WTF is 1inch?
Decentralized exchange protocols ensure liquidity without requiring a central custodian. Centralized exchanges are not able to provide that facility. And that allows various DEX platforms to utilize automated market makers to use liquidity pools to facilitate transactions. What's the benefit? First of all, these liquidity pools operate with the help of smart contracts. Smart contracts allow these platforms to dictate the conditions of different trading pairs.
Each decentralized liquidity pool ideally requires an exchange aggregator that goes through multiple decentralized exchanges and comes up with the lowest crypto prices. 1inch is that exchange aggregator.
What is 1inch DeFi DEX?
1inch is one of the most popular, effective, and trader-friendly exchange aggregators that scan through hundreds of decentralized exchanges and finds the lowest cryptocurrency prices. It is powered by a governance token and 1inch utility. 1inch furnishes the instant governance model, the base for the platform's decentralized liquidity mining facility through token staking.
It's best to get a clear understanding of the crypto market before exploring how 1inch works. Firstly, there are two categories of crypto exchanges: decentralized exchanges and centralized exchanges.
Centralized exchanges use order books in the open market to match buyers and sellers. They keep your currencies in custody and hold your assets in exchange-based wallets. The system is quite similar to the traditional securities trading platforms. On the other hand, decentralized exchanges use self-executing smart contracts with non-custodial infrastructure to match and execute transactions. This ensures better autonomy and security for buyers and sellers using DEX platforms like 1inch.
Most trading platforms want to make a sale as quickly as possible. Traders are in a hurry to make the most of their trading opportunities. But this type of trading system is suitable for veterans. You would find it hard to figure out which trade has the lowest market price. That's where 1inch makes trading easier for investors. It scans a range of exchanges and provides the lowest market price that can facilitate your trade.
What makes 1inch exciting?
Let's get an idea of how centralized exchanges work to better understand why 1inch DeFi DEX is so exciting for crypto traders. Centralized exchanges unify all your trading activities under one roof called the central marketplace. The main advantage of this infrastructure is it obtains more trading partners. And when you have more trading partners, you can buy or sell readily at desired market prices. But this system doesn't use automated market makers, making the process slightly less scientific and inaccurate.
On the other hand, decentralized exchanges use different strategies to make sure that it maintains liquidity without needing a central custodian. These platforms don't have matching engines and order books. Instead, they use automated market makers to facilitate their transactions using liquidity pools. The advantage of this system is they use smart contracts, and each transaction occurs on-chain.
Centralized exchanges often can't handle the trading volumes necessary to get the depth of liquidity. This means you have to operate within a restricted field. But 1inch, through its atomic swaps, offers a variety of buying and selling options that adhere to the trading standards. These drawbacks from centralized exchanges prove why there is a need for decentralized exchange aggregators like 1inch.
Traders often have to deal with slippage in the crypto market. Slippage occurs when you purchase an asset for a higher price than intended due to insufficient trading volume. According to the 1nch DEX protocol, the system aggregates its liquidity to all the decentralized platforms to counteract order slippage.
Suppose you want to buy 1000 BTC at a price of $50,000 per BTC. But there are only 500 BTC available on a specific decentralized exchange. You move on to the next sell order where you find that the per BTC price is $50,500. This means you pay $500 x 500 = $250,000 more. $250,000 is more than what you had originally intended to pay. This is known as slippage. You end up spending more than what you had bargained. And 1inch tries to stop this slippage by merging various trading activities across different platforms. It minimizes market inefficiencies and pools its liquidity according to market conditions.
Last year, 1inch came up with its V2 protocol that allows swapping of 21 decentralized exchanges. Apart from counteracting slippages on various trades, the V2 protocol indirectly buffered price volatility across a broader decentralized ecosystem by increasing its liquidity across a bigger and broader market.
The 1inch Network Token and Governance Model
The 1inch Liquidity Protocol boosts the platform's liquidity. 1inch Liquidity Protocol is an automated market maker that uses virtual balances to reduce impermanent losses. It enables users to use its tokens and liquidate them on the 1inch platform. This process is called liquidity mining, where traders can provide assets, such as BTC or ETH, to specific pools and lock them in to earn 1INCH tokens as interest. The model is similar to some of the native decentralized tokens like UNI (Uniswap's token) to incentivizes community-based liquidity provisions.
