Walking with Web 2.0, why do we need aggregators?

One thing that is common to both Web 2.0 and Web 3.0 is the user demand for products and tools that improve convenience and reduce search costs.

Amazon, for example, has built an empire by creating a convenient experience for customers to purchase goods and services online, optimizing costs and delivery times while creating a global marketplace that benefits buyers and sellers alike. Managing lower barriers to entry and increased competition comes at the expense of traditional business models, but it is good for the macroeconomy because it increases the productivity and purchasing power of retail customers.

In a parallel world where apps like Amazon don't exist, customers who want to buy a specific product online will have to browse different stores, interact with multiple front ends, and spend a lot of time comparing prices, quality, etc. offered by different vendors.

For these kinds of reasons, customers prefer to interact with Amazon rather than individual stores, and similarly Web 3.0 users prefer to interact with aggregators rather than individual smart contracts. The more complex the variety of products in the chain, the greater the user demand for the aggregator layer.

How important are aggregators today?

DEX Aggregator: The Future of On-Chain Trading

Source: https://dune.xyz/queries/428905

As the chart above shows, about 20% of monthly on-chain trading volume is generated through DEX aggregators, and there is a clear trend of growth. The reason this number needs more attention is, on the one hand, because the average aggregator represents non-robot trading volume (over 70% of aggregator volume is generated by non-robot traders). On the other hand, it is because bot volume represents about 50% of the total volume traded on the chain, which means that almost 1/3 of the volume generated by the average trader is done through DEX aggregators.

To support this claim, we use trading frequency as a proxy for robot trading. Assuming that robots trade much more frequently than regular traders, it is reasonable to speculate that addresses that trade less than 25 times per day are likely to be regular traders, while a relatively conservative speculation is that those that trade more than 25 times per day are likely to be robot traders, and those that trade more than 50 times are almost certainly machines.

Following this breakdown, as shown in the pie chart below (top), over 72.5% of aggregator transaction volume is generated by non-robotic addresses. On the other hand, the K-line chart below shows the total on-chain transactions, of which about 54.8% of the on-chain transaction volume is generated by non-robots.

DEX Aggregator: The Future of On-Chain Trading

DEX Aggregator: The Future of On-Chain Trading

Total transaction volume for different user groups (Ether, last 3 months data), source: https://dune.xyz/queries/429061/817641

Main functions of the aggregator

The aggregator basically performs two simple functions.

  • Easy Search
  • Execution Quality

The former refers to the fact that in some cases a user may also be interested in buying some tokens that are offered on exchanges he doesn't use regularly. And with Matcha or an aggregator like 1inch, the user can skip the step of repeatedly looking for a place to list a new token and buy any on-chain token directly.

These engines not only help users find newly listed tokens, but also ensure that any transactions are executed in the best possible way.

For example, here is a trade executed through 1inch. Instead of simply converting 20+ WBTC to USDC in a single trade, 1inch offers traders the best slippage and gas fees by converting multiple times and jumping multiple times, including four different tokens.

DEX Aggregator: The Future of On-Chain Trading

Source: https://etherscan.io/tx/0xe1d77f0a443f1ae130ec82b6f05f4675e735cc36a05cf629a29d12fc4250b473

As seen from the above example, aggregators are very useful for trading on Giant Whale. This should not be overlooked, considering that Giant Whales facilitate almost 90% of the on-chain transaction volume, despite accounting for less than 4% of DEX users.

DEX Aggregator: The Future of On-Chain Trading

DEX Aggregator: The Future of On-Chain Trading

Source: https://dune.xyz/momir/DEX-Users

Who are the leaders in the field of aggregators?

Before comparing the performance of different DEX aggregators, we should first note that benchmarking them is very difficult.

Because aggregators use different methods to record data on the chain, comparing their performance before normalizing the metrics may make the conclusions inaccurate.

Typically, the different aggregators measure transaction volume in their own way. For example, a user may choose to purchase $1,000 worth of ETH, yet this operation may generate more than $1,000 in volume due to a jump trade. Therefore, we have two different approaches to measuring transaction volume.

Given our focus on the aggregator's potential business model, pricing power and revenue potential, we chose to normalize the data according to the first approach. This is also because aggregators can only monetize the volume of transactions generated by users, and skip trades will be out of their pricing range.

So we first cleaned the aggregator data for those with exaggerated metrics. We then distinguished between protocols such as 1inch, 0x API and Paraswap, and end-user oriented products such as Cowswap, Metamask and Matcha.

The former group of protocols built their own applications in addition to providing APIs for various applications to interact with DEX. 1inch and Paraswap support front ends under the same brand, while 0x created another brand, Matcha, which relies on 0x's APIs to facilitate trading activity.

While it is possible to distinguish Matcha activity from 0x API total activity, we are currently unable to do a split of 1inch API from 1inch front-end, or Paraswap API from Paraswap front-end activity. Therefore, when referring to 1inch and Paraswap below, we assume that the data is the total activity generated through their APIs.

0x API, 1inch & Paraswap

In a nutshell, 0x API, 1inch, and Paraswap provide a direct window to on-chain liquidity for end-user facing applications, while also focusing on algorithmic optimization to provide the best experience for traders.

In terms of number of users, 1inch is by far the most competitive. However, since last December, the 0x API has gained more users relative to 1inch during this time. However, even though it is no longer the most favored API in terms of users, the 1inch API is still the largest aggregation period in terms of transaction volume, and in fact the giant whales still tend to use 1inch.

DEX Aggregator: The Future of On-Chain Trading

DEX Aggregator: The Future of On-Chain Trading

Source: https://dune.xyz/queries/262785/805765 & https://dune.xyz/queries/262785/805732

DEX Aggregator: The Future of On-Chain Trading

来源:IOSG风险投资公司 IOSG Ventures; Dune Analytics & Coingecko

Metamask Swap, Matcha & Cowswap

Although Metamask, Matcha, and Cowswap are different, we can also compare them to each other based on the fact that they are all ultimately serving end users. Matcha is a project incubated by 0x and is the front-end product of the 0x API.

