What is 1inch Network (1INCH)?

Finding the best exchange rate for tokens is hard, comparing rates on all decentralized exchanges (DEXes) takes time and a mistake can cost users a lot. Also, rates on DEXes are not fixed, the more you swap, the worse the exchange will be. Thus, 1inch Network was created to bridge this gap by aggregating through tons of decentralized finance (DeFi) and analyzing DEXes to source the best possible exchange rates, splitting the amount to be exchanged into several parts and swapping each part at the best rate at a different (decentralized exchange) DEX.

Coined as a tribute to the legendary Bruce Lee’s 1inch punch which was said to be so effective that it could floor his opponent. The 1inch Network’s team set out to do the same with their exchange. They wanted to develop an algorithm that was able to execute crypto swaps as quickly and efficiently as possible.

This article provides a basic understanding of all there is to know about the 1inch network. It also provides insights on how it works and highlights the 1inch Network Token.

What Is 1inch Network?

1inch is a DEX aggregator and automated market maker. As a DEX aggregator, 1inch uses an advanced algorithm that searches over 33 different liquidity protocols to discover the most efficient swap route for orders, and one which makes the most efficient trade based on several variables like price, liquidity, slippage, etc.

On the other hand, the 1inch Automated Market Maker or AMM protocol was initially launched as Mooniswap and operates much like other AMM protocols such as Uniswap, Sushiwap, etc. However, the 1inch AMM has some unique features that improve its efficiency over some of the other AMMs.

History of 1inch Network

Like many other DeFi protocols, 1Inch Network (1INCH) emerged from an ETHDev conference, this time it was the ETHGlobal hackathon back in 2019. It was founded by Sergej Kunz, an ex-Porshe software engineer, and Anton Bukov, a smart contract developer on the NEAR protocol. In the past, Sergej has used what would now become 1inch to carry out live smart contract audits, in one of those Livestream audits, he was introduced to Anton and they both set the ball rolling to become co-founders of 1inch Network.

In early 2020, the co-founders used their YouTube channel, “Cryptomaniacs” to showcase the initial iterations of 1inch. What started as a simple aggregator was completely swept up by the DeFi explosion in 2020 which led the team to secure the interests of several venture capital firms who wanted their share of DeFi.

In August 2020, they completed a seed round from Binance Labs of about 2.8 million dollars. Then in early December 2020, they managed to close a much larger 12 million dollar funding round that was led by Pantera Capital. In much the same way as Uniswap did, 1inch Network has airdropped some of their 1inch governance tokens to those in the 1inch community.

1inch Ecosystem

The 1inch Network is an initiative of the 1inch foundation committed to promoting the network and other initiatives within the ecosystem for the benefit of the 1inch community. To develop and expand the 1inch ecosystem, the foundation provides grants as well as deploys other forms of incentives to the community.

The 1inch ecosystem consists of developers, adopters as well as several other teams contributing to the protocol. The 1inch Labs represents a group of software developers within the ecosystem. These are responsible for deploying user governance protocols and they are regarded as the main contributors to the 1inch ecosystem.

How does 1inch Network Work? Smart Contracts and AMM Model

1inch Network exchange is a decentralized application that is built on the Ethereum network. It uses smart contract technology to source liquidity from different DEX protocols. These include the likes of Uniswap, Kyber Network, Bancor, etc.

The smart contracts are programmed to find the best order routes for the swap that you intend to use. They are also able to split the transaction into smaller transactions to find the best routes. This is called pathfinder and was one of the releases included in their version 2 (v2) upgrade.

The following are steps for swapping tokens on the 1inch Network:

In a situation where a user has excess RenBTC and would like to swap them for USDT.

• Head on to 1inch.exchange
• Authorize Web 3.0 wallet
• After clicking on the swap feature, 1inch indicates the fees the user is likely to be charged, as well as the rate. This can however be tweaked by either selection to get the maximum return on the swap or the lowest gas fees.
• 1inch also has a feature that projects all the routing parameters through which the orders would be routed, as well as the savings users are likely to get from using 1inch over other DEXes. Once the user is satisfied with the routing parameters, they can now proceed to unlock the token.
• There are two methods to unlock; the simple method which requires users to unlock the same token every time a trade is to be executed, or the infinity method which allows users to unlock once and for all times which saves gas fees. However, the infinity method is riskier unless the user is a pro at DeFi.
• The user confirms the unlock of the RenBTC and is ready to execute the swap.

