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DeFi Decrypted: 1inch Network and 1INCH Explained

DeFi Decrypted: 1inch Network and 1INCH Explained

Explainers DeFi

16 Sep 2021

As of September 16, 2021, there are over 1,700 decentralized finance (DeFi) solutions on the market on blockchains like Ethereum, Binance Smart Chain, Solana, and scalability networks like Polygon and Optimism.

While the market is expanding rapidly – featuring a TVL (total value locked) of $180 billion –, it becomes more challenging every day to pick the decentralized exchange (DEX) or automated market maker (AMM) protocol to trade coins at the best prices, the highest liquidity, and the lowest gas costs.

And this is where the 1inch Network comes into the picture.

Featuring a DEX aggregation protocol, which has been accompanied by numerous other decentralized finance solutions, 1inch sources liquidity from various sources to ensure users are trading cryptocurrency at the best rates.

What Is 1inch?

Founded in 2019 during an ETHNewYork hackathon event by Sergej Kunz and Anton Bukov, 1inch primarily functions as a DEX aggregator protocol.

With the goal to provide users the best prices – taking gas costs into account as well –, the project's aggregator solution connects to over 120 liquidity sources (e.g., DEXs, lending protocols, and AMMs) across four different platforms: the Ethereum and Binance Smart Chain blockchains as well as the Polygon and Optimism ETH scalability solutions.

In addition to optimized prices, 1inch's aggregator protocol also minimizes slippage (a difference in the expected price and the actual price at which the trade is executed) by pooling together liquidity from numerous sources connected to the platform.

At the same time, the aggregator utilizes a smart contract that performs runtime verification of transaction execution to ensure the security of users' funds even when interacting with an unsafe liquidity source. Also, the protocol minimizes the risks of frontrunning, a common practice in which malicious parties leverage the data of pending transactions to cause financial losses for traders.

In addition to the aggregator protocol, 1inch's fast-growing ecosystem features the following DeFi solutions and platform components:

  • 1inch Liquidity Protocol: Formerly known as Mooniswap, 1inch's liquidity protocol provides AMM functionality for the project, which users can leverage to swap tokens (natively on the platform) as well as generate a passive income via yield farming.
  • 1inch Limit Order Protocol: Simply put, the limit order protocol solution introduces an enhanced trading experience that is similar to what centralized crypto exchanges offer but in a decentralized way. In addition to market orders, users can utilize the protocol to place limit, stop-loss, and trailing stop orders with zero trading fees across Ethereum, BSC, and Polygon.
  • 1inch DAO: A decentralized autonomous organization featuring a user-friendly interface clients can utilize to participate in community governance and use their native 1INCH coins to vote on the matters that concern the project's future.
  • 1inch Foundation: A non-profit organization dedicated to facilitating the growth of the project's ecosystem and incentivizing activity and contributions via different methods, such as distributing governance rewards and developer grants as well as launching yield farming programs.
  • 1inch Wallet: A user-friendly, non-custodial DeFi wallet users can utilize to store coins, connect to decentralized finance applications, and 1inch's protocols.

What Is the 1INCH Token and What Are its Main Functionalities?

The 1INCH token is the native utility and governance cryptocurrency of the project that is available on both Ethereum and Binance Smart Chain.

Featuring a total supply of 1.5 billion coins, a little over 180 million 1INCH tokens are in circulation currently, with the remaining assets being gradually unlocked and released to the market until December 30, 2024, throughout a four-year period.

The main functionalities of the digital asset include:

  • Achieving high-efficiency routing by serving as a connector for the 1inch Liquidity Protocol
  • Participating in governance decisions by staking 1INCH (and receiving rewards in exchange)
  • Distributing yield farming rewards to liquidity providers

The project initially airdropped 6% of the 1INCH supply to existing users and allocated the rest of the coins to be distributed throughout further airdrops, yield farming, grants, various community incentives, and other methods related to token allocation.

Now, let's quickly explore how 1INCH has been performing in the past few months.

Despite the project being around since 2019, it only rolled out its native coin on December 25, 2020.

However, soon after its launch, 1INCH entered into a significant bull run, in which it surged from January 1's $1.16 to $6.06 on February 5, with the cryptocurrency's value further increasing to as high as $7.58 by May 8.

After a fall to the bottom of $1.68 on July 20 due to the crypto market crash between May and June, 1INCH has since been recovering its losses, currently trading at $3.34 (as of September 16.) As a result, the digital asset features a 188% year-to-date ROI in 2021.

What Are 1inch's Most Important Project Updates?

Since its launch in 2019, 1inch has seen quite some development throughout its little more than two years of history.

In addition to its original DEX aggregator solution, it introduced its liquidity and limit order protocols, as well as integrated its products and services with Binance Smart Chain, Polygon, and Optimism in addition to Ethereum.

Besides the above, we have collected the most important project updates for 1inch below:

  • Launching of the 1INCH token in December 2020
  • Upgrading the community governance framework of the project in June 2021
  • Adding Over-the-Counter (OTC) swap feature to 1inch dApp (June 2021)
  • Introducing a $3 million grant program in July 2021 to fund and incentivize network and community development as well as research and analytics
  • Since September 1, 2021, the project has initiated a new campaign in which it allocated 10 million 1INCH tokens (worth nearly $33.5 million currently) to refund the Ethereum gas costs of users staking the protocol's native coin via its dApp

Trade 1INCH With AAX

1inch is a DeFi project that aims to provide a viable solution to important issues like increased slippage, illiquid markets, and high frontrunning risks.

As a result, 1inch has become one of the leading aggregator protocols in the decentralized finance industry that features its own AMM, yield farming solution, as well as a limit-order solution to offer advanced trading functionalities for its users.

If you want to gain exposure to 1INCH, we highly recommend heading to the following link on AAX, where you can leverage our LSEG-powered, institutional-grade platform to trade the cryptocurrency with zero fees (applicable for all spot market trades until further notice).

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