What is 1inch?

ForkLog

4 years ago

Key points

1inch is a DEX liquidity aggregator that uses order-routing and limit-order placement. It also offers liquidity farming.
When swapping crypto via the 1inch protocol, it sources quotes in real time from dozens of venues to offer the most competitive prices.
The project has a native token used in the 1inch DAO and to reduce paid fees.

Who founded 1inch?

The project was founded by Sergej Kunz and Anton Bukov, who built the aggregator at an ETHGlobal hackathon in New York in 2019. They had previously taken part in several other blockchain programming contests.

Today the ecosystem is developed by the non-profit 1inch Foundation, which issues grants and funds farming programmes. The community, with more than 100 developers, also contributes to improving the protocol. The app’s code is published on Github.

At the end of 2021 the project raised $175m from leading investment funds.

What is order routing?

1inch uses the Aggregation Protocol for dynamic aggregation of quotes from various decentralised platforms. Its main function is to find and offer users the best rates across platforms and blockchains when they swap assets via the platform.

The 1inch aggregator works with dozens of liquidity sources, including Uniswap, Curve, Balancer, Bancor, PancakeSwap and other popular decentralised exchanges.

A dedicated smart contract controls execution, preventing loss of user funds even if it connects to an unreliable liquidity source. Optimisation of network fees built into the protocol also helps secure better prices.

To save costs, the protocol can also split an order across multiple pools on different platforms.

Which networks does 1inch support?

As of May 2022 the platform supports numerous DeFi protocols and pools across eight blockchains:

Ethereum;
BNB Chain;
Polygon;
Optimism;
Arbitrum;
Gnosis Chain;
Avalanche;
Fantom.

How to trade on 1inch?

The web app is clean and reminiscent of Uniswap. First connect a browser wallet, selecting a network. A dedicated button lets you switch chains.

At the centre of the screen is the order ticket. Users can choose the order type and the assets to swap. Advanced settings include network fee, maximum slippage, partial fills and more.

Which order types does 1inch offer?

Traditional trading features are often limited in DeFi owing to technical constraints; most protocols only allow swaps at the current market price. 1inch, by contrast, supports limit orders, as on centralised exchanges. This function is powered by the Limit Order Protocol.

Once filled out by the user, an order is sent to the aggregator’s decentralised database. It is automatically matched with any opposing order, including those placed by the 1inch protocol itself (it also acts as a liquidity source).

User funds are not reserved. Therefore, if after placing an order the user moves the funds to another address, the order simply will not execute.

When a limit order executes, the taker (buyer) also pays the network fee. Only the 1inch protocol does not pay “gas”, which allows it to offer users more favourable prices.

Beyond market and limit orders, users can also conduct direct peer-to-peer swaps. This option was added in 2022.

Can you provide and farm liquidity on 1inch?

Yes. The platform enables liquidity provision via the Liquidity Protocol. You can participate in pools. The app also runs 1inch Earn, aimed at stable and efficient capital use. In May 2022 one pool, USDC/USDT, offered about 4.7% annual yield. In addition, 1inch conducts time-limited farming programmes.

Why does 1inch have its own token?

The aggregator has a native cryptocurrency, which was issued in 2020 on Ethereum and BNB Chain (via a cross-chain bridge).

The token grants participation in the project’s DAO. Members submit proposals, discuss them on the forum and vote. To vote, 1inch tokens must be locked in a special smart contract. The coin is expected to be used within the routing protocol. New tokens can currently be earned via staking.

There is also a cashback programme on paid fees for 1inch holders. The rebate depends on the number of coins in the wallet. To participate, you need at least 100 tokens—in that case the cashback is 25%.

What is the 1inch wallet for?

Alongside the trading and farming app, the team also develops a wallet designed specifically for DeFi. The wallet can be used with any DeFi application, not just 1inch, and is available on mobile devices.

Beyond storing and transferring cryptoassets, the wallet lets you swap, stake the 1inch token and discover decentralised applications. In addition, 1inch Wallet can hold non-fungible tokens (NFTs), buy crypto with fiat and even play blockchain games.