Note: RenBTC is a fungible token (ERC-20) created on the Ethereum blockchain and pegged to Bitcoin. This means that the RenBTC can potentially retain its value in proximity to the Bitcoin market rate.

Meanwhile, 1inch Automated Market Maker (AMM) otherwise known as the 1inch liquidity protocol was originally launched as Mooniswap, it was 1inch’s answer to the AMM protocols developed by the likes of Uniswap and Bancor. These AMMs use what is called the Constant Product Invariant Equation – an equation that is used for price swaps in a pre-funded liquidity pool. It adjusts prices such that the product of the number of tokens in each pool is equal to a constant.

However, because of impermanent loss, liquidity providers suffer because they have no control over the composition of the pool where they are supplying liquidity. Although some dev protocols such as Curve and Bancor have tried to address it to no avail 1inch network’s Mooniswap was able to address these challenges.

This is achieved by building a time delay between updates of price feeds and slowly using the invariant algorithm to reduce the profits for the arbitrage traders, and since its launch in August 2020, Mooniswap has been effective.

1inch Network also bootstrapped liquidity for these pools through a number of liquidity mining incentives such that users not only earn fees from distribution but are also entitled to 1inch Network’s tokens when they are released. The Mooniswap was renamed the 1inch liquidity protocol after a few months which was the main feature of version 2.

1inch DAO

After the November 25, 2020 launch of its Version 2 (v2), the 1inch Foundation unveiled its 1INCH governance token in December 2020, and the governance of the 1inch Network was undertaken by a decentralized autonomous organization (DAO).

DAO governance choices can include all things from implementing a new 1inch Network protocol to allocating Treasury assets for specific proposals.

By giving the community direct authority over more extensive governance structures, the 1inch Network DAO made the transition to a fully featured DAO operation. The goal of the 1inch foundation is that 1inch Network protocols and its token should be entirely decentralized, managed, and administered by the DAO. This is the common goal of all DAO participants.

The 1INCH coin serves as the DAO’s governance token. Everyone is welcome to join debates within the DAO, but only users having 1INCH governance tokens can cast votes. 1INCH holders are first required to deposit the token in the staking contract to guarantee all parties involved in the governance process are invested in the project’s success.

What Is the 1INCH Token?

(The design team should please recreate the picture)

In December 2020, 1inch Network (1INCH) decided to give its community members governance tokens. 1inch Network (1INCH) released these tokens to certain wallets that had interacted with the 1inch Network (1INCH) exchange by either having traded once before the 15^th of September 2020, having made 4 trades in total, or having traded at least $20 in total volume.

At its launch, 1inch Network (1INCH) released a total of 1.5billion supply of 1INCH tokens which will be unlocked over 4 years to numerous stakeholders including 30% for community incentives, 14% for R&D, and the rest to the core backers, contributors, and advisors.

Unlike a utility token, the 1INCH governance token’s value is derived from the voting rights that come with it. The more the users want to be able to shape governance decisions in the 1inch ecosystem, the more they are likely to hold and accumulate 1INCH tokens. The 1INCH token is unique because it is the only token that has launched with what is called Instant Governance.

This is a feature that holds no barriers to users meeting a minimum threshold to vote on important proposals in the 1inch ecosystem. In essence, 1INCH token holders can vote on important parameters that add value to the protocol and all participants including them.

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Source: 1inch Network

There are quite a few things that 1INCH token stakers can vote on and it applies to parameters both in the aggregation protocol and pool governance.

