A DeFi aggregator is a platform that leverages multiple different DEXs and implements various buying and selling strategies to help users maximize their profits while reducing high gas fees and DEX trading commissions.
DeFi aggregators account for a growing percentage of total DEX volume (courtesy Dune Analytics).
Popular DeFi aggregators 1inch, 0x, and Paraswap facilitate approximately $1.2 billion in weekly volume.
Accordingly Dune Analytics dataIn 2023, the number of new users, daily transactions and daily volumes have skyrocketed, reaching around $10 billion in weekly volume, dominated by Ethereum-based DEX aggregators.
Dune Analytics data August 2023
What is yield farming?
To better understand the utility of a DeFi aggregator, it is helpful to gloss over the concept Yield farming.
Yield farming (noun): a methodical approach to lending and staking cryptocurrency assets in the locations that provide the highest returns and rewards. Yield farming requires a cryptocurrency holder to lock their funds in a smart contract that determines how much and how often a lender will receive their rewards.
Without a DeFi aggregator, a yield farmer would click through several different lending pools and decentralized exchanges like Aave and Compound, manually comparing the best interest rates and Cryptocurrency tokens available options and the migration of the funds themselves.
Where do DeFi returns come from? In theory, the other side of the decentralized finance equation is for a borrower to take out a loan using their own cryptocurrency as collateral. Most often, these borrowers need funds for liquidity on decentralized exchanges.
These returns tend to be much higher on average than more traditional investments, but come with much higher risks.
How yield farming works
The majority of yield farming is typically done by lending ETH or an ERC-20 token via a decentralized, non-custodial money market protocol.
Yield farming and the tokens it generates can be a risky endeavor. Thats how it works:
Step 1: Add money to a liquidity pool. These are smart contracts that hold the funds themselves, and the pools operate a marketplace where users can exchange, borrow, or lend tokens.
Step 2: Once you add your money to a pool, you become a “liquidity provider” and start generating interest through fees.
Step 3: Next, you have the option to close a leveraged yield farming position. To do this, connect to your wallet and make sure your network is set to the chain in question. The “Your Positions” section displays your active positions. You need to select a position you want to close and click “Close Position”. Wait for the transaction to process and you should be able to see the tokens back in your wallet.
The best DeFi aggregators
DeFi Aggregator Definition: Instead of having to manually search multiple pools, DeFi users can use a DeFi aggregator to access a wide range of decentralized exchanges and trading pools from a single dashboard that pulls information from a variety of exchanges and automated market makers.
1 inch
1inch is a well-known DEX aggregator that specializes in finding the best crypto prices compared to various decentralized exchanges. The platform was launched with its own governance token called 1INCH. The main way you as a user can earn 1INCH tokens is by providing liquidity to the liquidity platform.
1 inch DeFi interface
The token is based on Ethereum and the aggregator sources liquidity from different DExs, meaning you can get better token swap rates than you would on a single DEX.
1inch was founded by Sergej Kunz.
1 inch can be accessed https://app.1inch.io/.
Zap
Zapper allows you to manage DeFi assets and liabilities through a simple interface and is widely considered one of the most intuitive DeFi aggregators – users can provide various DeFi positions with a single click.
Zapper's user interface
Users can enter and exit DeFi positions through features called “Zapping In” and “Zapping Out”.
Zapper integrates with multiple DeFi platforms such as 1inch, Aave, Alchemix, Alpha and more, enabling portfolio rebalancing by shifting capital to other platforms. Portfolio rebalancing offers benefits compared to simply holding cryptocurrencies, and the strategy implemented by Zapper helps you minimize risk by rebalancing your portfolio over specific time periods.
Zapper even has a multi-pooling feature that allows for diversification in asset distribution.
Zapper was founded by Seb Audet and Nodar Janashia.
Zapper can be accessed at Zapper.Fi
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Zerion allows traders to discover the potential of every asset in the market and trade at the best prices from a single dashboard.
Interface of the DeFi aggregator Zerion.
The app tracks over 50 protocols, making it easier to find less popular tokens.
It also sources liquidity from major decentralized exchanges, allowing users to access liquidity pools and even automated strategies with a single transaction. This means they can exchange assets and send them to another wallet within a single transaction.
Zerion was founded by Vadim Koleoshkin, Alexey Bashlykov and Evgeny Yartaev.
Zerio can be accessed via https://app.zerion.io/.
Plasma.Finance
Plasma.Finance allows you to manage your portfolio, fiat on/off ramp, liquidity pools, DEX and SWAP aggregator, lending and borrowing, and cross-chain asset swap through a single interface.
Plasma.Finance’s DeFi interface
It is one of the easiest ways to buy and sell tokens as it allows credit card or bank integration. This is done through a partnership with Plasmapay, rampAnd simplex.
Plasma.Finance was founded by Ilia Maskimenka.
Plasma.Finance can be accessed via Plasma.Finance.
Matcha
Matcha is a DeFi platform designed to provide crypto traders with the best rates on all cryptocurrency exchanges through the use of a proprietary 0x API technology that checks 23 decentralized exchanges (DEXs) simultaneously.
Matcha’s DeFi interface
It works with 0x, Uniswap, SushiSwap, Curve, Kyber, Balancer, Mooniswap, Bancor, mStable and some other coins. Users can search 23 exchanges simultaneously and route their orders intelligently to trade safely and without hidden fees.
No account is required and there are no trading limits, deposit requirements or withdrawal fees.
Matcha was created by Will Warren.
Matcha can be accessed at https://matcha.xyz/.
How to use DeFi for free
You may find that just experimenting with DeFi protocols and aggregators quickly becomes expensive due to the Ethereum network's gas fees.
Some aggregators offer DeFi simulators, meaning the dashboard allows you to play around with fake Ethereum or other tokens generated through the mock simulation.
The Defiant has a great explainer video on how to use the DeFi simulator feature on another DeFi aggregator called InstaDapp:
Final Thoughts: The Evolving Role of the DEX Aggregator
An aggregator fetches the best prices from different DEXs, so you don't have to check anything manually.
This gives you the opportunity to make an informed decision about what to grow next much more quickly. DeFi aggregators are a popular innovation that has significantly simplified the DeFi landscape for both beginners and experts.
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