What Is 1inch Exchange (1INCH)?
1inch Exchange (1INCH) is a DEX aggregator that compares prices across exchanges before determining the most cost-effective method for your trade. Instead of picking a single exchange, 1inch allows you to combine them to get the biggest bang for your cash.
What exactly is 1inch Exchange?
1inch Exchange is a revolutionary new decentralized exchange platform that combines two features:
- Decentralized exchange platform
- Decentralized exchange aggregator
What's the difference, you might wonder. The 1inch DEX platform refers to how you can buy and sell cryptocurrencies on the Exchange using a structure similar to Uniswap.
The DEX aggregator component distinguishes 1inch Exchange from its competitors. 1inch collects liquidity from popular DEXes such as Uniswap, Sushi, Balancer, Bancor, etc.
In this example, aggregating implies that 1inch examines all available exchanges for the best rates on your trading pairings.
When it's time to finalize the transaction, 1inch separates your order and distributes it among multiple exchanges. However, the trade appears to be a single transaction on the user end.
How Does the 1inch Exchange Work?
In 2021, everyone who uses a DEX had hit the same stumbling block: gas prices. Gas expenses for DEX trading have skyrocketed due to increased congestion on the Ethereum network.
As a result, when looking for the best crypto prices, you must factor gas fees into DEX trades. Some exchanges may carry the Token you're looking for, but after factoring in gas, the transaction may be more expensive than it's worth.
1inch Exchange was intended to help you solve this problem by allowing you to spread your trade across multiple exchanges utilizing micro-transactions. Distributing transactions between exchanges lowers overall gas costs and help 1inch put together the highest potential return for your trade.
To try 1inch for yourself, open the app and fill the swap interface with the tokens you want to trade. By entering an ETH —> CRV trade, we were able to test the interface. Compared to other exchanges, 1inch provides you the most CRV for the trade.
1inch isn't only about lowering petrol prices. The Exchange lessens slippage by routing your transaction across many DEXes.
To comprehend slippage, you must first understand how pooled liquidity works. If an ETH-CRV liquidity pool is illiquid, it will be unable to absorb a significant swap or high-volume trade. As a result, the price of token slips rises, resulting in you receiving less CRV than stated.
The likelihood that numerous exchanges lack the liquidity to absorb a large purchase or high volume for a given pair of assets exacerbates the problem.
But keep in mind that 1inch aggregates liquidity from multiple DEXes. To avoid slippage, 1inch devised a brilliant strategy of sourcing tokens from many pools.
Whales, or large traders, adore 1inch because of their slippage-reducing abilities. Even if you're not a whale by definition, 1inch can help you save money on your trades, especially if you're buying a high-traffic token.
Key Features of the 1inch Exchange
1inch is credited with inventing a decentralized exchange that effectively eliminates liquidity shortages. That isn't all the crew has accomplished, though. Take a look at some of 1inch's essential features below.
1inch initially concentrated on gathering liquidity from other DEXes. It wasn't long before the team created a liquidity protocol to attract native liquidity to 1inch.
Anyone can stake in the 1inch liquidity pools that underpin the 1inch Exchange and its Mooniswap AMM (more on that below).
1inch has struggled to attract LPs from major AMMs such as Uniswap and Sushi, despite introducing its liquidity protocol with a liquidity mining scheme. Today, the total value trapped in 1inch liquidity pools is roughly $45 million, a far cry from the billions on Uniswap.
1inch released its v3 aggregation protocol with enhanced smart contracts in March 2021. The update improved on an already good product by allowing faster and more efficient aggregated trading on the Exchange.
Aside from the unicorn power, 1inch v3 links to more DEXes via Ethereum and Binance Smart Chain. You can get liquidity on Ethereum and BSC's largest DEXes with a single click.
Protocol for Limiting Orders
On DEXes like Uniswap, advanced trading capabilities are sadly inadequate. Thanks to the team's revolutionary limit order procedure, this is not the case with 1inch Exchange.
