Beginners’ Guide on 1inch: The Decentralized Exchange Aggregator

Over the few years of its existence in the industry, 1inch aggregator has served as a go-to platform for crypto users who intend to look out for the best crypto prices across decentralized exchanges. Hence, it is expedient for beginners to get proper understanding of what decentralized exchanges are, before diving further.

Decentralized exchanges (DEXs) can be likened to cryptocurrency exchanges that are not centralized. In other words, they are cryptocurrency trading platforms that do not require a third party to govern them. These non-centralized exchanges do not recognise the need for any single or third party company maintaining the order books, custodying funds or calling the shots.

Decentralized exchanges are easily accessible to anyone for the purpose of trading. They only require traders to connect their wallets, without giving access to their funds or personal information to companies. Some of the decentralized exchanges in the industry include Uniswap (UNI), SushiSwap (SUSHI), and PancakeSwap (CAKE).

1inch: DEX Aggregator

1inch is one of the most popular DEX aggregators in the industry. Basically, 1inch serves as a DEX aggregator that critically evaluates a handful of decentralized exchanges for the cheapest prices best suitable for its users.

To put it simply, 1inch is likened to be a friend to crypto traders as the platform reroutes the trade of its customers between the decentralized exchanges in a bid to ensure that they’re getting the best prices for their trade. Notably, with 1inch, crypto traders do not need to go through any form of rigorous research to get the best crypto prices across decentralized exchanges.

1inch draws on a number of decentralized exchanges to ensure optimum satisfaction for its users. Some of the decentralized exchanges listed on 1 inch include Uniswap, 0x and Balancer. In addition, it has its own liquidity protocol, formerly known as Mooniswap.

1inch Founders

Back in May 2019, Surjey Kunz and Anton Bukov founded 1inch during an ETHGlobal hackathon. The crypto experts utilized the event to build the project on the Ethereum blockchain.

About a year after the platform iteration, the 1inch founders secured about $12 million from a funding round. The event saw participation from many reputable firms including Pantera Capital, Binance Labs, Galaxy Digital, and ParaFi Capital.

This triggered the team into launching the platform’s 1INCH token later, in December 2020. As a result, the team airdropped the 1INCH governance token to anyone who had used the 1inch exchange platform before that date.

The founders leveraged their expertise to build a fully efficient DEX aggregator. Both of them were professionals with experience by that time. Surjey Kunz previously worked as a software engineer for Porsche. Meanwhile, Anton Bukov was a developer who previously worked on the NEAR Protocol.

How 1inch Works

1inch provides users with a range of products, while basically serving as a DEX aggregator. As said earlier, 1inch operates by comparing cryptocurrency prices and trading fees across several decentralized exchanges.

Let us have a look at some of the project’s key features:

• Aggregation protocol. With its Aggregation protocol, 1inch automatically routes trades to the platforms with the best prices and lowest fees, allowing traders to use a single platform while comparing prices and executing trades across the entire DEX landscape. 1inch allows crypto traders to perform a single transaction without having to worry about the complex discovery and routing processes happening behind the scenes.
• Liquidity Protocol. 1inch also features a liquidity protool. The liquidity protocol was initially launched under the name Mooniswap. The protocol functions in a way that allows users to earn passive income on their crypto assets by depositing them in 1inch liquidity pools. Afterwards, the cryptocurrencies held in liquidity pools can then be used as the opposite side of transactions by traders who place trades using the 1inch decentralized exchange. In return, liquidity providers earn LP tokens which can then be staked or exchanged for other cryptocurrencies.
• Virtual rates. 1inch liquidity protocol also adopts virtual rates. This feature aims to address trade front-running issues. Front running occurs when a malicious trader, miner or bot, observes a transaction being broadcast to the network and bids a higher fee to have their transaction be placed before that observed pending transaction. Virtual rates introduce an adjustment to the fees in the liquidity pool that makes this unprofitable to execute for malicious actors.
• Limit order protocol. 1inch’s limit order protocol allows traders to place more advanced, conditional orders beyond standard swap orders. Using the limit order protocol, 1inch traders are able to place orders such as stop-loss orders and trailing stop orders in order to automatically lock in their profits at certain prices or prevent losses.

Advantages of 1inch Over Other DEXes

Considering the mechanism deployed by decentralized exchanges, they often provide users with greater security and autonomy, however, they are challenged with issues of limited liquidity.

More notably, lack of liquidity in decentralized exchanges is most likely to result in a situation of inefficiency in the pricing of assets, dubbed slippage. This will therefore result in a difference between the expected price of a trade and the actual price of the trade when executed.

1inch has proven to be more advantageous over other DEXes because it deploys an infrastructure that focuses on deepening liquidity pools by scanning a range of DEXs to find the lowest market price to facilitate a trade.

1INCH Token

The governance token of 1inch protocol is 1INCH. This implies that the token can be used to vote on how the 1inch platform is run. The token was launched about a year after the platform launch, in December 2020 precisely.

1INCH represents the platform as an ERC-20 token that runs on the Ethereum network. The token has gained listing in many reputable cryptocurrency exchanges.

Conclusion

1inch has emerged as a go-to DEX aggregator and decentralized exchange for many crypto users and it is still set for further developments. Information provided on the platform suggests that some of the 1inch token supply is earmarked for development, and it has seen the exchange integrate new liquidity protocols at a rapid clip. The platform is developing at a rocket pace.