Author: Odos

Compiled by: Deep Tide TechFlow

If you are trading on-chain cryptocurrencies without a DeFi aggregator, you may be missing out on potential profits.

The emergence of decentralized finance (DeFi) has fundamentally changed cryptocurrency trading, providing users with unprecedented access to assets and financial products. However, trading directly on a single decentralized exchange (DEX) can expose users to issues such as price impact, slippage, security risks, and limited token selection, especially for large or complex trades.

At this point, DeFi aggregators emerged. These platforms allocate trades across multiple liquidity sources, optimizing prices and reducing risk exposure, thereby solving the trading difficulties of a single DEX. As one of the leading DeFi aggregators, Odos demonstrates how to enhance on-chain trading experiences through complex algorithms and extensive liquidity integration.

Article Content

  • Why do you need an aggregator? Aggregators like Odos are crucial for DeFi traders as they can address issues such as price impact, slippage, and access to long-tail assets while enhancing trading security.

  • Differences in Aggregators: Different aggregators exhibit significant differences in routing algorithms, liquidity sources, and chain support, leading to varying service quality.

  • Odos's Unique Advantages: With outstanding routing algorithms, extensive liquidity integration, multi-token swapping, and the new Simple Swap experience, Odos provides users with the best trading pricing and efficiency.

Why do you need an aggregator?

Trading in the DeFi ecosystem can be very complex. Hundreds of decentralized exchanges offer different tokens, fees, and prices. Similar to how travel platforms like Expedia or Kayak simplify the booking process by comparing multiple airlines and routes, aggregators like Odos eliminate uncertainties in trading by finding the optimal path for your trades.

Core Advantages of Aggregators:

  • Better Pricing: Aggregators ensure that users receive the most valuable trading prices by integrating multiple DEXs and liquidity pools.

  • Broader token selection: Users can access a wider range of tokens, including long-tail assets, without manually searching multiple platforms.

  • Better user experience: Odos provides tools like Simple Swap and advanced routing to simplify the trading process, saving users time and effort.

Challenges of Trading on a Single DEX

Decentralized exchanges (DEX) are an essential infrastructure of the decentralized finance (DeFi) ecosystem. By reserving trading pair tokens in liquidity pools and using mathematical pricing curves to determine exchange rates, DEX ensures that liquidity is always available without permission. However, the operational mechanisms of DEX also present unique challenges that may affect trading.

Price Impact

When trading on a single DEX, large trades can significantly alter the asset ratio within the liquidity pool, leading to adverse price changes. This phenomenon is known as Price Impact.

The extent of price impact usually depends on the trade size and the depth of the liquidity pool. For large liquidity pools with deep liquidity, even large trades will only cause slight price fluctuations. However, for smaller liquidity pools with shallow liquidity, even medium-sized trades can lead to significant price fluctuations.

The following diagram illustrates how pricing curves operate in a typical liquidity pool (e.g., ETH/WBTC trading pair). As trades occur, the asset ratio in the pool changes, affecting the price ratio.

The figure illustrates a visual example of pricing curves under the Automated Market Maker (AMM) model, where the pricing curve of the liquidity pool dynamically adjusts based on the proportion of tokens in the pool, thereby determining the exchange rate for trades.

Source reference here

Slippage

Slippage refers to the difference between the expected price of a trade and the actual execution price. Rapid market fluctuations or network congestion may cause trades to be completed at lower than expected prices.

Limited token selection

A single DEX may not support all tokens, especially some uncommon long-tail assets, limiting users' trading choices.

Security Risks

Trading on multiple DEXs requires repeated token authorizations, increasing users' exposure to malicious contracts or potential security vulnerabilities. For example, the $120 million vulnerability incident of BadgerDAO was due to malicious token authorization requests.

Solution: DeFi Aggregators

DeFi aggregators effectively address various challenges in trading by optimizing prices, expanding token selection, enhancing security, and simplifying operational processes.

Aggregators minimize price impact and slippage throughout the trading process by integrating with multiple protocols and their liquidity pools, providing users with better rates than a single DEX.

Moreover, aggregators provide a unified and trusted interface, reducing the need for users to repeatedly authorize tokens across multiple DEXs, thereby lowering security risks and simplifying the trading process. With an aggregator, you can easily complete complex trades without manually switching between multiple platforms, saving significant time and effort.

Here is an example of an ETH-to-DAI trade routed through Odos:

Aggregators automatically find the best trading paths

Source: Odos dApp

Not all aggregators are the same

Aggregators are highly efficient in saving users trading costs, with over 50 aggregators in the market currently, totaling daily trading volumes of $1-3 billion. However, performance differences between different aggregators are significant.

