🦐 Small Trades on ParaSwap

While ParaSwap's benefits are apparent for large transactions, they are also very real on smaller trades: learn how and why here.

The impact of gas costs on trades can be significant, especially for smaller capitals. This page details all the key items to consider to better understand how and when ParaSwap can help you both get a better rate for your trades and save on transaction costs.

The importance of pathing

While swapping, the first thing to understand is the location: where is your swap actually happening? At the end of the day, all swaps are settled on a decentralized exchange such as Uniswap or Curve. However, what happens before that can greatly impact the rate obtained.

There are essentially two ways to swaps:

  1. You can use the "direct route" by going directly on a DEX, such as Uniswap.

  2. Or you can explore an optimized route using an aggregator like ParaSwap.

Any given trade can be settled used many possible routes. The art of pathing is to find the most efficient one, accounting for all the parameters of the trade.

Aggregators have no liquidity of their own: they simply provide another gateway to access the liquidity of the main decentralized exchanges.

ParaSwap's Pathing: MultiPath

As seen on the graph above, ParaSwap is able to aggregate the liquidity available on dozens of decentralized exchanges. Thanks to MultiPath, an order can be split onto several exchanges or routed through intermediary tokens to further improve the rate. MultiPath is also able to interact with money markets like Aave or Compound, enabling further optimizations for your trades.

Uniswap routing limits

Uniswap routing logic is currently limited: for any given trade, Uniswap currently routes through the following pairs, even when a better option is available: wETH, DAI, USDC, USDT, COMP, and MKR (more information).

It means that trading tokens which liquidity is not against any of the above, such as BADGER (/wBTC) will result in significantly worse rates. On the other hand, ParaSwap considers all the relevant pairs while computing a trade, avoiding this shortcoming.

Finally, Uniswap is a healthy competition and is no longer the top liquidity source for some major ERC-20 tokens. Limiting yourself to Uniswap is suboptimal, but checking every DEX every single time is a painful process - so why not harness ParaSwap to do it for you?

Aggregation's benefits

On top of the advantages provided by the improved routing logic, ParaSwap provides additional benefits impacting trades of all sizes.

Gas computation & optimizations

ParaSwap pathing logic accounts for the gas costs of any suggested step to avoid overengineering the route, especially on smaller trades. ParaSwap also implements the GST2 gas token enabling reduction in the effective gas costs of your trades under certain conditions.

Swap & deposit or withdraw & swap

You can interact with several money markets directly from ParaSwap. The full list is available here: dApps Integrating ParaSwap​

Altogether, the depth of liquidity available on ParaSwap as well as the native integration with several key DeFi services can help savvy traders to reduce the impact of transaction costs on their strategies even further.

ParaSwapPool2

On top of all the DEX supported, ParaSwap gives you access to its own liquidity source provided by private market makers: the ParaSwapPool. When available, your trade can be routed through ParaSwapPool for even better rates.

Streamlined "allow"

Since ParaSwap aggregates the liquidity of all the main decentralized exchanges, using ParaSwap can help you reduce the amount of "allow" transactions required for your trades. Once you allow a token once on ParaSwap, you can swap it on all supported exchanges.

For each token, you can choose between a limited or infinite allow depending on your preference. The limited allowance must be renewed for every trade.