How to choose a DEX aggregator

There are more than 130 decentralized exchanges (DEXes) currently in operation. That’s a lot of choices when it comes to picking where to trade in DeFi. To cope with the explosion of DEXes, a new industry emerged: DEX aggregators. These unique projects search lots of decentralized exchanges on your behalf to find the best prices for your trades.

This has been a game changer for people looking to find the best prices for their trades. But with the proliferation of DEX aggregators comes a conundrum: how to choose the right one for you?

There are lots of different factors to consider before choosing to trade with a specific aggregator. That’s why in this article we’re going to walk you through the key features of DEX aggregators, and how to decide which one is right for you.

The DEX aggregator advantage over traditional DEXs

A DEX aggregator is a platform that searches multiple decentralized exchanges to find the best prices for your trades. In the world of crypto, the price of an asset will vary depending on where, when and what medium you use to make a trade.

But finding the best price manually can be time-consuming. This is where a DEX aggregator comes in. They provide a single platform where multiple options for buying and selling can be seen on one page. They search platforms such as Balancer, Uniswap, and others for the best price for your trade, and you can complete a trade without having to visit those sites yourself. Typical examples include, 1inch, Matcha, or ParaSwap.

DEX aggregators offer a number of advantages over just using DEXs:

• Liquidity access: Because aggregators pull liquidity from multiple DEXs, they are better able to find the deepest liquidity for your trade. That means less slippage, and a higher trade success rate.

• Cost efficiency: Aggregators pick the best route for your trade, which means you can find the best price for your trade with the lowest fees.

• Convenience: A DEX aggregator does the hard work for you of searching multiple exchanges to find the best route for your trade, all within one interface.

• Advanced features: DEX aggregators often layer unique features on top of the DEXs they aggregate. Things like MEV protection, batch auctions, and gas optimizations are all options you can utilise.

Evaluating a DEX aggregator

Before picking the DEX aggregator for you, there’s a few things you need to consider:

Defining your trading needs: are you a whale or a minnow? Do you only trade popular tokens or are you looking to up your meme coin game? Are you looking for the next big project or looking to make marginal gains on more established ones? These questions can help you work out the best DEX for you. That’s because each DEX, and each DEX aggregator has strengths, but also weaknesses, depending on what you’re looking to trade.

How simple are they to use? If you’re a pro and used to navigating the intricacies of DeFi, you’ll be happy to get into the weeds of creating advanced order types and parameters. But if you’re a newbie who just wants to do simple swaps, some platforms may not be suitable.

Where do they source their trades from? Each DEX aggregator will have a preference for where and how it finds the best route for your trade. While some will only source from the larger DEXes, others will focus on less well known channels, while some will be able to look into private liquidity pools for the best ways to execute your trade. We’ll explain more about that one later.

What to consider when choosing a DEX aggregator

Below we’ll explore what you need to consider before choosing the DEX aggregator that works for you.

Your specific goals and needs

What tokens do you trade across what blockchains? Some DEX aggregators specialise in certain trading pairs or networks, so make sure to check to see if that particular aggregator suits your specific need. Another point to consider: are you looking for specific tools or customisation features for your trades? Some DEX aggregators are more technical than others.

Transaction fees and cost efficiency

Analyze the aggregator’s fee structure. Each DEX and DEX aggregator will have their own way of charging for their services. Some will charge gas fees, while others may charge platform fees, or a percentage of the trade.

Then there are other features such as gasless trading, where users can pay fees in the tokens they are trading instead of having to hold ETH to pay for gas.

Then there are other costs such as MEV. Looking for a DEX aggregator with MEV protection can help you avoid losing a percentage of your profits to MEV bots.

Advanced features and tools

Do you need advanced trading features to help you manage your portfolio? DEX aggregators have different feature sets to suit different types of traders. For example, at CoW Swap there are lots of different order types, including Market orders, Limit orders, TWAP orders, Programmatic orders, Milkman orders, and CoW Hooks, giving users the freedom to trade their way.

Security and support

While the world of DeFi is non-custodial, there are still security issues to consider. Doing your research on whether a DEX aggregator regularly has its smart contracts audited is vital. DEX aggregators can and do get hacked so checking what security assurances they offer is an important step when considering who to trade with.

