An empirical study on historical trade gains: DEX aggregators versus Uniswap

Decentralized Exchanges (DEXs) have revolutionized the DeFi space by enabling trustless trading of tokens through Automated Market Maker (AMM) algorithms. Recently, DEX aggregators have emerged as a new DeFi protocol, promising higher returns than traditional DEXs by sourcing liquidity from multiple...

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Main Author: Mohamed Irfan Bin Shahul Hameed
Other Authors: Li Yi
Format: Final Year Project
Language:English
Published: Nanyang Technological University 2023
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Online Access:https://hdl.handle.net/10356/166160
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Institution: Nanyang Technological University
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spelling sg-ntu-dr.10356-1661602023-04-21T15:37:51Z An empirical study on historical trade gains: DEX aggregators versus Uniswap Mohamed Irfan Bin Shahul Hameed Li Yi School of Computer Science and Engineering yi_li@ntu.edu.sg Engineering::Computer science and engineering Decentralized Exchanges (DEXs) have revolutionized the DeFi space by enabling trustless trading of tokens through Automated Market Maker (AMM) algorithms. Recently, DEX aggregators have emerged as a new DeFi protocol, promising higher returns than traditional DEXs by sourcing liquidity from multiple DEXs. In this study, we analyze historical on-chain transactions from 1st January 2021 to 31st December 2022, to evaluate the performance of the three largest DEX aggregators (1inch, 0x API, and Paraswap) compared to Uniswap, the largest AMM-DEX. Our findings show that, on average, trades done through aggregators result in higher returns than Uniswap. Specifically, 1inch gave higher returns by 0.23%, 0x API gave higher returns by 0.17%, and Paraswap gave higher returns by 0.27%. We also found that the size of the trade does not necessarily contribute to higher returns over Uniswap, but that the tokens involved in the trade can significantly impact performance. Additionally, we found that the majority of aggregator trades still rely on Uniswap for liquidity, highlighting the dominance of Uniswap in the DeFi trading landscape. To the best of our knowledge, this work is the first formal empirical study on DEX aggregators. Our research has implications for the future of DeFi and DEX aggregators, as it suggests that aggregators have the potential to offer higher returns than traditional DEXs. However, the heavy reliance on Uniswap for liquidity may be limiting its potential gains. Bachelor of Engineering (Computer Science) 2023-04-18T01:20:10Z 2023-04-18T01:20:10Z 2023 Final Year Project (FYP) Mohamed Irfan Bin Shahul Hameed (2023). An empirical study on historical trade gains: DEX aggregators versus Uniswap. Final Year Project (FYP), Nanyang Technological University, Singapore. https://hdl.handle.net/10356/166160 https://hdl.handle.net/10356/166160 en SCSE22-0221 application/pdf Nanyang Technological University
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic Engineering::Computer science and engineering
spellingShingle Engineering::Computer science and engineering
Mohamed Irfan Bin Shahul Hameed
An empirical study on historical trade gains: DEX aggregators versus Uniswap
description Decentralized Exchanges (DEXs) have revolutionized the DeFi space by enabling trustless trading of tokens through Automated Market Maker (AMM) algorithms. Recently, DEX aggregators have emerged as a new DeFi protocol, promising higher returns than traditional DEXs by sourcing liquidity from multiple DEXs. In this study, we analyze historical on-chain transactions from 1st January 2021 to 31st December 2022, to evaluate the performance of the three largest DEX aggregators (1inch, 0x API, and Paraswap) compared to Uniswap, the largest AMM-DEX. Our findings show that, on average, trades done through aggregators result in higher returns than Uniswap. Specifically, 1inch gave higher returns by 0.23%, 0x API gave higher returns by 0.17%, and Paraswap gave higher returns by 0.27%. We also found that the size of the trade does not necessarily contribute to higher returns over Uniswap, but that the tokens involved in the trade can significantly impact performance. Additionally, we found that the majority of aggregator trades still rely on Uniswap for liquidity, highlighting the dominance of Uniswap in the DeFi trading landscape. To the best of our knowledge, this work is the first formal empirical study on DEX aggregators. Our research has implications for the future of DeFi and DEX aggregators, as it suggests that aggregators have the potential to offer higher returns than traditional DEXs. However, the heavy reliance on Uniswap for liquidity may be limiting its potential gains.
author2 Li Yi
author_facet Li Yi
Mohamed Irfan Bin Shahul Hameed
format Final Year Project
author Mohamed Irfan Bin Shahul Hameed
author_sort Mohamed Irfan Bin Shahul Hameed
title An empirical study on historical trade gains: DEX aggregators versus Uniswap
title_short An empirical study on historical trade gains: DEX aggregators versus Uniswap
title_full An empirical study on historical trade gains: DEX aggregators versus Uniswap
title_fullStr An empirical study on historical trade gains: DEX aggregators versus Uniswap
title_full_unstemmed An empirical study on historical trade gains: DEX aggregators versus Uniswap
title_sort empirical study on historical trade gains: dex aggregators versus uniswap
publisher Nanyang Technological University
publishDate 2023
url https://hdl.handle.net/10356/166160
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