DEX aggregator: the future of on-chain trading

原文标题：《 IOSG Weekly Brief | DEX 聚合器：链上交易的未来 #113 》

原文来源： IOSG

Part.1  DEX 聚合器：链上交易的未来

Author: Momir

Edit: James   

This article is for the purpose of industry learning and exchange only, and does not constitute any investment advice

With Web2.0, why do we need aggregators?

One thing that is common between Web 2.0 and Web 3.0 is the need for products and tools that increase convenience and reduce the cost of searching.

Amazon, for example, has built an empire by creating a convenient experience for customers to buy goods and services online, optimizing costs and lead times, while creating a global marketplace that benefits both buyers and sellers. Although lowering barriers to entry and increasing competition will come at the expense of traditional business models, it is good for the macro economy 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 specific products online would have to browse different stores, interact with multiple front ends, and spend a lot of time comparing prices and quality from different suppliers, among other things.

For such reasons, customers prefer to interact with Amazon rather than individual stores, and Web 3.0 users prefer to interact with aggregators rather than individual smart contracts. The more complex the variety of products on the chain, the greater the user need for an aggregator layer.

How important are aggregators today?

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

As the chart above shows, approximately 20% of on-chain transactions are generated through DEX aggregators each month, and there is a clear growth trend. The reason this number deserves more attention is partly because the average aggregator represents non-robot trading (more than 70% of aggregator trading is done by non-robot traders). On the other hand, bots account for about 50% of all on-chain transactions, meaning that almost a third of the volume generated by ordinary traders is through DEX aggregators.

To support this claim, we use transaction frequency as a proxy for bot trading. Assuming that robots trade much more frequently than ordinary traders, a reasonable guess would be that addresses that trade less than 25 times a day are likely to be ordinary traders, while a more conservative guess would be that addresses that trade more than 25 times a day are likely to be robot traders, and those that trade more than 50 times a day are almost certainly machines.

By this classification, as the pie chart (top) below shows, more than 72.5% of aggregator transactions are generated by non-robot addresses. On the other hand, the chart below shows the total value of on-chain transactions, of which about 54.8 percent are generated by non-robots.

Total volume of different user groups (Ethernet, data) in the past three months, source: https://dune.xyz/queries/429061/817641

The main functions of aggregators

Aggregators basically perform two simple functions:

- Easy retrieval

- Execution quality

前者指的是在某些情况下，用户也可能有意购买一些在他不经常使用的交易所上发售的 Token。而通过 Matcha 或类似 1inch 的聚合器，用户可以直接跳过反复寻找新 Token 上市的场所这个步骤，直接购买任何链上  Token 。

这些引擎不仅帮助用户找到新上市的 Token ，而且还确保任何交易以最佳方式执行。

例如，下面是通过 1inch 执行的一笔交易。1inch 没有简单地在一次交易中把 20 多个 WBTC 兑换成 USDC，而是通过多次兑换，多次跳空，包括四种不同的 Token ，来为交易者提供最佳的滑点和 gas 费。

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

As you can see from the example above, aggregators are very useful for the whale trade. Given that Orca accounts for less than 4 per cent of DEX users but drives almost 90 per cent of on-chain transactions, this should not be overlooked.

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

Who are the leaders in aggregators?

Before comparing the performance of the different DEX aggregators, we should first note the difficulty of benchmarking them.

Because aggregators use different methods to record on-chain data, comparing the performance of metrics before standardization can lead to inaccurate conclusions.

Typically, different aggregators measure transaction volumes in their own way. For example, a user may choose to purchase ETH worth $1000, but due to jump short transactions, this operation may generate more than $1000 in transactions. Therefore, we have two different ways to measure transaction volume:

Some aggregators measure transactions only from a user's perspective, as in the example above, accounting for $1,000.

Other aggregators count all jumps as their trading volume.

Given our focus on aggregators' underlying business models, pricing power, and revenue potential, we chose to standardize the data according to the first approach. This is also because aggregators can only monetize transactions generated by users, and jump trades will not be part of their pricing.

So we started by cleansing aggregator data for metrics that were exaggerated. We then differentiate between protocols such as 1Inch, 0X API and Paraswap and end-user oriented products such as Cowswap, Metamask and Matcha.

The former set of protocols built their own applications in addition to providing apis for various applications to interact with DEX. 1Inch and Paraswap support the front end under the same brand, while 0X created another brand, Matcha, which relies on 0X's API to facilitate trading activities.

While it is possible to separate Matcha activities from total 0X API activities, it is currently impossible to separate the 1inch API from the 1inch front-end, or the Paraswap API from the Paraswap front-end activities. Therefore, when referring to 1Inch and Paraswap below, we assume that the data is the total amount of activity generated through their API.

