On Stablecoins and Aggregators

From our own Head of Cumberland Business Development, Paul Kremsky:

On the eve of the Jupiter launch, I’ve been thinking about the impact aggregators have on (surprise) stablecoins. I think they just might be the key to growing stablecoins for non-USD currencies. I have a firmly-held belief that crypto traders globally, if they want to be in stables, should be able to hold onto a stablecoin pegged to their local currency.

If I get paid in SGD, and all my expenses are in SGD, why should I need to hold USD exposure? (To read more, check out this paper from Cumberland!)

The problem that arises is that if all users are holding different stables, liquidity can become fragmented. This is where aggregators come in.

Aggregators find the most efficient path between the coin a user holds and the coin they want to buy. They can go multiple hops, linking different liquidity pools in order to find the best price.

What this means from a user perspective is that you can come to the market with whatever stablecoin suits you, and as long as there is a deep pool connecting it to the most liquid stablecoin, aggregators will take you where you want to go. This is efficiency.

It also means that DEXes change their focus. They don’t want to be the front-end that everyone goes to, because eventually everyone will go to the aggregator. Instead, DEXes are motivated to have the most liquid pools that the aggregators will point to. Some DEXes out there don’t even have a front end… who needs em?

One thing that occurred to me recently – and it seemed appropriate to highlight this on JUP eve – is just how important it is for fees to be cheap.

Aggregators don’t do much if each hop costs a mainnet-sized transaction fee. But if you’re on Solana, Avalanche, or an L2, aggregators become an insane power boost.

Essentially, aggregators enable an ecosystem of multiple currency stablecoins. It’s just not practical without them.

Happy Jupiter Eve!