Other protections to consider are whether the DEX aggregator protects you from MEV exploits like front-running and sandwich attacks. These exploits take hundreds of millions from traders every year, but there are DEX aggregators that do offer protection, like CoW Swap. While some DEX aggregators don’t.

Research and reviews

Any crypto citizen knows the importance of DYOR. Taking your time to read user testimonials and reviews can help you decide which DEX aggregators are better than the rest. But there are a number of other areas you should look out for too. The first is customer support. Whether its places like GitHub or Discord, checking out how well projects handle complaints or bugs can help increase your trust in a project.

Then there are things like roadmap activity, security updates and features. If a project is consistently upgrading, refining and releasing features, it’s a sign of a healthy ecosystem. If things have gone quiet? Tread with caution.

Popular DEX aggregators to consider

While there are lots of DEX aggregators out there, below are four of the biggest when it comes to trading volume.

1inch

• Multiple chain support

• Advanced features for sophisticated traders

• Gasless swaps

Paraswap

• Support for both ERC-20 and BEP-20 token standards.

• Integration with popular wallets including MetaMask and Ledger.

• Built in private market maker liquidity pools

Kyberswap

• Split trade feature to allow multiple sources to complete one order for optimal prices.

• Real time access to multiple trading paths.

• Tiered liquidity pools allow LPs to concentrate liquidity in certain trading pairs.

CoW Swap

• Best-in-class MEV protection.

• Profit optimization via batch auctions and fee savings.

• Transparent and secure token handling.

• Intent-based trading ensures best prices (more on that below)

The vulnerabilities of DEXes and DEX aggregators

While DEX aggregators have helped people navigate the dizzying world of DeFi, there are some areas where they still struggle to deliver the best prices possible. Below are a few areas where DEX aggregators are vulnerable to poor performance

• MEV: Maximum Extractable Value is where malicious actors manipulate transactions to extract profits. MEV costs traders hundreds of millions of dollars every year. This increases the cost of trading.

• Liquidity fragmentation: With more than 130 DEXes currently trading, liquidity has become increasingly fragmented meaning traders increasingly suffer from failed transactions and higher slippage costs.

• Security: DeFi, like many parts of the crypto space has its challenges when it comes to security. From coding errors, to unaudited smart contracts, DEX aggregators have been exploited in the past for gaps in their security.

• Centralization: While you might think DeFi doesn’t suffer from centralization, there are certain areas where it does. One of those is oracles. These are price feeds that help exchanges determine what price they should charge for certain assets. These oracles can be prone to vulnerabilities and attack. Most famously in 2023 when a price feed used by QuickSwap, a DEX was hacked and used to manipulate the price of tokens leading to losses of $188,000.

Intent-based DEX aggregators minimize the risk

Intent-based aggregators operate differently from other DEX aggregators. That’s because instead of placing orders by signing a raw transaction that executes directly on-chain (i.e. as happens on Uniswap or SushiSwap), CoW Swap users place orders by signing an "intent to trade" message that specifies parameters like the assets and amounts they would like to trade. The intent is a signed message which allows the solvers to execute a trade on behalf of the user using their specified assets and amounts.

Let’s take an example. When you use Uniswap and you want to make a trade, once you’ve chosen the tokens you want to trade with and hit ‘swap’ that order is submitted to the ‘mempool’ a public list of transactions awaiting validation. This is where MEV creeps in. Because the mempool is public, anyone can see your trade waiting and manipulate conditions around it to their benefit.

With an intent-based DEX however, your intent to trade is not made public, but remains private inside a pool of selected individuals who attempt to find the best trade on your behalf. That lowers the risk of your trade being manipulated.

There are other security benefits, too:

• Less smart contract risk: Because solvers take on the risk of interacting with smart contracts and AMMs, you as a trader don’t have to worry.

• Increased gas efficiency: All trades are credited directly to user accounts without withdrawals or deposits into an exchange contract. That means less is spent on executing your trade.

• Better security: Funds can only be transferred if a trader has approved the contract and signed an order to sell the given token for another.

• Order expiry dates: Signed orders have an expiry date and they can be cancelled on-chain, preventing exploits where orders can be re-executed by relying on old approvals.

Intent-based DEX vs traditional aggregators

Intent-based DEXes have a number of important distinctions over traditional aggregators. Below we explain some of the key differences.

