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Baking Bad – one of the most active developer teams in the Tezos ecosystem, who are behind popular products like tzkt.io, better-call.dev, Juster.fi and more, just announced the release of their next-generation DEX (decentralized exchange) aggregator, 3Route. There are multiple DEXs on Tezos, some of which have relatively equal amounts of liquidity. The problem with having multiple DEXs, however, is that it means the liquidity available for any given token is disbursed, and this makes it difficult for users to swap tokens in an efficient, cost-effective way.
DEX aggregators thus help to pull disbursed liquidity together in various ways, allowing users to find better trade values and making the experience of DEX hoping more convenient.
Consider you want to make a trade between token A and token B. Whether conducted manually or through using some other kind of swap router, the paths to an efficient trade from A to B would typically be executed by finding either 1), the most liquid pair between A and B, or 2), the best route through making multiple consecutive trades between different DEXs.
If conducted manually, option 1) might prove to be sufficient, provided the liquidity for your trade is deep enough, but it's always possible that there was a multi-step trade that might have saved you some costs. This is when option 2), which finds a single route of consecutive trades becomes a favorable choice. Option 2) is how Temple wallet's built-in swap router works. In their blog post, the 3Route team notes some subtle shortcomings of this option.
Even if you use some advantageous route for your swap, it immediately creates some arbitrage opportunities in some other routes. So, if the size of your swap is sufficient, arbitrage bots immediately find some route that can extract some money from DEXes after your swap. So, you actually pay them, because you can't use all DEXes liquidity at once. - 3Route blog
3Route DEX aggregator, on the other hand, uses a third option – it introduces "autorouting" – utilizing smart contracts, 3Route automatically builds the routes to find the best exchange rates across multiple DEXs with low slippage, all in one swap. The result is a more efficient trade, helping you save up to 50% of the cost that you would otherwise incur due to price impact from using a single DEX to perform an exchange.
It's quite an essential thing when you try to execute a number of parallel and consecutive swaps in one transaction. So it means that your slippage could be quite small and the swap will still have good chances to be included in the block. - 3Route.io blog
The 3Route DEX aggregator has a 0% service fee, and it currently supports liquidity from over 200 liquidity pools on 8 different platforms:
- Sirius (liquidity baking)
- Ctez Swap
- WTZ Swap
For a more in depth review of the 3Route DEX aggregator, check out the team's blog post.