1inch is a non-custodial decentralized exchange and DEX aggregator. It works by connecting multiple DEXs into a single unified platform, giving users the ability to optimize their decentralized cryptocurrency trades or swaps without having to manually check rates across every DEX. This optimization is accomplished via smart contracts that source liquidity from various DEXs — including, but not limited to, Balancer, Kyber Network, Uniswap, and Mooniswap.
1inch currently supports over 250 coins and tokens.
What is 1inch?
In the simplest terms, 1inch uses APIs to discover the best possible route for a decentralized token swap — even if that requires using multiple exchanges to complete a user’s trade in the most optimal fashion. This process results in the user receiving the best possible rate while minimizing slippage and reducing the likelihood of transactions getting canceled.
Being a decentralized exchange, 1inch does not require an account or any identity information. Users simply connect a supported Ethereum wallet — such as MetaMask, WalletConnect, Ledger, Portis, MEW, Fortmatic, and others — and can start using the platform instantly. Being non-custodial, 1inch never takes complete control over a user’s coins or tokens and merely executes the desired trades after receiving the wallet holder’s permission.
1inch sources liquidity from a wide variety of DEXs in an easy-to-understand user interface. Source: 1inch
The history of 1inch
1inch was founded by Sergej Kunz and Anton Bukov, who formulated the idea at the ETHNewYork hackathon in 2019 after initially meeting during a live stream on Kunz’s YouTube channel. Kunz previously worked in the field of price aggregation at Commerce Connector and as a DevOps and cybersecurity specialist at Porsche. Bukov, meanwhile, has a long history of software development and a more recent history of work in decentralized finance protocols.
The pair launched 1inch in August 2020 after receiving nearly $3 million in funding from the likes of Binance Labs, Galaxy Digital, FTX, and other big-name investors. This initial fundraising was followed by a $12 million Series A, led by investing behemoths Pantera Capital, Blockchain Capital, Spartan Group, and others.
It wasn’t until December 2020 that 1inch launched its own governance token, which carries the ticker 1INCH.
1INCH tokenomics
The 1INCH token was given away to users of the 1inch protocol who met a series of requirements. They had to have either executed one trade before September 15, 2020, completed a minimum of four total trades, or traded a minimum of $20. Users who successfully met the criteria were able to claim 1INCH directly in their connected wallet.
Being a governance token, 1INCH is used to stake and participate in the protocol’s decentralized autonomous organization, or DAO. The founders have explicitly made clear that 1INCH tokens should be considered neither as securities nor investments.
The total supply of 1INCH is currently 1.5 billion tokens, six percent of which were initially released on the token’s launch day. Another 0.5 percent was released over 1inch’s two-week-long liquidity mining program.
Another 30 percent of the total 1INCH supply was allocated to the incentivization of the community. This portion will be distributed over the span of four years — unless changed via a decentralized governance proposal and successful vote. During the same time frame, another 14.5 percent of the total supply will fund the development and growth of 1inch.
What are the benefits of using 1inch?
The objective benefits of using a decentralized exchange aggregator, such as 1inch, are many.
1 Security
First and foremost, 1inch is non-custodial and has no access to users’ crypto-assets. In addition to an increased level of security, this also means that 1inch has no deposit or withdrawal fees commonly associated with centralized exchanges. 1inch also charges no additional fees to use the platform.
1inch has yet to experience any major security breach, hack, or exploitation of its smart contract technology. Its aggregation of DEXs also equates to a high level of liquidity and a low amount of slippage.
2 Lower gas fees
1inch also allows users to take advantage of CHI Gas Tokens, which may be used to reduce the traditionally high Ethereum gas fees.
On the flip side, decentralized exchanges aren’t often considered beginner-friendly, and 1inch is no different. It does not support the purchase of crypto-assets through fiat currencies or other means — meaning that all users of the DEX aggregator must own their own cryptocurrencies.
Conclusion
1inch successfully solves one of decentralized exchanges’ biggest issues — liquidity — by sourcing it through the aggregation of many leading DEXs – At the same time, the platform has put forth novel tools in the form of the fee-reducing CHI Gas Token and its Mooniswap automated market maker.
The simple fact that 1inch allows users to see the best exchange rates across a wide variety of DEXs, without having to do so manually themselves, has carved out a unique niche for the protocol. The non-custodial nature of the platform is also an added benefit.
Cryptocurrency newcomers, though, may find the process of connecting an Ethereum wallet and operating the platform difficult or confusing. The inability to purchase cryptocurrencies with fiat currencies also presents a barrier to entry.
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