0x API, 1inch & Paraswap

In summary, 0X API, 1Inch, and Paraswap provide a direct window to on-chain liquidity for end-user applications, while also focusing on algorithm optimization to provide the best experience for traders.

In terms of the number of users, 1inch is the most competitive at present. However, since Last December, the 0x API has gained more users than the 1inch during this period. However, even though it is no longer the API favored by the most users, the 1inch API is still the aggregation period for the most transactions, and in fact The whale still prefers to use the 1inch API.

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

Source: IOSG Ventures; Dune Analytics & Coingecko

Metamask Swap, Matcha & Cowswap

Although Metamask, Matcha, and Cowswap are different, we can compare them to each other based on the fact that they are ultimately serving end users. Metamask and Cowswap already use all known apis and major sources of liquidity and can be called super aggregators. Matcha is an 0X incubator project that is the front end of the 0X API.

The interesting conclusion is that Metamask has far more users than other end-user-oriented aggregators. However, Metamask's transaction volume was consistently lower than Matcha's, indicating that the user profiles of the two apps were different.

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

Let's take a closer look at the differences between Matcha and Metamask users. Matcha's trading volume is largely driven by Orca (defined as more than $100K per day). Meanwhile, Metamask is not highly dependent on Orca, and its main trading volume comes from small and medium-sized retail investors.

We found that Matcha's top 10, 25, and 50 users accounted for approximately 35%, 47%, and 58% of total transactions, respectively, over the last 30 days. Among them, one address accounted for about 17 percent of total transaction volume. For Metamask, the top 10, 25 and 50 users accounted for about 10 percent, 15 percent and 19 percent of total transactions, respectively, in the last 30 days.

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

Which user groups are favored?

For the whales, between Matcha and Metamask, they choose the former, so they are more inclined to choose Matcha. However, in terms of liquidity, Metamask is obviously more advantageous. Metamask's transaction volume is also more sustainable, given that its user base is dominated by small and medium users. At the same time, Whales are more sensitive to price, and Matcha might resist charging a higher fee.

Metamask, ethereum's most popular wallet, has a stronger moat than other client aggregators, so they can afford to charge a hefty 0.875% fee. However, there is uncertainty as to whether such a business model can support Metamask Swap's millions of users and ceX-level transaction volume.

DEX aggregator risks

Uniswap

Uniswap became the most dominant source of on-chain liquidity before V3 went live. Even more dramatically, Uniswap's market share has reached 80% since v3 came online!

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

Uniswap V3 offers the best price for many cryptocurrency pairs. Uniswap has even added automatic routing to ensure that customers get the best price by searching multiple liquidity pools, while ensuring that overpaid gas fees are fully utilized.

Therefore, such automatic routing is also a form of aggregator to some extent, in addition to the transaction breadth limitation. So the question is, is there room for aggregators in a market where Uniswap accounts for 80% of on-chain transactions and shows no signs of slowing down?

How much aggregator liquidity comes from Uniswap?

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

We can understand the data in this way: although Uniswap is the most competitive, users are better off using the DEX aggregator 40% of the time than Uniswap directly.

In addition, it is important to note that the aggregator's intelligent order routing engine does not address the transaction slippage caused by MEV. As routing technology improves, it is expected that more and more of the volume will go to sources of zero-trading slipping-points, such as RFQ, which will threaten AMM's position to some extent.

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

Best-case scenario

In summary, the fact that there are absolute DEX faucets doesn't mean there isn't a need for DEX aggregators. While the existence of oligopolistic DEX might make this requirement impractical, such a scenario is highly unlikely given that cryptocurrencies are open source and have relatively low barriers to entry.

Different from the above scenario, considering that the public chain will simplify the on-chain behavior, in order to make the user value feedback and better experience, the high probability of the competition on the chain will become more fierce.

On the automatic routing side, adding more sources of liquidity, such as RFQ, is an improvement on the automatic routing technology. In addition, cheaper public links and rollups will also help the DEVELOPMENT of RFQ, and there will be more competition for liquidity sources.

There are two main reasons:

- With Rollup, market makers can quote more frequently and aggressively thanks to faster block finality.

- Rollup and cheaper public chains can create good positive cycles, increase on-chain order flow, and attract more market makers through RFQS.

The first point is relatively easy to understand because RFQ guarantees zero slip points, so the longer the order processing time, the higher the risk for the market maker, and therefore the quoted price of the Ethereum main chain will be much more conservative compared to L2.

On the second point, once gas Fee is no longer an issue, we can expect a number of end-user oriented applications to connect to the aggregator's API.

