Article content
* What is 1inch Network?
* 1inch Foundation
* 1inch Labs
* 1inch liquidity protocol
* 1inch aggregation protocol
* 1inch DAO and 1inch Token (1INCH)
* 1inch V3
* Links of interest
The decentralized exchange (DEX) and 1inch revolutionized financial technology where traders need only connect their wallets, without ever giving access to their funds or personal information to companies. DEXs allow users to maintain control of their funds while converting one token for another.
DEXs provide more security and privacy than their centralized counterparts, which is why they have seen a substantial increase in activity in recent years. 2020 has been insane for the DeFi market, as not only have funds on DeFi protocols skyrocketed, but innovations have also emerged to enhance the crypto trading experience. One of these innovations is DEX aggregators.
Decentralized exchanges have garnered a lot of attention, but problems are also emerging as they have grown from few to many. The problem with decentralized exchanges is that most of them do not provide enough liquidity, especially for smaller tokens, making it difficult to enter and exit larger positions without substantial slippage.
To address these liquidity issues, DEX aggregator innovation has joined the DeFi market. DEX aggregators are decentralized finance (DeFi) protocols that allow crypto traders to access a wide range of trading pools through a single dashboard. The 1inch protocol is a DEX aggregator.
In March 2021, the 1inch team recently released the third version, 1inch V3 . Let's take a look at the 1inch Protocol which has been renamed to 1inch Network.
What is 1inch Network?
1inch Network, launched in August 2020 after a $ 2.8 million fundraiser from Binance Labs, Galaxy Digital, Greenfield One, Libertus Capital, Dragonfly Capital, FTX, IOSG, LAUNCHub Ventures and Divergence Ventures, is an aggregator decentralized cryptocurrency exchange (DEX) used to buy or sell cryptocurrencies through multiple DEXs. The project is the brainchild of Russian developers Sergej Kunz and Anton Bukov. They built the first viable medium product (MVP) for a DEX aggregation protocol at the ETHGlobal hackathon in New York in May 2019.
This MVP later evolved into the 1inch Network, an ecosystem of decentralized protocols whose synergy enables the most lucrative, efficient and secure operations in the DeFi space. A 1inch Network blog post describes the 1inch ecosystem as:
"1inch Network is a collection of robust and composable DeFi instruments, which together enable veteran and new DeFi users to maximize the financial opportunity of Web3 with a clean user experience and secure contracts."
As a DEX aggregator, you search for a handful of decentralized exchanges to get the cheapest prices and redirect your clients' transactions to each other to try to make sure they are getting the best prices. Orders are divided into multiple DEXs to find the best available market price by using arbitrage bots. By exchanging tokens in 1inch, users gain access to the highest value of liquidity available. According to DeFi Pulse , the 1inch liquidity protocol is currently ranked 26th with $ 258.2 million in TVL .
Based on available data, the 1inch network consists of 5 distinct but interoperable components: 1inch Aggregation Protocol, 1inch Liquidity Protocol, 1inch DAO, 1inch Labs, and 1inch Foundation.
1inch Foundation
1inch Foundation is a non-profit organization that issued the 1INCH token and is dedicated to fostering the 1inch Network and initiatives that benefit the network community. The mission of the 1inch Foundation is to foster the growth and expansion of the 1inch Network and to incentivize contributions through grants and other capital deployment vehicles.
The foundation engages adopters and maximizes network decentralization through the growing number of stake owners and their involvement in the governance of DAO. It incentivizes developers and individual teams to build on the 1inch Network protocols and contribute to the evolution of the protocol through a grant program.
1inch Labs
According to a blog post explaining 1inch Network, 1inch Labs is a key contributor to the protocol. It is a decentralized group of software developers who develop a range of user-governed open source protocols through the 1inch DAO.
1inch liquidity protocol
1inch Liquidity Protocol is an Automated Market Maker (AMM) that facilitates decentralized token exchanges without the need for an order book. The intelligent 1inch algorithm is designed to capture the value that arbitrageurs typically capture to provide liquidity providers with competitive returns compared to other AMM designs.
1inch Liquidity Protocol tries to serve liquidity providers. Although the main 1inch DApp also allows users to provide liquidity in 1inch pools, it also has a separate AMM protocol called Mooniswap .