Using the protocol's dynamic pricing mechanism, 1inch Exchange provides DEX traders with complicated order types like stop-loss orders, trailing-stop orders, and auctions. Aside from conditional orders, the 1inch limit order protocol does not impose fees, which is a significant difference from competitor 0x.
Ethereum-based decentralized exchanges and applications take pride in their home blockchain. This maximalism has entrapped several DEXs in Ethereum's high-cost ecosystem, even as other blockchains reach scaling milestones.
This could explain why the announcement of a Binance Smart Chain integration by 1inch Exchange surprised the crypto community. Following the meteoric rise of the BSC DeFi ecosystem in the first half of 2021, 1inch made the smart decision to try to recreate it on another chain.
The BSC deployment of 1inch provides the same functionality as the Ethereum version. 1inch on BSC routes to PancakeSwap, Venus Protocol, and BakerySwap instead of Uniswap and Sushi.
1inch launched on Polygon, a blockchain for scalable Ethereum transactions, shortly after launching on BSC. Uniswap, Sushi, Aave, and Curve are the only aggregate powers that 1inch on Polygon currently has.
Low Trading Fees
Regardless of your trade size, 1inch does not charge trading fees. In our opinion, this is a significant plus. Please keep in mind that this does not imply that there will be no trading fees. When 1inch routes your transaction through other exchanges, the transaction will be charged fees by other exchanges, which 1inch will hand to you.
That isn't to argue that 1inch exchanges are more costly than going directly to Uniswap or Curve. Usually, your fees are just as low as advertised, with a favorable exchange rate.
In the early days of the 1inch Exchange, the team wanted to set themselves apart from the liquidity protocol being developed concurrently. As a result, the Mooniswap DEX was created to simplify token swaps while also giving liquidity providers greater firepower.
Mooniswap, unlike arbitrageurs, returns a percentage of slippage profits to LPs. Trader protections against threats such as front-running and LP referral fees are other enhancements.
The 1INCH Token is described in detail.
The 1inch Exchange is represented by the ERC-20 token 1INCH on the Ethereum network. A BEP-20 1INCH token became available via the Binance bridge once 1inch was deployed on BSC.
This year, the 1INCH Token has gained much traction as an asset. A robust investment fund, Grayscale is considering adding 1INCH to its portfolio after Coinbase joined it in April.
1INCH is a governance token that allows its owner to vote in 1inch DAO procedures. Keep 1INCH tokens in your Metamask wallet to vote.
Mining and Liquidity Routing
Aside from its governance tasks, 1INCH also serves as a liquidity pool base pair and a reward for onboarding liquidity. Yield farmers can access the APY offered in liquidity pools like 1INCH-YFI and 1INCH-DAI by purchasing and holding 1INCH tokens.
What about the Chi Gastoken, for example?
The 1inch team has created another token that few people are aware of. The Chi Gastoken is what it's called.
We discussed 1inch's capacity to minimize gas expenses when trading earlier in this book dramatically. You would think that 1inch has a unique deal with Ethereum miners, but that isn't the case.
1inch, on the other hand, employs the Chi Gastoken. In a word, the Gastoken lets you retain CHI as a hedge against Ethereum gas prices. When it's time to trade on 1inch, CHI tokens can be redeemed to cover a significant percentage of your trading gas fees.
CHI primarily benefits High-volume traders and liquidity, pool arbitrageurs. Even if you don't trade frequently, Chi Gastoken can save you up to 50% on gas.
How Does 1inch Compare to Uniswap?
Overall, 1inch and Uniswap have a lot in common. The main distinction is that 1inch allows you to trade on many exchanges, whereas Uniswap trades are supplied from Uniswap liquidity pools.
1inch Exchange is the way to go if you require a slippage-reducing exchange that sources crypto in real-time from the greatest liquidity pools.
Casual investors who are purchasing and holding cryptocurrencies, on the other hand, will likely like Uniswap's basic simplicity. Besides, the almost $6 in liquidity provided by Uniswap is more than enough to cover most trades.