Every token should have a governance model to assure users of its safety and security. Apart from the 1inch AMM Liquidity protocol, users also enjoy the 1INCH token as a central foundation to the 1inch governance model. The founders distributed 1INCH tokens on Christmas Day last year. 1INCH tokens have since then become governance tokens that provide equal voting rights to 1INCH's decentralized governance administration. The advantage of this system was its retroactive distribution that offered a guarantee to token holders. However, the founders ensured that only those who are eligible would receive the governance tokens. Here are a few eligibility criteria that the founders added:
• Anyone who had made at least one transaction on the platform before 15th September 2020.
• Anyone who had made at least four transactions over time.
• Anyone who had made at least $20 worth of transactions over time.
The founders minted 1.5 billion tokens. They had also decided that they would distribute 6% of the tokens during 1INCH's initial airdrop. Out of the remaining 94%, 14.5% of the 1INCH tokens would get unlocked over the next four years to support grants, tokens, insurance against potential hacks, and team expansion. The founders also allotted 23% of the 1INCH tokens to fund for community incentives, including its 1inch Liquidity Protocol.
This token ecosystem also contains Chi Gastoken that 1inch users can use to pay for their transaction costs. Experts believe that the Chi Gastoken is a type of tokenized ERC-20 token that increases network efficiency by pegging the cost of gas on Ethereum. You can incentivize a Gastoken through discounts on trading fees.
The 1INCH token facilitates participation in various decentralized autonomous organizations and represent voting rights. This decentralized autonomous organization governs the 1inch decentralized platform. Many would say that decentralized autonomous organizations are common in the crypto industry, but if you see the 1inch exchange, you will notice that it uses a governance model called instant governance. It has a proprietary model that makes the entire process easier for token holders. They can make necessary changes in the protocol to facilitate transactions.
Its founders believe that the instant governance model provides token holders ownership to the platform as they can participate in the token's governance process. They think that every vote would count and no token holder would get additional benefits. Everyone is on the same page when it comes to voting rights. It doesn't matter whether you hold 10 tokens or a 100.
Although the DeFi ecosystem is growing vast every day, 1inch stands out as the platform that offers a unified access point to decentralized exchanges providing various types of tokens. It pools its liquidity in the wider DeFi sector and offers a native source of liquidity using its automated market maker. This shows how 1inch handles its liquidity in a decentralized finance ecosystem.
Who is on the 1inch Team?
1inch operates as the initial contributor into a decentralized 1inch network. Its founders are Anton Bukov and Sergej Kunz. Sergej was a senior developer at a Stuttgart-based product price aggregator, while Anton was his friend who took part in many hackathons. The two decided to start 1inch after discussing the decentralized market and its opportunities.
Who funds the 1inch DeFi DEX?
1inch DeFi DEX had four rounds of funding that resulted in $14.8 million. Some of the leading investors are Republic Labs, gumi Cryptos Capital, Pantera Capital, and Binance Labs. The other investors who usually fund this platform are:
• The Spartan Group
• Blockchain Capital
• Struck Capital Crypto
• ParaFi Capital
• Illia Polosukhin
• Rockaway Blockchain Fund
• Nima Capital
How to participate in the 1inch DeFi DEX?
• Open an account on any platform or exchange that supports 1INCH. You will have to provide your ID proof, phone number, and email address.
• Link your bank account and transfer funds into your 1inch wallet.
• Buy 1inch tokens at the best prices.
With so many trading benefits, it's easy to see why traders and experts are so excited about 1inch. Open your account and start investing to enjoy its benefits like other veteran traders.
1/— 1inch Network (@1inchNetwork) April 27, 2021
🌋 Somewhere deep in the land of #Crypto, in the Fires of #ETH and #BSC, the #1inch Labs team forged a master #iOS wallet, and into this wallet, they poured their skill, talent, and the will to dominate the #DeFi.
⤵️ One wallet to rule them all.https://t.co/XH9wEziUA3 pic.twitter.com/8GSgQusxhV