How Does Multi-Hop Routing Affect the Final Price a User Receives for Their Trade?
Multi-hop routing can have both positive and negative effects on the final price. On the positive side, it can unlock liquidity from pools that would otherwise be inaccessible, potentially leading to a better price.
On the negative side, each "hop" in the route incurs its own transaction fee and slippage. The more hops a trade takes, the higher the total fees and potential slippage will be.
DEX aggregators are designed to find the optimal route that balances these factors to achieve the best possible price for the user.
Glossar
Best Possible Price
Principle ⎊ Best Possible Price dictates that a client's order, when routed through a venue or broker, must receive execution terms that are superior or equal to the prevailing national best bid or offer, adjusted for the specific market context.
Dex Aggregators
Architecture ⎊ Dex aggregators represent a critical layer within decentralized finance (DeFi), functioning as smart contract systems designed to source liquidity across multiple decentralized exchanges.
Final Price
Settlement ⎊ The final price represents the critical reference point for determining the intrinsic value of an option contract at its expiration, triggering the final cash or asset transfer.