In other words, we will see more and more centralized, regional, compliant front-end products, and these customized needs will address mobility (which aggregator apis can address) as well as geographic differentiation.

These apps can be likened to centralized exchanges, but the difference is that they are designed with no infrastructure in mind, focusing only on improving the user experience and creating a loyal user base.

Increasing order flows routed to the aggregator API create additional incentives for market makers to access the RFQ, further optimizing prices and promoting better competition.

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

In the future, it is likely that most manual traders will use DEX aggregators like Matcha, 1Inch, Cowswap or other similar products to complete trades, with DEX acting as a sort of back-end application. Dividing responsibilities, DEX focuses on capital efficiency while aggregator is front-end user experience oriented. Curve.fi is a similar product currently on the market.

FYI: Above is 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 compete more on the underlying order flow.

Part.2 Investment and financing events

Matrix World has raised $5.5 million in angel funding at a $50 million valuation

* yuan universe

Meta-universe project Matrix World announced a $5.5 million angel round led by Tess Ventures, Everest Ventures Group, Com2Us and Y2Z Ventures at a $50 million valuation, Other investors include Sky9 Capital, Dapper Labs, Animoca Brands, Bonfire Ventures, Matcha, SevenX, SecondLive, Hash Global, LucidBlue Ventures and PANONY.

Mizar, a trading vehicle, closed a $3 million seed round, led by Nexo

* DeFi

Mizar, an intelligent trading tool, announced a $3 million seed round led by Nexo, Huobi Ventures, KuCoin Ventures, Gate Labs, MEXC, WOO Ventures, Spark Digital Capital, Shima Capital, Stakely VC, Evolve Capital, Kairon Labs, AU21 Capital, Tenzor Capital, NFT Tech, David Post, and Dean Thomas contributed.

GameFi project Tiny World has raised $2.5 million, including HashKey

* GameFi

GameFi project Tiny World has raised $2.5 million, according to its official Twitter account. HashKey, SNZ, Sky9 Capital, Everest Ventures Group (EVG), TokenPocket, Cipholio, Foresight Ventures, CoCOS-BCX and others participated in the round.  

Tiny World is a hybrid NFT and GameFi game that allows players to collect over 100 Tiny Hero NFT and make money.

DAO infrastructure project Squads completes $5 million strategic funding, led by Multicoin Capital

*  DAO

DAO infrastructure project Squads announced the closing of a $5 million strategic funding round led by Multicoin Capital, Jump Capital, Delphi Digital, Collab+ Currency, SeedClub Ventures, Volt Capital, etc. Squads also announced the launch of its main web site at the Solana Hacker House event in Moscow. Squads is an application that can be used to create decentralized autonomous organizations (DAOs) on the Solana blockchain. It is intended to be a collaboration infrastructure for Web3 native teams, ensuring that DAOs remain transparent while enabling decentralized collaboration.

Web3 infrastructure provider InfStones raised $33 million in Series B funding from Dragonfly Capital

* Web3

InfStones, a Web3 infrastructure provider, raised $33 million in Series B financing from SIG Haina Asia, Dragonfly Capital, Qiming Venture Capital, DHVC, 渶 Strategic Capital and A& T Capital and Value Internet Fund were among the investors. InfStones previously raised $12 million in seed and Series A rounds for A total of $4,500.

With this round, InfStones plans to triple the size of its team this year and expand its support to hundreds of blockchain protocols. InfStones aims to be the "AWS" of Web3, where users can run validator nodes, access on-chain data, and build decentralized applications on blockchain networks.

Web 3 infrastructure provider Aligned closed a $34 million funding round

*  Web3

Web 3 infrastructure provider Aligned has raised $34 million at an undisclosed valuation. The round was backed by GSR Ventures, Altium Capital Management, Calvary Fund, and angel investors including film producer and sports agent Happy Walters. The funding was primarily used to expand Aligned's high-performance computing business.

Animoca Brands has raised $4 million from Zodium, a NFT online game developer

*  Yuan universe

Zodium has raised $4 million in a private equity round led by Animoca Brands, Polygon, Kucoin Labs and GuildFi. Other investors include Brinc, TPX Ventures, UniValues Associates, DWEB3, Astronaut Capital, Vanda Capital, SL2 Capital, GBIC, Tayssir Capital, Basics Capital, ROK Capital, HG Ventures, Kyros Ventures, Parachain Ventures, Evernew Capital, Panony, Momentum 6. Gate. IO Labs, Polkastarter Labs, etc. Animoca Brands will become Zodium's second largest shareholder.

