Comparing Popular DEX Aggregator Routing Algorithms

Detailed Instructions

A user submits a swap request via a frontend, specifying input token, output token, and amount. The DEX aggregator's API receives this request and initiates a quote discovery process. This involves querying multiple integrated DEXs (e.g., Uniswap V3, Curve, Balancer) and other aggregators for potential routes and prices. The system calculates the expected output amount for each possible path, considering current reserve balances, liquidity pool fees, and slippage tolerance. The goal is to gather a comprehensive set of executable quotes before the routing algorithm evaluates them.

typescriptCopy
// Example API request structure for quote discovery
const quoteRequest = {
  chainId: 1,
  sellToken: '0xA0b86991c6218b36c1d19D4a2e9Eb0cE3606eB48', // USDC
  buyToken: '0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2', // WETH
  sellAmount: '1000000000', // 1000 USDC (6 decimals)
  takerAddress: '0xUserAddress...'
};

Tip: Aggregators often use a fallback latency system, where they wait a few hundred milliseconds for slower DEX APIs to respond before finalizing the quote set, ensuring price completeness.

Detailed Instructions

The core routing algorithm (e.g., Dijkstra's for pathfinding, a solver for multi-hop splits) processes the collected quotes. It evaluates routes based on effective exchange rate, which accounts for all fees and price impact. For complex swaps, the algorithm may split the order across multiple paths (split routing) to minimize overall slippage. It simulates each potential route's execution, checking for gas cost implications of different contract interactions and verifying that routes do not exceed predefined maximum hop counts (e.g., 5 hops). The final output is a single, optimized transaction payload containing one or more sub-swaps.

solidityCopy
// Simplified logic for evaluating a two-hop route (USDC -> DAI -> WETH)
function simulateRoute(
    uint amountIn,
    address pool1,
    address pool2
) internal view returns (uint amountOut) {
    uint midAmount = IUniswapV2Pool(pool1).getAmountOut(amountIn);
    amountOut = IUniswapV2Pool(pool2).getAmountOut(midAmount);
    // Deduct estimated gas cost converted to output token value
    amountOut -= estimateGasCostInToken(GAS_ESTIMATE_MULTIHOP);
}

Tip: Advanced algorithms perform MEV-aware routing, avoiding pools with high pending arbitrage activity that could lead to unfavorable price movements before the user's transaction is mined.

Detailed Instructions

Before returning the quote to the user interface, the aggregator performs critical validations. It re-fetches the latest state of the primary liquidity pools involved to ensure the quote is not stale (typically within a 30-second window). It runs slippage checks to confirm the minimum output amount is acceptable given current market volatility. The system also executes smart contract simulations (e.g., using eth_call) to verify the entire route will execute successfully without reverting due to insufficient liquidity, transfer fees, or approval issues. This step includes checking for token blacklists or compliance restrictions on the involved addresses.

• Sub-step 1: Call router.getAmountsOut on the final route with a 0.5% slippage buffer.
• Sub-step 2: Simulate the full transaction via a static call to the aggregator's contract with the user's address.
• Sub-step 3: Validate that the final output token is the expected ERC-20 and not a malicious proxy.

Tip: Some aggregators use on-chain oracle prices as a benchmark to flag quotes that deviate significantly from the market rate, protecting users from incorrect pricing due to manipulated pools.

Detailed Instructions

The user reviews the final quote, including the net output after fees and estimated gas cost. They must first grant an ERC-20 approval to the aggregator's router contract (or a permit signature for gasless approvals) for the exact input token amount. Once approved, the frontend constructs the final transaction. The payload includes the encoded calls for each swap step in the route, directed through the aggregator's dispatcher contract. The user signs and broadcasts this transaction to the network. The aggregator may provide transaction monitoring, tracking the TX hash and notifying the user upon completion or if it requires a higher gas price due to network congestion.

javascriptCopy
// Example transaction object for a 1inch swap
const tx = {
  from: userAddress,
  to: '0x1111111254EEB25477B68fb85Ed929f73A960582', // 1inch Router
  data: '0x...encodedSwapData...',
  value: '0', // For non-ETH trades
  gasLimit: 300000,
  gasPrice: await web3.eth.getGasPrice()
};

Tip: For better success rates, users can enable RPC bundling services (like Flashbots) when submitting trades during high network activity to avoid front-running and ensure timely execution.

Detailed Instructions

The user's transaction is mined. The aggregator's router contract receives the call and begins execution. It uses a transferFrom to pull the approved input tokens from the user. Then, it executes the pre-defined route: for each hop, it calls the respective DEX pool contract (e.g., swapExactTokensForTokens on a Uniswap V2 router, or interacts directly with a pool's swap function). The contract holds intermediate tokens only within the scope of the transaction, adhering to the checks-effects-interactions pattern to prevent reentrancy. After the final swap, the router transfers the output tokens directly to the user's specified address. Any leftover dust amounts from intermediate steps or rounding are typically sent to the user or a treasury, depending on the aggregator's design.

• Sub-step 1: Router verifies the user's token allowance and transfers input amount.
• Sub-step 2: For a split route, the router distributes the input amount to multiple sub-swaps proportionally.
• Sub-step 3: Each sub-swap executes sequentially, with output tokens accumulating in the router.
• Sub-step 4: Router performs a final balance check and sends the total output to the user.

Tip: Settlement uses deadline parameters to ensure the transaction reverts if mined after a certain block, protecting the user from excessive front-running or price movement.