Trading & AMMs
Routing
Trade Routing
Finding optimal trading paths across multiple liquidity sources
Definition
Routing is the process of finding the most efficient path for a trade across multiple liquidity sources to minimize costs and slippage, often used by DEX aggregators.
Example
1inch routes your ETH-to-USDC trade through multiple DEXs and pools to get the best possible price.
What to check
Treat it as a trading concept: compare expected benefit with fees, slippage, liquidity, volatility, and execution risk. The main checks are: Complex execution; Higher gas costs; Routing failures.
Risks to Consider
- Complex execution
- Higher gas costs
- Routing failures
Common Questions
What does Routing mean in DeFi?
Routing means Finding optimal trading paths across multiple liquidity sources. The useful question is not only the definition, but how the mechanism changes risk, return, liquidity, or governance for the user.
How is Routing used in practice?
A practical example: 1inch routes your ETH-to-USDC trade through multiple DEXs and pools to get the best possible price.
What should I check before relying on Routing?
Check complex execution, higher gas costs, routing failures. Also verify liquidity, oracle assumptions, admin controls, and whether the protocol has been tested during stressed markets.