Part.3 Project progress after IOSG investment

Decentralized derivatives agreement SynFutures launches 2022 roadmap

* DeFi

SynFutures Protocol, a decentralized derivatives Protocol, has published its roadmap for 2022. V2 test net, perpetual futures contract and margin futures contract will be released in q1. The second quarter will see the launch of NFT derivatives NFTures and limit orders, and deployment to more EVM compatible blockchains. A V2 Beta will be released in q3.

Shanghai launches Conflux tree map blockchain public chain system 2.0

*  Layer 1

At the 2022 Shanghai Blockchain innovation promotion meeting and major results release conference, Shanghai Tree Map Blockchain Research Institute released the "Conflux tree map blockchain public chain system 2.0". As the third generation of public chain with the number of dynamic nodes ranking among the top three in the world, treemap blockchain will support the "meta-universe" and "Web3.0" industries to a large extent, release the production capacity of VR (virtual reality), AR (augmented reality), online games, artificial intelligence and other digital information industries, and promote the intensive leapfrog growth of the digital economy. At present, the number of accounts in treemap blockchain public chain system has exceeded 10 million, the number of smart contracts has exceeded 6,000, and the daily transaction processing can reach 300,000 to 500,000.

Multichain NFT Game Blockchain Monster Hunt has integrated Moonbeam

*  Layer 2

Multichain NFT Gaming Blockchain Monster Hunt announced that it has integrated into Boca smart contract platform Moonbeam Network. Blockchain Monster Hunt is a Multi-chain NFT game inspired by Pokemon Go. Users can Hunt NFT monsters in the game or purchase NFT from the market.

Interlay wins boca's 10th parallel chain slot auction

* Boca Ecology

The candlelight period for the 10th Polkadot network parallel chain slot auction ended at 9:44 PM yesterday. With Interlay in the lead throughout the candle period, after the "roll of the dice" ended, Interlay won boca's 10th parallel chain slot auction at 23:35 on February 24 with a lock of 2,751,900 DOT.

Polkadot has fixed the next 12 months slot auction time

* Boca Ecology

The Polkadot Council has approved Motion 158, scheduling the parallel chain auction for the rest of the year. Over the next 12 months, or four LP's, seven auctions were held on each LP, with the first two winners of the batch joining the Polkadot network immediately, and the next five winners joining the Polkadot relay chain in the next LP; Auction opening period: 2700 blocks (less than 2 days); Start a new auction every 172,800 blocks (12 days); 73,800 blocks (approximately 5 days and 3 hours) were left between the two auctions.

Boca Eco-project Acala will open Staking on March 3rd

* Boca Ecology

In a YouTube live today, Acala, A Boca Staking platform for DeFi smart contracts, reveals that ACA Staking will start next Thursday, March 3rd, Where Staking is rewarded by the surplus assets in the Acala Treasury that buy back ACA. Previously, Acala project mainnet was launched on January 25.

Kava will launch internal beta version of Ethereum Common Chain Alpha

* DeFi

Kava will launch the Ethereum Common Chain Alpha beta and build the Kava Network with its unique Ethereum and Cosmos common chain architectures. Kava will also recruit hundreds of the most innovative developers from both ecosystems, expand the developer incentive program, and build a transparent and fair on-chain incentive program in the Layer-1 space.

Part.4 Industry pulse

Yearn Finance has launched ethereum extension solution Arbitrum

*  DeFi

收益聚合器项目 Yearn Finance 宣布已上线以太坊扩展解决方案 Arbitrum，Yearn 将在 Arbitrum 上推出一个单一的 vault：Curve 的 triCrypto，代表一个 Curve 流动性池，持有等量的 wBTC、wETH 和 USDT 三个 Token 。

OpenSea warns users of phishing email attacks

* NFT

OpenSea tweeted that some users had received emails from OpenSeateam. IO. The official team says this is not an official Email address for OpenSea and warns users not to click on such emails.

Animoca Brands has formed AniCube, a joint venture with CUBE Entertainment of South Korea

* NFT

Animoca Brands 今日宣布已与韩国 CUBE 娱乐公司（Cube Entertainment）成立新合资企业 AniCube Entertainment。据悉，AniCube 将建立一个音乐元宇宙，并基于 Cube Entertainment 全球流行 K-pop 音乐艺人和演员的知识产权发行 NFT 和生态系统 Token 。

UkraineDAO, founded by a Russian band, will launch NFT to raise money for humanitarian relief in Ukraine

* DAO

Nadya Tolokonnikova, a founding member of The Russian rock band Pussy Riot, founded UkraineDAO, a decentralized autonomous organisation that aims to raise money for humanitarian relief with the launch of NFT. NFT casting began on February 26th with a casting price of 0.08241991 ETH (approximately US $220).

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