Decentralized finance aggregators are growing in popularity in 2021 as the embryonic industry continues to expand.
Delphi Digital analyst Ashwath Balakrishnan has observed that year-to-date growth for DeFi aggregators puts the sector on track to dwarf 2020’s figures.
The researcher noted 1inch, Matcha, and Paraswap facilitated a total $9.3 billion of volume across 2020 — but that as of Feb. 16, the 1inch exchange alone had recorded close to $10 billion in volume in just the first 46 days of 2021.
With liquidity being the lifeblood of decentralized finance markets, competition for collateral increases, and a market for aggregators to improve user experiences has emerged.
A DeFi aggregator is a platform that gathers information and prices from various other exchanges and automated market makers and presents them on one single interface. High gas fees and DEX trading commissions have also prompted users to seek out aggregators to get the best rate for their token swaps.
Some of the most popular, and fastest-growing, include the 1inch exchange, Matcha, and Paraswap. 1inch aggregates liquidity from over 20 decentralized exchanges according to the researcher.
According to Dune Analytics data, the number of new users, daily transactions, and volumes have surged since the beginning of the year. From $325 million per week in mid-December, 1inch is now processing 450% more, with $1.8 billion recorded for the week ending Feb. 14.
Balakrishnan noted that Matcha, which uses the 0x protocol, is also becoming a “hotspot for DeFi traders thanks to its sleek UI." The aggregator has grown from averaging $1 million in daily volume in its first month, July 2020, to over $40 million a day, in January 2021.
The researcher noted that aggregators often provide better token swap rates on smaller DEXes and do not always default to the largest ones;
“Uniswap and Sushiswap lead general purposes DEXes in volume and liquidity. But if you've used an aggregator for fairly large trades, you would notice you get routed to other DEXes too,”
He added that 38% and 36% of volume on Kyber Network and Bancor respectively has come from 1inch between December 2020 and January 2021. This is due to Bancor's single-sided AMM and Kyber's quote-based model being more efficient for larger trades, he added.
Other DeFi aggregators such as Zapper.fi and Zerion.io provide vast improvements to user experience, aiming to become the “front page of DeFi”. These have also seen huge growth as yield farmers and token swappers seek the best deals on the market.