar kind so that the user gets all-in-one access to their features without the need to register at each website separately. In terms of DEX aggregators, the benefit is using one website and one wallet to complete operations on different DEXs.
How do yield farming aggregators work?
Yield farming is the practice that investors and traders in the crypto world use to lend and stake their crypto assets and receive passive income from those operations. When involved in yield farming, users literally deposit their crypto belongings to the aggregator’s liquidity pool, locking them for personal use but giving other users (borrowers) access to those funds in return for interest.
What are the flaws of DeFi aggregators?
A significant downside of DeFi aggregators is the gas fee that users need to pay for the inter-currency transactions. As ETH is reaching all-time highs, user fees rise together with the ETH value, sometimes exceeding the standard transaction fees by 150%. Some platforms have already addressed the issue by creating gas tokens or cubes inside their platforms, thus reducing user fees by half. However, users still need to be careful about transactions as wrongful actions or experiments can cost them a lot of money. Still, the higher fee compared to using separate DEXs is a good tradeoff in exchange for the improved efficiency, convenience, and speed of execution that users receive on the aggregator platforms.