Decentralized exchanges and aggregators drive DeFi growth

Published at: Aug. 31, 2021

As the decentralized finance segment continues to gain steam despite an overall slump in the crypto space, decentralized exchanges (DEXs) and aggregation services have recently shown sustainable growth. Meanwhile, within the DEX segment, aggregation services have made remarkable progress.

DeFi still running strong

When Bitcoin’s (BTC) exchange rate dropped dramatically in May, some observers feared it could deal a major blow to the entire crypto sector. However, that didn’t happen. A few months later, the industry is still chugging along, and its, arguably, most promising area — decentralized finance — continues to grow.

Within DeFi, decentralized exchanges have recently been the main growth driver, pushing aside centralized exchanges (CEXs).

Between January and May, the total trading volume generated by decentralized exchanges tripled from approximately $100 billion to $300 billion, before dipping to about $200 billion in June, according to CoinGecko. Meanwhile, during the same period, the CEX segment saw much more modest growth from $1.2 trillion to $1.3 trillion.

The DEX segment has also reported an uptake in user numbers. Currently, Uniswap is the segment’s leader with about 2.5 million unique users (addresses), followed by 1inch, which has 600,000 users, and Compound with about 360,000 users.

Meanwhile, the user bases of lending/borrowing protocols, such as Compound and Aave, have hardly grown since the beginning of the year.

The rise of DEX aggregators

But even within the DEX segment, growth has been 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.

One major trend observed in recent months is that more and more users prefer to use outside aggregation services, such as MetaMask or DEX aggregators, as opposed to trading directly on DEXs. As a result, trade volumes on services of this kind have been on the rise.

DEX aggregators have been able to offer users better swap rates than what they would get by swapping directly on Uniswap, SushiSwap and other DEXs. Therefore, users have been increasingly opting for DEX aggregators, boosting their market share. Since the beginning of 2021, the share of DEX aggregators in terms of total swap volume has doubled from 7.5% to 15%.

Lower fees as a factor

One of the reasons that users are increasingly choosing DEX aggregators over DEXs is lower fees. Overall, two types of fees are involved in swaps: trading fees charged by projects and gas fees automatically applied to any transaction on the Ethereum network.

If you swap crypto assets using a DEX aggregator, you still have to pay the DEX’s trading fee, but aggregation services don’t normally charge anything on top of that. However, DEX aggregators often take extra steps to enable users to reduce their gas costs, which can be quite substantial.

The chart below displays gas costs incurred by the users of several projects as total gas cost in U.S. dollars divided by the July 2021 swap volume.

Moving forward

Despite all the hurdles, the DeFi segment is running strong, and there are no signs that it will slow down substantially.

However, as DeFi services gain more mass adoption, the competition for customers will become tougher, and projects offering higher efficiency, more attractive conditions and a better user experience will be the winners.

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

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

Sergej Kunz is the co-founder of the 1inch Network, a distributed network of decentralized protocols. From 2015 to 2019, Sergej worked for consulting firm Mimacom, running projects for major customers such as Bosch, Siemens and Porsche. After joining Porsche on a full-time basis, he gradually shifted toward cybersecurity. He also co-hosted the YouTube show CryptoManiacs. At a 2019 hackathon, Sergej and the 1inch Network's eventual co-founder, Anton Bukov, developed a prototype crypto exchange aggregator that became the basis of the entire network.
Tags
Related Posts
How this crypto project is bringing all things DeFi under one roof
A crypto project says it is changing the game of decentralized portfolio management — and delivers an all-in-one platform that brings everything users need under one roof. DEXKIT has been built to provide a genuinely user-friendly way of managing and trading digital assets. The application features a DEX aggregator, professional exchange, NFT marketplace, and dashboard where users can monitor asset performance. The DSwap aggregator continually monitors more than 30 decentralized exchanges on the Binance Smart Chain and Ethereum networks, delivering up-to-the-minute crypto data. Swaps can be filled by multiple protocols at once which can result in more tokens for trades. …
Decentralization / June 17, 2021
For decentralization, speed and low fees, crypto payments pioneer turns to BSC
The crypto payment solutions provider that introduced blockchain-based subscription billing to credit card-harried merchants is moving to the Binance Smart Chain. PumaPay pioneered cryptocurrency-funded payments with its PullPayment Protocol, a series of smart contracts that opens up the use of flexible billing tools like recurring subscriptions and automated account balance top-ups that actively “pull” payments from clients. By doing away with the need to ask customers to actively “push” out crypto payment every month, it gives online merchants an alternative to the high fees and restrictive rules of fiat credit card companies that were previously the only source of “set …
Decentralization / June 7, 2021
‘DeFi summer’ sees project unlock access to the hottest farms and games
This summer is going to be DeFi’s biggest and best, according to one project. KardiaChain says it has launched a brand-new destination for crypto enthusiasts — delivering access to the hottest farms. The team are hoping to build on the success of summer 2020, which was instrumental in helping decentralized finance become an established sector within the crypto community. Innovative concepts such as automated market makers came to fruition, the total value locked in protocols surged, and we began to see how financial power truly belongs to the people. This year, KardiaChain is hoping to ensure that history repeats itself …
Decentralization / July 15, 2021
New exchange offers liquidity mining ahead of key features launching
A high-frequency trading company has launched liquidity mining for holders of its native token. The new service is hosted on Uniswap, meaning users can still take advantage of the familiar, simple interface that this decentralized exchange provides. Black Ocean’s CEO, Andrei Grachev, says this feature gives users a chance to provide liquidity to decentralized markets — unlocking a wealth of new opportunities. Co-founder Vladimir Demin added: “Liquidity mining for FLy is a very important step on the development roadmap. As the FLy ecosystem is growing, we wish to give more benefits for early contributors. We also believe that taking a …
Decentralization / May 5, 2021
What are the best altcoins you can buy for under $3? | Find out now on The Market Report
“The Market Report” with Cointelegraph is live right now. On this week’s show, Cointelegraph’s resident experts discuss the best altcoins to buy for under $3. But first, market expert Marcel Pechman carefully examines the Bitcoin (BTC) and Ether (ETH) markets. Are the current market conditions bullish or bearish? What is the outlook for the next few months? Pechman is here to break it down. Next up: the main event. Join Cointelegraph analysts Benton Yaun, Jordan Finneseth and Sam Bourgi as they discuss the best altcoins to buy for under $3. First up, we have Bourgi with his first pick of …
Decentralization / March 29, 2022