Decentralized exchanges and aggregators drive DeFi growth


Despite the overall downturn in the cryptocurrency sector, as the decentralized financial sector continues to grow, decentralized exchanges (DEX) and aggregation services have recently shown sustainable growth. At the same time, in the DEX sector, aggregation services have also made significant progress.

DeFi is still strong

When Bitcoin (Bitcoin) exchange rate May fell sharply, Some observers worry that this may cause a major blow to the entire encryption industry. However, this did not happen. A few months later, the industry is still developing, and its arguably the most promising field—decentralized finance—continues to grow.

In DeFi, decentralized exchanges have recently become the main growth driver, putting centralized exchanges (CEX) aside.

From January to May, the total transaction volume generated by decentralized exchanges three times According to CoinGecko’s data, it increased from approximately US$100 billion to US$300 billion, and then dropped to approximately US$200 billion in June. At the same time, during the same period, the growth of the CEX sector was much more modest, from US$1.2 trillion to US$1.3 trillion.

The DEX section also reported an increase in the number of users. Currently, Uniswap is the leader in this segment, with about 2.5 million unique users (addresses), followed by 1inch with 600,000 users and Compound with about 360,000 users.

At the same time, the user base of lending agreements such as Compound and Aave has barely grown since the beginning of the year.

The rise of DEX aggregators

But even in the DEX segment, the growth is unevenly distributed, with automated market maker-based protocols and DEX aggregators (such as Uniswap, 1inch, SushiSwap, and 0x) reporting stronger numbers than most other projects.

A major trend observed in recent months is that more and more users prefer to use external aggregation services, such as MetaMask or DEX aggregators, instead of trading directly on DEX. As a result, the volume of trade in such services has been on the rise.

The DEX aggregator has been able to provide users with a higher exchange rate than the exchange rate obtained by direct exchange on Uniswap, SushiSwap and other DEX. As a result, users are increasingly choosing DEX aggregators, thereby increasing their market share. Since the beginning of 2021, the share of DEX aggregators in total swap volume has doubled, increasing from 7.5% to 15%.

Cost reduction is a factor

One of the reasons why users are increasingly choosing DEX aggregators over DEX is the lower fees. In general, swaps involve two types of fees: transaction fees charged by the project and gas fees that are automatically applied to any transaction on the Ethereum network.

If you use a DEX aggregator to exchange encrypted assets, you still need to pay the DEX transaction fee, but the aggregation service usually does not charge any fees on top of this. However, DEX aggregators usually take additional steps to help users reduce gas costs, which can be considerable.

The chart below shows the natural gas costs incurred by users of several projects, the total cost of natural gas in USD divided by the swap amount in July 2021.

go ahead

Despite all the obstacles, the DeFi field is operating strongly, and there are no signs that it will slow down significantly.

However, with the widespread adoption of DeFi services, competition for customers will become more intense, and projects that provide higher efficiency, more attractive conditions and better user experience will become winners.

This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.

The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Sergey Kunz He is the co-founder of 1inch Network, a distributed network of decentralized protocols. From 2015 to 2019, Sergej worked at consulting company Mimacom, running projects for major clients such as Bosch, Siemens and Porsche. After joining Porsche full-time, he gradually turned to cybersecurity.He also co-hosted a YouTube show Crypto lunaticIn the 2019 hackathon, Sergej and Anton Bukov, the ultimate co-founder of 1inch Network, developed a prototype encrypted exchange aggregator that became the foundation of the entire network.