What is DeFi Aggregator?
Decentralized finance is spread out across blockchains like Ethereum and Binance Smart Chain, and within each blockchain is an ecosystem of siloed financial protocols. While these individual protocols offer great returns on lending your crypto, part of the appeal of DeFi is swapping, selling and trading crypto at the best rates, which can be challenging when financial information is spread across multiple protocols.
Enter DeFi aggregators, which bring trades across decentralized exchanges (DEXs) into one place, saving users time and increasing efficiency for better trades.
An aggregator pulls the best prices from across the DeFi landscape — including DEXs, lending services and liquidity pools — into one place so that users can optimize their trades. Without using an aggregator, users have to individually visit various exchanges, compare trading prices on each exchange to get the best deal and then manually execute each transaction using smart contracts. Manually checking prices across exchanges for the best swaps does not allow for complex trading routes or mechanisms. Aggregators not only pull the best prices, but they allow users to compare and combine strategies by dragging and dropping blocks to create the best strategy.
DeFi aggregators identify and share successful trading strategies with their users who are then able to adopt these combos to their own DeFi trading strategy. In addition to these successful strategies, all transactions and combinations are visible to users to allow for a truly open, collaborative and transparent trading experience.
By collecting successful strategies and allowing traders to access them on a single platform, users of DeFi aggregators can save time and action trades quicker to take advantage of the most favorable yields.
One of the most appealing benefits of a DeFi aggregator is the ability to connect users with lucrative services like flash loans without the need to write any code or customize smart contracts. A flash loan is an uncollateralized loan where a trader borrows, exchanges and repays a debt in a single transaction using a smart contract. This is possible with no collateral because the loan will not execute without all parties borrowing and being repaid simultaneously, alleviating the risk of a borrower defaulting on the loan. A simple example of flash loans is performing arbitrage trades to make profit based on minor price differences between exchanges.
Without a DeFi aggregator platform, users would need to write and implement some of the code required to create the smart contract. By allowing traders to access these DeFi without writing a single line of code and presenting many successful DeFi trading strategies in real-time, DeFi aggregators make DeFi accessible to many who would otherwise be excluded from participating.
It is no secret that user experience is left out of many DeFi protocols. While many decentralized (DApps) offer promises of high yielding trades, it is often challenging for the average user to conceptualize and learn the intricacies of trading across multiple platforms and protocols. DeFi aggregators solve this problem by bringing the best trades to the user in one place.