What is 1inch?

1inch is a powerful DeFi decentralized finance protocol, which seeks to offer its clients a simple exchange interface, with support for multiple chains, with low commissions and a system that guarantees the best possible exchange for those who use its service. 

SSurely you have heard of 1inch, one of the great DEX of the crypto world and that has become especially famous for a reason: They claim to offer at all times the best exchange rate among all their competition and with powerful options to save on commissions.

Imagine the enormous utility of this type of tool for traders who usually use applications DeFi, convert not only the tokens they have in their possession but, at the same time, do it at the lowest cost and at the best possible price. Below we will explain everything you need to know about this interesting project ...

1inch origin

1inch was founded in May 2019 by Russian developers Serjez Kunz and Anton Bukov, after many years working in the world of smart contract auditing. The idea was born at the ETHNewYork Hackathon where they experimented with arbitrage bots and strategy, and in which a preliminary version of what the protocol would be was developed. The protocol was an AMM capable of joining several DEXs, using them as bridges to obtain liquidity and offering the best exchange rates at all times.

Then, in August 2020, Kunz and Bukov were able to raise their first $ 2,8 million seed capital thanks to Binance Labs, Galaxy Digital, Greenfield One, Libertus Capital, Dragonfly Capital, FTX, IOSG, LAUNCHub Ventures, and Divergence Ventures. To this, an additional investment of $ 12 million was added by Pantera Capital, ParaFi Capital, Blockchain Capital, Nima Capital and Spartan Group.

Thanks to this capital, 1inch launched in August 2020, mooniswap, also known as 1inch Liquidity Protocol. Mooniswap is an Automatic Market Maker (AMM) that operated with a five-minute delay in prices, allowing it to create a more competitive environment for traders in arbitration and, at the same time, it reduced the risks of permanent loss to your liquidity providers.

However, at the same time that Mooniswap was deployed, Kunz and Bukov worked on an improved version of the protocol, which was released in November 2020, 1inch V2. That new version featured a powerful routing and matchmaking algorithm known as "Pathfinder«, which made it possible to offer even better exchanges and at a speed several times higher than the previous algorithm.

In addition, Pathfinder could use strategies to make the trades that were executed always possible to be done with the most optimal exchange formula, taking advantage of the depth of the DEX markets (which it used as feeders) and the price curve behavior of the MMAs. In general, this new version of Pathfinder was much more optimal and its interchanges superior to those of the competition.

Finally, in December 2020, 1inch launched the 1INCH token which became the governance token for its DAO. Since then, the community can actively participate in the development of the project that has positioned itself as one of the most important in the DeFi world.

How does 1inch work?

1inch is a very particular DEX, because its operation depends on dividing the exchange order that it receives from the user, among the different DEXs that it uses as liquidity feeders. For example, if you want to change ETH by WBTC, what it does is take your exchange order and divide your order between the different DEX that it has indexed (Uniswap, Kyber, AAVE, Bancor, Corners, Compound, yearn, among others).

Once your order is divided, the Pathfinder algorithm begins to analyze the different pools available in those DEXs to make your exchange. It analyzes data such as the depth of each of these pools, simulates the price slippage for the given order, calculates the cost in gas and the rest of the commissions for the exchange. This process is repeated in each of the DEX consulted (which can be up to 12 at the same time) and, at the end, a comparative table is created to offer you the most optimal exchange solution, taking into account:

1. The exchange that offers the best price.
2. The lowest cost of operation and commissions.

The best thing is that to perform all this operation you only need to connect to the DEX through a Web3 wallet such as Dappradar, since the rest of the transactions are carried out completely automatically.

In addition, it also offers the ability to create your own liquidity pools within 1inch for exchanges within the same platform, as well as having advanced exchange features such as the ability to create limit orders for more precise handling of trade orders.

1INCH Token and its role in 1inch DAO

The 1INCH token is a token created with a well-defined purpose: to be used within the 1inch protocol. Basically it is a utility token for the governance of the protocol. In addition, the token can be used so that third parties can use it as a service exchange currency.

On the other hand, the total issuance of the 1INCH token is limited to 1.500 billion units and they are released on a scheduled basis within the network. Also, the token is multi-chain and available on Ethereum and BSC.

In fact, 30 percent of all issuance will be released in the form of community incentives over four years, thus forming the basis for the protocol's decentralized governance. On the other hand, during the same period, 14,5 percent of the total supply will be used as a development and growth fund for the protocol. The idea is that the protocol can continue to develop and grow.

Regarding their role in governance, 1INCH token holders can participate in the governance of the protocol without having any tenure limits. That is, anyone who has at least 1 1INCH token can participate.

Exchange fees or commissions

A curiosity of 1inch is that there are no fees to use the protocol. In other words, there are no fees for exchanges, no deposit or withdrawal. The only costs for users solely depend on the decentralized exchanges used to obtain liquidity for operations. This makes 1inch a unique DEX, as most DEXs charge some kind of fee to perform trades.

Yield Farming and Liquidity pools

1inch also offers us multiple ways to obtain profits for participating in it, such as the ability to be liquidity providers within the protocol, or to be part of its strategies of yield farming. In this way, you can earn returns for your tokens and receive 1INCH tokens as a reward.

Other highlights of 1inch

Among the advantages of using 1inch we can mention:

1. From its launch to the present, 1inch Exchange has been one of the few DEXs that have not suffered security breaches or hacks to their platform.
2. It has a very clean and easy-to-use interface.
3. The fact that it does not charge commissions for trading, makes it a perfect option for those who carry out many operations in DEX.
4. Its Pathfinder algorithm is one of the best when it comes to offering the best exchange rate.
5. If you use CHI gas tokens, transaction costs can be greatly reduced.
6. It allows to apply strategies of liquidity mining and yield farming in one place.
7. It is possible to use it through decentralized services Skynet de Both e IPFS, from anywhere in the world.
8. It has bridges or "Bridges" for chains such as Polygon, BSC, Arbitrum or Optimism. In this way, we can choose the place where we want to make the exchanges, further reducing the costs per transaction.
9. It is possible to buy ETH through the MoonPay service, thus creating a bridge between the crypto world and fiat currencies.