It is interesting to conclude that the number of users of Metamask far exceeds the number of users of other end-user oriented aggregators. However, Metamask's transaction volume is consistently lower than Matcha's, indicating that the two applications have different user profiles.

DEX Aggregator: The Future of On-Chain Trading

DEX Aggregator: The Future of On-Chain Trading

Source: https://dune.xyz/queries/262785/811814 & https://dune.xyz/queries/262785/811810

DEX Aggregator: The Future of On-Chain Trading

Let's take a closer look at the differences between Matcha and Metamask users, Matcha's trading volume is mainly driven by mega whales (defined as average daily trading volume over $100k). At the same time, Metamask is not as dependent on mega whales, and the main trading volume comes from small and medium-sized retail investors.

We found that the top 10, 25, and 50 users of Matcha accounted for about 35%, 47%, and 58% of the total transaction volume, respectively, in the last 30 days. Of these, one address accounts for roughly 17% of the total transaction volume now. For Metamask, the largest 10, 25, and 50 users accounted for about 10%, 15%, and 19% of the total transaction volume, respectively, over the last 30 days.

DEX Aggregator: The Future of On-Chain Trading

DEX Aggregator: The Future of On-Chain Trading

Source: https://dune.xyz/queries/426331/812633 & https://dune.xyz/queries/300820/571179

Which user group is more popular?

For Giant Whale, between Matcha and Metamask, they chose the former so they also prefer Matcha, however, in terms of cashing in, Metamask is clearly more advantageous. Considering its user size is mainly small and medium users, Metamask's transaction volume is also more sustainable. At the same time, the giant whales are more price sensitive, and Matcha may receive resistance from the giant whales if it charges higher fees.

Metamask, as the most popular wallet in Ether, has a more solid moat than other user-side aggregators, so they can afford to charge up to 0.875% commission. However, the uncertainty lies in whether such a business model can support Metamask Swap's ability to reach millions of users and CEX-level transaction volumes.

Risks of DEX Aggregator


Uniswap has been the most dominant source of on-chain liquidity even before v3 went live. Even more dramatically, Uniswap's market share has reached 80% since v3's launch

DEX Aggregator: The Future of On-Chain Trading

Source: https://dune.xyz/queries/443564

Uniswap v3 offers the best prices for many cryptocurrency pairs, and Uniswap even adds automatic routing to ensure that users get the best prices by searching multiple liquid mining pools, while also ensuring that the overpaid gas fees are put to good use.

So, such an auto-routing feature is in some ways a form of aggregator, except that the breadth of transactions is limited. So the question we ponder is, is there room for aggregators in a market where Uniswap accounts for 80% of on-chain transactions and has no tendency to slow down?

How much of the aggregator's mobility actually comes from Uniswap?

Taking 1inch liquidity as an example, Uniswap accounts for 60% of the liquidity sources, followed by Curve, Sushiswap, Balancer and DODO.

We can interpret the following data in such a way that although Uniswap is the most competitive, users use the DEX aggregator 40% of the time as opposed to using Uniswap directly, which is preferable.

Beyond that, we need to be clear that the aggregator's intelligent order routing engine does not address trade slippage caused by MEV. As the routing technology is upgraded, it is expected that more and more volume will go to sources of 0 transaction slippage, such as RFQs, which will threaten the position of AMM to some extent.

DEX Aggregator: The Future of On-Chain Trading

Source: https://dune.xyz/queries/16257

Best case scenario

Overall, just because there is currently an absolute DEX leader does not mean that there is not a demand for using DEX aggregators. While the existence of an oligopolistic DEX scenario may make that demand impractical, such a scenario is almost impossible given that cryptocurrencies are open source and have relatively low barriers to entry.

In contrast to the above scenario, considering that public chains will simplify on-chain behavior even more, the probability is that on-chain competition will become more intense in order to make the value back to users as well as the experience better.

In terms of auto-routing, adding more liquidity sources, such as RFQ, is an improvement for auto-routing technology. Besides, cheaper public chains and Rollup will also be good for RFQ development, and more fierce competition will be generated on liquidity sources.

There are two main reasons for this.

The first point is relatively well understood, because RFQ guarantees 0 slippage, so the longer the order processing time, the higher the risk for the market maker, so the quotation of the main chain of Ether will be much more conservative compared to L2.

For the second point, once gas fee is no longer an issue, it is foreseeable that a large number of end-user oriented applications will connect to the aggregator's API.

That said, the future could see more and more, centralized, regionalized, compliance-required front-end products that are customized to address mobility (which aggregator APIs can address) while also taking into account differentiation based on different geographic locations.

These apps can be likened to centralized exchanges, and the difference is that these apps are designed without infrastructure in mind, focusing only on improving the user experience and creating a loyal user base.

The increasing flow of orders being routed to the aggregator API creates additional incentives for market makers to access the RFQ, further optimizing prices and promoting better competition.

All of these factors create the ground for a more competitive DEX environment, so it is logical to strengthen the market positioning of aggregators.

In the future it is likely that most manual traders will use DEX aggregators such as Matcha, 1inch, Cowswap or other similar products to complete trades, with DEX acting as a back-end like application. Curve.fi is a similar product on the market today.

DEX Aggregator: The Future of On-Chain Trading

FYI: The above picture shows the UI design of Curve.fi

In this interface, aggregators offer higher value than liquidity sources, such as attracting loyal users willing to pay for convenience, while mainstream liquidity sources will be more likely to jockey for more in the underlying order flow.