0/ I'm feeling rant-y about aggregators today, so let's keep going

In some ways, we already know the end state of demand side aggregators

See robinhood

How does robinhood make money?

Payment for order flow (PFOF) https://twitter.com/KyleSamani/status/1289237439685570562

1/ PFOF sounds bad on the surface - citadel pays robinhood to be the market maker

But amazingly, this is actually the best thing for the consumer

2/ The problem with being an MM is that the taker may be running you over with some insight that the MM doesn't have

So MMs love trading against dumb retail, and hate trading against large hedge funds

3/ Robinhood guarantees that their order flow is retail

The vast majority of which is unsophisticated

So citadel will offer *tighter* spreads to robinhood order flow than the rest of the market

Amazing power of discrimination

4/ Now, back to crypto

In theory, demand side aggregators like 1inch, matcha, etc will evolve to similar end state: PFOF

But there's one problem: PFOF only works if your users are unlikely to have an edge

5/ The people using DEX aggregators today very likely have an edge

Insiders, people who coordinate press/marketing campaigns, etc

So no MM in their right mind wants to provide liquidity on the long tail of defi assets. they are going to get run over

6/ That's why the only place a lot of these trade is uniswap/balancer

Unsophisticated capital not realizing the massive adverse selection they face

7/ This also means that DEX aggregators won't be able to build a PFOF revenue line for a long time

{fin}