Routing Algorithm

The core of an aggregator is its routing algorithm. Advanced algorithms can split trades across multiple liquidity pools to minimize price impact; they can also identify arbitrage opportunities in the market to optimize trading prices; at the same time, they can handle complex multi-token swaps efficiently. It can be said that advanced algorithms act like an experienced trader, searching for the best trading opportunities in the market.

Liquidity sources

The more liquidity sources an aggregator integrates, and the higher their quality, the better its trade pricing and asset availability. More liquidity sources increase the likelihood of finding the best prices, while deep liquidity pools effectively reduce price impact and slippage.

Network Support

Aggregators that support multiple blockchains can provide broader asset coverage, allowing users to access more tokens and trading pairs. In addition, these aggregators can directly meet the needs of the chain where users are located, eliminating the need for users to spend time transferring assets between different chains. Choosing an aggregator that supports the chain where your assets are located and can meet your trading needs is crucial.

Odos's Leading Position

Odos is a leader in most Layer 2 networks (such as Base, Optimism, Arbitrum, zkSync Era, and Mantle) as well as other major networks (like Avalanche and Fantom). For example, on the Base network, Odos's weekly trading volume reaches up to $619 million, nearly double that of the second largest aggregator on Base.

Odos leads in trading volume on Layer 2 networks, indicating a significant advantage in price optimization.

Source reference here

Why choose Odos

With its complex smart order routing algorithm, Odos stands out among top DeFi aggregators. Through this algorithm, Odos can provide users with the best trading paths, ensuring optimal trade pricing and efficiency.

Outstanding Routing Algorithm

Odos uses proprietary algorithms to intelligently search for optimal trading paths for users. It can split trades across multiple liquidity pools to reduce price impact and leverage price differences between different liquidity pools to save costs for users. Additionally, Odos can explore numerous intermediary tokens to discover arbitrage opportunities between tokens that users do not trade directly.

Furthermore, Odos supports multi-token atomic swaps, allowing users to exchange multiple tokens in a single transaction. This feature not only demonstrates Odos's flexibility but also enhances trading efficiency. Atomic swaps are a technology that ensures both parties execute the transaction simultaneously, avoiding the risk of unilateral default, thus providing users with higher trading security.

Extensive liquidity integration

Odos integrates over 900 liquidity sources, covering a vast network of decentralized exchanges (DEX). Its support for 14 EVM-compatible blockchains, including Ethereum, Arbitrum, and Base, provides users with unparalleled coverage.

Additionally, Odos supports trading of over 100,000 tokens, covering almost all mainstream and long-tail assets, allowing users to easily find the trading pairs they need.

Not just DEXs

The strength of Odos lies in its consideration of not only DEX but also the incorporation of various DeFi protocols into routing optimization. For example, Odos can convert stETH to ETH through the Lido protocol, providing users with a more cost-effective trading path. It can also leverage private liquidity sources to unlock more hidden value for users. This support for complex scenarios allows Odos's routing capabilities to far exceed traditional aggregators.

User-friendly experience

Odos provides a user-friendly interface that caters to both novice and experienced traders. For novice users, Odos's Simple Swap feature greatly simplifies the DeFi trading process. It allows trades to be executed without requiring users to hold native Gas tokens, completely avoiding slippage issues with fixed quotes, making trading simpler and more reliable.

For experienced users, Odos offers Advanced Swaps and Limit Orders features. Advanced Swaps allow users to fully configure parameters such as liquidity sources and slippage tolerance. At the same time, innovative visualization tools (like Sankey diagrams) intuitively present trading paths, allowing users to clearly understand the execution details of each trade. Whether you are a novice or an experienced trader, Odos can provide you with powerful tools to optimize trading.

Are you ready to change your trading experience?

In the rapidly evolving DeFi world, using an aggregator like Odos is not just an advantage but a necessary choice. Odos helps users fully unlock the potential of their crypto assets by providing better prices, simplifying complex operations, and enhancing trading security.

Don't miss out on profits anymore. Start using Odos today to unlock a new trading experience!

Visit app.odos.xyz, connect your wallet, and embark on a smarter trading journey. Explore the infinite possibilities of the DeFi world through optimized trading paths. Make every trade count and achieve more with Odos.

Join the Odos community

Become a core member shaping the future of DeFi:

  • Participate in the Odos loyalty program: Earn $ODOS rewards through trading. For details, please visit this website: link.

  • Get the latest updates: Follow Odos on Twitter to stay informed about the latest news.

  • Interaction and Learning: Join Odos' Discord to exchange experiences with community members.

  • Experience optimized trading: Visit app.odos.xyz to experience how Odos enhances your trading efficiency.

If you are interested in integrating our API, please refer to our documentation.

Note: This article is for reference only and does not constitute financial advice. Please conduct your own research before engaging in cryptocurrency trading.