• Execution model:

Traditional: Trades are often routed through predefined on-chain paths, meaning you might not be getting the best price for your trade.

Intent-Based: Solvers organically go and search for the most efficient execution strategy for your trade.

• Liquidity access:

Traditional: Relies solely on on-chain DEX liquidity. Many DEX aggregators solely rely on liquidity they can find on-chain.

Intent-Based: Intent-based aggregators can and do search both on-chain liquidity and off-chain sources. They can also explore peer-to-peer matching, too. More on that below.

• MEV protection:

Traditional: Your intent to trade goes into the mempool, meaning searchers are able to identify ways of making a profit from your trade through a number of different MEV attacks.

Intent-Based: Your intent to trade is hidden, and is only committed to the blockchain once the order has been filled. This means no one can prey on your trades to make an easy profit.

Beyond liquidity aggregation: the CoW Swap approach

CoW Swap is not built like other aggregators. That’s because it relies on third parties known as "solvers" to find the best execution paths for trade intents — signed messages that specify conditions for executing transactions on Ethereum and EVM-compatible chains. Let’s explain this a bit more.

When a trader signals their intent to trade, the CoW Protocol, the execution layer beneath CoW Swap, groups that intent to trade along with other intents into what’s called a batch. That batch is then turned into an auction where solvers compete to find the best price for the trades in the batch.

One method they do is by trying to find what’s called a Coincidence of Wants (CoW). This is when two traders want to make the same trade but from opposite sides. So a user with USDC wants to swap to ETH and another user with ETH that wants to swap it to USDC can be paired together in a Coincidence of Wants, or CoWs. CoWs allow users to bypass liquidity provider (LP) fees and also reduce gas fees since orders only interact with CoW Protocol's smart contracts.

If those solvers can’t find a CoW in the batch, they search all available on-chain and off-chain liquidity to find the best price for a set of trade intents within a batch.

Liquidity sources include:

• AMMs (e.g. Uniswap, Sushiswap, Balancer, Curve, etc.)

• DEX Aggregators (e.g. 1inch, Paraswap, Matcha, etc.)

• Private Market Makers - yes, our solvers can access private liquidity to help execute your trade.

Because your intent to trade is not published into the mempool, trading on CoW Swap also ensures you’re protected from MEV: a hidden tax on all types of Ethereum transactions. That means any time you want to transact in DeFi: from buying or selling an NFT, lending tokens to a liquidity pool, or swapping one token for another, a group of opportunistic users known as “searchers” have the opportunity to see your trade, and manipulate the criteria surrounding your trade to ensure they make profit, at your expense. Not with CoW Swap.

Another feature found in a meta DEX like CoW Swap is different order types. Most DEXes have some order type functionality, CoW Swap goes further. Below is a list of the different types of orders you can do with CoW Swap.

• Market orders - buy or sell tokens as soon as possible at the current market rate.

• Limit orders - set your own parameters for how much you are willing to buy and sell.

• TWAP orders - allows traders to spread their trade over a specified period of time.

• Programmatic orders.) - create conditional orders that execute when certain on-chain conditions are met (such as asset prices, wallet balances, time elapsed, and much more)

• Milkman orders- delayed execution trading: set and forget your trades for optimum conditions.

• CoW Hooks- allow users to pair any Ethereum action (or set of actions) with an order on CoW Protocol, leveraging the solvers to execute the actions together in the sequence.

In summary, CoW Swap brings you class-leading MEV protection, liquidity access and custom order types to let you do more with less worry.

Next steps

As you can see, CoW Swap takes a very different approach to helping find the best route for your trade.

Another element that sets it apart from all the rest is its use of a Coincidence of Wants as one way to execute a trade.

This term, which comes from economics, involves two parties - each holding the asset that the other needs - exchanging assets directly in an equivalent barter. Let’s break this down a bit further.

Any time you submit a trade on CoW Swap, solvers start looking for the best way to execute it. Before checking on-chain liquidity, solvers check other incoming orders on CoW Swap’s current batch auction to see if your trades can be matched peer-to-peer.

If someone wants to do a trade in the opposite direction to what you want, you are paired together, and the whole thing is executed gas free!

Want to know more? Check out our explainer on Coincidence of Wants.