Basics
1inch is a decentralized exchange (DEX) aggregator known for its advanced order routing and limit order placement technologies. It provides users with the best cryptocurrency exchange rates by sourcing prices from numerous platforms in real time. Additionally, 1inch offers liquidity farming opportunities. The platform features a native token, which can be utilized within the 1inch DAO and to reduce transaction fees.
Founders and Development of 1inch
Sergej Kunz and Anton Bukov launched the 1inch project during the ETHGlobal hackathon in New York in 2019. Today, the 1inch Foundation, a non-profit organization, oversees the ecosystem's development, providing grants and funding liquidity farming programs. The community, which includes over 100 developers, also contributes to protocol improvements, with the application code available on GitHub. In late 2021, leading investment funds invested $175 million in the project.
Understanding Order Routing in 1inch
The 1inch platform uses its Aggregation Protocol to dynamically source quotes from multiple decentralized platforms, ensuring users get the best rates when exchanging digital assets. It aggregates liquidity from numerous sources, including Uniswap, Curve, Balancer, Bancor, and PancakeSwap.
A specialized smart contract oversees transaction execution, safeguarding user funds even when connecting to less reliable liquidity sources. This protocol also optimizes network fees to offer competitive exchange rates. Additionally, to maximize efficiency, it can split orders across several pools on different platforms.
Trading on 1inch: User Interface and Features
The interface of the 1inch web application is concise and reminiscent of Uniswap. To begin trading, users must first connect their browser wallet and select the desired network, with the option to switch blockchains using a dedicated button.
In the center of the screen, a window allows users to create their orders. They can choose the order type and select the cryptocurrencies they wish to exchange. Advanced settings include network fee size, maximum allowable slippage rate, partial fill feature, and more.
Order Types on 1inch
Traditional trading capabilities in DeFi applications are often limited due to technical complexities. Many protocols only allow exchanges at the current market price. However, 1inch offers limit orders similar to centralized exchanges through its Limit Order Protocol.
Once submitted by the user, the order enters the decentralized aggregator's order book. It automatically matches with any opposing order, including those placed by the 1inch protocol itself (which also acts as a liquidity source). User funds are not reserved, meaning if funds are moved to another address after order placement, the order will simply not execute. When a limit order is executed, the taker (buyer) also covers the network transaction fee. Only the 1inch protocol does not charge 'gas' fees, enabling it to offer users more competitive prices.
In addition to market and limit orders, users can engage in peer-to-peer (P2P) direct swaps, introduced in 2022.
Liquidity Provision and Farming Opportunities on 1inch
1inch allows users to earn income by providing liquidity through its Liquidity Protocol. Participation in pools enables users to engage in this process. Additionally, the platform features its own 1inch Earn program, designed for stable and efficient capital utilization. As of May 2022, the program includes a single pool, USDC/USDT, offering an annual yield of approximately 4.7%. Moreover, 1inch periodically offers time-limited farming programs.
Purpose of 1inch Token: Utility and Governance
1inch operates with its native cryptocurrency, launched in 2020 on Ethereum and BNB Chain via a cross-chain bridge. The token enables participation in the project's DAO, where members propose, discuss, and vote on initiatives through a forum. Voting requires locking tokens in a dedicated smart contract. The token is expected to play a role in the protocol's routing mechanisms. Currently, new tokens can be obtained through staking. Token holders benefit from a cashback program on transaction fees based on the amount of tokens held. Participants with at least 100 tokens receive a 25% cashback on fees paid.
The Purpose of 1inch Wallet
In addition to its trading and farming applications, the project team is developing a wallet specifically designed for the DeFi space. This wallet is not limited to 1inch and is accessible on mobile devices. Apart from storing and transferring cryptocurrencies, users can perform swaps, participate in 1inch token staking, and explore decentralized applications. Moreover, 1inch Wallet supports non-fungible tokens (NFTs), facilitates crypto purchases with fiat, and even enables blockchain gaming.
Conclusion
1inch is a leading decentralized exchange aggregator renowned for its advanced order routing and competitive cryptocurrency rates sourced in real time from various platforms. Supported by the 1inch Foundation and a community of developers, it offers liquidity farming and governance through its native token. Beyond trading, 1inch provides user-friendly interfaces, diverse DeFi functionalities, and a specialized wallet for seamless crypto transactions and NFT support.