On the Hunt for the Best Rate: DEX Aggregators vs Instant Exchanges

On the other side of the scales are instant exchanges; if DEX aggregators connect to decentralized exchanges, these platforms deal with their centralized counterparts. Examples include SimpleSwap, Changelly, and the ChangeHero crypto exchange.

If 1inch or its competitor routes a transaction through integrated DEXs, an instant exchange calculates the rates based on what is available in their own liquidity sources, most commonly, CEXs (although connecting to a DEX is not out of the ordinary).

Similarly to a DEX aggregator, a user of an instant swap platform can choose just about any combination of the supported assets rather than a certain market pair. Instead of connecting their wallet to the service, users send an amount they specified to an address the platform generates for them. In return, once an incoming transaction is confirmed, the service sends the requested currency in the appropriate amount. This design hinges on trust assumptions but circumvents the need to onboard to the exchange(s) where the trade(s) takes place.

Security Implications of (De)Centralization

The main distinction between the two is not in the liquidity sources, though, but in how much of the process is on the chain.

If the cross-chain swap with a DEX aggregator uses bridges to move tokens from one network to another, for an instant exchange, this process is off-chain. As a result, it is not as transparent and partially centralized.

However, the instant cryptocurrency exchange design is non-custodial, meaning that these platforms do not track user balances or have custody (i.e. access to private keys) over user funds at any point of the swap. Its because these platforms emerged as a direct response to users seeking solutions that would not require deposits like most CEXs do.

Furthermore, to use a DEX aggregator, you need to connect your wallet. While safe most of the time, this action can still expose users to several risks: permission risks for spending your tokens, smart contract vulnerabilities, and malicious transaction signing. Even though from the user experience standpoint, connecting a wallet once is more convenient than sending funds for exchanging on an instant swap service every time, the wallet is not exposed to any such risk there.

Choose Your User Experience: Simple or Controlled

Needless to say, the user experience varies between these two types of platforms. Wallet connection is one aspect we mentioned but its not the only difference.

As simple and controlled DEX aggregators aim to be, they still require the user to be familiar with more advanced wallet features like permissions and gas fee management. As such, the entry threshold is low but not absolute-beginner-friendly.

Instant crypto exchanges may also be tough to navigate as someone who has no idea of how to use crypto at all but they generally are considerably more simplified. The interfaces use simple labels (i.e. ‘You send’ and ‘You get’) and commands and do not dwell on blockchain-specific concepts more than necessary. Its less customizable but less confusing, too. And in case some confusion does arise, these platforms offer support service instead of leaving the user to troubleshoot themselves.

It warrants mentioning that the lack of need for a user account does not entirely remove customer identification requirements in the case of instant exchanges. If you try to swap a large amount on one of those, expect the transaction to be paused until you go through a “know-your-customer” procedure. Decentralized services such as exchanges and aggregators do not enforce similar policies and operate on permissionless basis, making them a more privacy-conscious choice but closing off fiat pathways entirely.

Conclusion: Which Should You Choose？

Long story short, after unpacking the two types of rate routing platforms, the choice becomes obvious. DEX aggregators cater to a demographic that values optimization, privacy and transparency over accessibility features such as customer support. Instant exchanges can tap into deeper liquidity sources and offer more coins and tokens on more networks but have their own limitations. The crypto industry benefits from having both to meet varying user demands.

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