• A spread surplus in aggregation protocol
• Swap fee for liquidity providers: This fee is generated on every swap conducted within the 1Inch protocol.
• Price impact fee: This is a swapping fee generated according to the price impact during a swap.
• Decay period: This feature shields traders away from the risk of frontrunning and bars traders who want to just take advantage of the system through arbitrage. Stakers within the pool can prolong the decay period for up to 5 minutes. This is beneficial because the longer the decay period, the wider the price spread after trades.
• Governance reward
• Referral reward

1inch token holders can identify important parameters for their votes, especially ones that add value both to them and the protocol. If a user wants to vote on certain propositions, 1inch tokens have to be staked which translates to staking rewards earned as 1INCH tokens.

However, the amount of staking returns earned is dependent on the amount of generated fees from the protocol, which means, the more fees the protocol garners, the more fees the user gets and vice versa. This further reiterates the power of the governance tokens because users get to stake a token each time they want to exercise their voting power which also translates to more tokens for them as well.

Governance

The instant governance component of 1inch Network’s governance model sets it apart from most DeFi protocols and enables users in the 1inch network to vote on protocol parameters with the 1inch DAO in an open, user-friendly, and efficient way.

Instant governance is more decentralized and community-focused because there are no barriers to participation for anyone.

Owners of governance tokens can submit new proposals or cast votes on current ones using 1inch. The number of tokens a user has in the staking contract directly affects how much influence they have in voting. Additionally, users have the option to assign other addresses — referred to as “Delegates” — their voting authority.

To vote on the proposal and gain additional tokens as staking rewards, users must stake their 1INCH tokens. The volume of stake payouts is directly related to the total fees accrued on the 1inch network. In essence, the more protocol fees acquired within the network equals the amount of staking returns for users who vote.

Tokenomics

The 1INCH token provides different tokenomics by acting as a utility token and a governance token. The token is used in two existing protocols in various ways, and it will be incorporated into the tokenomics of all future protocols readily accessible by the 1inch Network. The multi-chain coin known as 1INCH is presently accessible via a bridge on both Ethereum and BNB chains. 6% of the 1.5 billion 1INCH tokens that were issued were unlocked on the day of distribution.

By the end of 2024, the last tokens will be gradually released over four years. Community reward schemes will receive 30% of all the tokens. 14.5% more caters to the growth and development fund, which will be applied to grant applications and to encourage software developers to expand on 1inch protocols. Holders and core contributors will receive the tokens that are left over.

Benefits of the 1INCH Token

• 1INCH offers users the possibility of high liquidity with its decentralized exchange aggregation feature.
• With 1INCH, traders get to save the huge Ethereum gas fee with the Network’s exchange.
• The token staking feature of the 1inch Network also facilitates liquidity retention within the ecosystem and remains an incredibly over instance for the 1inch price increase over time.
• The fact that 1inch Network works with several wallets is a plus which also makes it user-friendly.

Risks to look out for

• Although 1inch networks have proven to be resistant to volatility, the likelihood should not be ruled out as it is common as a trader in liquidity mining.
• Also, 1INCH does not directly charge a gas fee, each network within which it runs, charges transaction fees which also fluctuate based on the network traffic per time.
• Newbies in the crypto space may struggle to use the swap feature especially if they cannot buy from the wide spectrum of coins available. It could be costly for a newbie to experiment with.

Is 1inch a Good Investment?

It is quite obvious that the 1inch exchange has lots of impressive features – its aggregation protocol provides a seamless and efficient way to get the best rates on the market. Equally outstanding is the effort to solve the issue faced by current AMMs with their unique liquidity protocol. There is therefore no stopover time growth the 1inch network has garnered over time.

However, the fact that it has these amazing features does not mean the token is a great investment, considering how it slumped down a few months after the initial release. This is clearly because it takes time for governance use cases to impact the demand for the token, just as it takes time for the market to find an appropriate price for the demand.

How to Own 1INCH?

To own 1INCH, you can use the services of a centralized crypto exchange. Start by creating a Gate.io account, and get it verified and funded. Then you are ready to go through the steps to buy 1INCH.

Useful References

For the latest updates about 1inch Network, you can visit:

• The official website
• Twitter
• Telegram
• Reddit
• Discord
• GitHub

Take Action on 1INCH

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