Mooniswap was launched in August 2020. According to the 1inch team, Mooniswap is the next generation of an automated market maker with virtual balances that allow liquidity providers to capture profits that would otherwise be captured by arbitrageurs.
This means that Mooniswap is designed to increase the profits of liquidity providers and prevent arbitrageurs from getting an unfair percentage of token swap slippages. The model adopted by Uniswap provides opportunities for arbitrageurs, often at the expense of liquidity providers (LPs). But Mooniswap addresses this problem by allowing LPs to act as arbitrageurs. Some estimates say this can increase LP earnings by 50-200% compared to Uniswap.
To earn passive income from their crypto assets, users provide liquidity to 1inch pools. Liquidity providers collect rewards on assets locked in pools and additional yield farm rewards in 1inch tokens. They can also earn 1inch tokens by participating in many liquidity mining programs. They must be a liquidity provider for one of the 1inch pools supported by the program.
According to the protocol, 1inch-inch transactions are up to 42% cheaper due to the use of its own CHI GasToken , a standard ERC20 token. To protect against high gas fees on Ethereum, GasToken was created. GasToken is a more liquid form of gas because it can be purchased and stored at times when gas is cheap and released when gas is expensive.
1inch aggregation protocol
The 1inch DEX aggregation protocol is the most talked about protocol in the ecosystem. It facilitates safe and cost-effective atomic transactions by using a wide range of protocols and performing argument validation and execution verification.
Users take advantage of the aggregation protocol every time they interact with 1inch to find and execute the most efficient transactions on DEXs. When using a crypto exchange to place large orders, traders often get caught up in slippage. If a trading pair is under-liquid, even a modest order could drastically raise the price of a small-cap asset.
The 1inch DEX aggregation protocol splits an exchange between many protocols through Pathfinder, API containing a routing algorithm, which finds the best possible routes for a token exchange in the shortest possible time. Pathfinder finds the best trade routes in multiple markets, taking gas costs into account. Pathfinder operates on Ethereum and Binance Smart Chain (BSC), compatible with the CHI gas token, allowing users to save up to 40% on gas fees.
Based on available data, swaps are divided into 21 supported liquidity protocols, using different “depths of market” within the same protocol. All major protocols are supported, including Uniswap v1 and v2, Balancer, Curve , Kyber, SushiSwap , DODO, Oasis, Mooniswap, and many more.
1inch DAO and 1inch Token (1INCH)
After the launch of 1inch V2 on November 25, 2020, in December 2020, the 1inch Foundation launched its 1INCH governance token, and the 1inch Network began to be governed by a decentralized autonomous organization (DAO). Ninety million 1 INCH tokens were distributed to anyone who made a transaction on the platform before September 15, 2020 or made a total of four transactions totaling at least $ 20.
The main way to earn 1INCH tokens is by providing liquidity to the 1inch liquidity platform. The token can also be purchased on exchanges. The current total supply of 1 INCH is 1.5 billion tokens. 30% of the total supply of tokens has been allocated to community incentives, and they will be unlocked and distributed over the next 4 years.
14.5% of the supply, unlocked for 4 years, will form the growth and development fund of the protocol. It will be used to award grants, attract developers to develop and improve 1inch protocols, fund audits, and compensate users for their losses due to unforeseen circumstances.
1INCH drives an innovative governance model , known as instant governance. According to the 1inch team, most governance models are not designed to adopt protocol changes quickly to respond to the rapidly evolving market. The 1inch 'instant governance' aims to reshape the DAO model by making it easier for token holders to make protocol changes and bypassing many of the inefficiencies of many current DAO models.
1inch V3
On March 16, 2021, 1inch Network introduced version 3 of the 1inch Aggregation Protocol, which facilitates lower gas rates. Currently, the biggest problem facing the Ethereum network is high gas rates, and the main improvement in version 3 is the ability to substantially reduce gas rates thanks to the optimization of the assembly code.
According to 1inch, exchanging ETH for DAI in 1inch requires 10.3% less gas than the same trade in Uniswap and 4.9% less than in 0x.
Links of interest
Website: https://app.1inch.io/#/1/swap/ETH/DAI
Mooniswap: https://mooniswap.exchange/#/
Twitter: https://twitter.com/1inchNetwork
1inch Blog: https://blog.1inch.io/