Aggregators Are the Next Big Thing in DeFi

There is little doubt that decentralized finance (DeFi) is the hottest trend in crypto, but in the rush to decentralize financial services, the consumer experience may have been left behind. DeFi protocols and centralized exchanges are both, in their own ways, siloed. Protocols remain isolated by their incompatible technology stacks and blockchains, while centralized exchanges are isolated by the regulatory capital controls of the countries in which they operate. 

There is a growing awareness in the sector that while decentralization of services is desirable, the piecemeal user experience which often results from that decentralization is not. This is where DeFi aggregators step in, binding individual protocols into a single simple interface that can dramatically improve the customer journey.

Aggregate Everything

While aggregators unite many protocols in DeFi into a single manageable user interface, they do so without fundamentally compromising its decentralized credentials. In fact, it can be argued that by allowing users to access multiple protocols from a single interface it increases the potential for decentralization within the space. Aggregators empower users to ‘shop around’, to broaden their horizons, and select from a wider range of options available on the market. 

1inch and Ox are among the many DeFi aggregators which enjoyed considerable success in 2020. If any illustration was needed of just how new this space is, 1inch, which is already considered a strongly established player, only launched in August of 2020. The company has since launched Mooniswap - its own dedicated automated market maker. 

There are now aggregators which go beyond DeFi and seek to combine both centralized and decentralized exchanges under one roof. Finxflo, based in Singapore, is one such example. Finxflo is a regulated ‘hybrid’ aggregator that allows users to access a breadth of financial services with a single KYC process and wallet. By aggregating the world’s leading exchanges, both centralized and decentralized, it can offer the very best buy and sell prices available anywhere. Finxflo is targeting both institutions that seek regulated solutions as well as general crypto users that want access to professional tools. Finxflo is launching soon with a fair launch and a token contribution event on Polkastarter on February 8.

Another project, Orion Protocol, also aggregates every CEX, DEX, and swap platform into an easy to use decentralized platform. Their mainnet is already live, with early users being able to experience early functionality of their terminal. Additional features will be added to the terminal next year including lending, margin trading, leveraged ETFs, derivatives, contract trading, NFTs, and the staking of any digital asset type. Orion was one of the darlings of the summer DeFi boom, gaining support from some of the biggest exchanges, brokers, and blockchain projects in the market. 

The hybrid concept could be especially important in penetrating the Asian market which has historically been slower to move to further decentralization. While centralized exchanges have lost significant ground to DeFi in the west, in Asia the existing intermediary platforms have proved to be much more resilient. With both DeFi and CeFi under one roof, aggregators can offer the best of both worlds; greater price choice and liquidity, without demanding its users abandon successful and popular regional exchanges.

Not Just Exchanges

Exchanges are just one potential area where the DeFi sector can benefit from aggregation. Yield farming, which was the rocket fuel of DeFi in 2020, is another area in which aggregation is a growing trend. Following a successful seed round funding of $3.6M last September, APY.Finance is one of the projects proving that the utility of these types of strategies goes well beyond exchanges. The smart contracts employed by APY.Finance continuously route user funds to a portfolio of the latest-and-greatest yield farming strategies across many of the leading DeFi protocols. 

From exchanges, to liquidity mining and everything in-between, aggregators are slowly taking over the cryptosphere. While we are witnessing an increasingly decentralized financial landscape, the human desire for simplicity and ease means that aggregators are here to stay.