Published on Oct 28, 2021

Down the Rabbit Hole: 1inch, an industry leading DEX!

Author: Rubin

#Insights

7 Mins

Down the Rabbit Hole: 1inch, an industry leading DEX!

DEXs (decentralised exchanges) are cryptocurrency exchanges that a third party does not govern. After all, the name implies that no single company manages the order books, custody assets or calls the shots on a decentralised exchange.

On a decentralised exchange, anyone get to trade; traders only have to connect their wallets, never giving firms access to their personal details or any assets.

Uniswap, SushiSwap, and PancakeSwap are just a handful of these exchanges. However, these exchanges, all relatively new and having various structures, sell cryptocurrencies at varying prices. Thus, Ethereum may sell for a different cost on Uniswap than it does on 0x.

If only there were a way to figure out how to get the most incredible decentralised exchange price! There is, thankfully, and it’s called 1inch.

Know more about Decentralised Finance from our Learn Web3 series!

1inch

First and foremost, 1inch is a DEX aggregator. That is, it scans most of the decentralised exchanges for the best costs and routes the trades of users across them for securing the best prices.

1inch claims to provide consumers with 50+ sources of Ethereum liquidity, 20 sources of Binance Smart Chain liquidity, and eight sources of Polygon liquidity as of June 2021. 0x, Uniswap, SushiSwap and Balancer are the DEXs it uses for liquidity, as is 1inch’s liquidity protocol, previously known as Mooniswap.

Sergej Kunz and Anton Bukov launched 1inch during 2019’s ETHNewYork hackathon. Binance Labs, Galaxy Digital, and Pantera Capital have supported 1inch’s mission with $15 million since then.

Perks of using 1inch

Because 1inch is a non-custodial exchange, you’ll need to utilise a third-party wallet to access its cryptocurrency services. Wallets are areas where you can keep the keys to your coins (code allow you to control them).

Best Rates:

1inch compares rates from numerous exchanges to discover the best deal for any transaction you’re looking to make. It may offer you better rates than many of the significant exchanges, depending on the currency pair you’re trading. It may also split the swap among multiple exchanges if you get a better rate that way.

Plus, if the rates you see aren’t to your liking, you can place a limited order. You can enter the price you want to pay, and the trade will only take place if the currency rate hits that level.

No Fee:

When you trade with 1inch, you’ll be responsible for the exchange’s fees as well as any transaction costs. However, 1inch does not impose any additional fees.

You’ll never have to pay fees to withdraw or deposit your crypto because 1inch doesn’t retain your assets on its servers.

Ability to put your crypto to work:

You can also earn interest by keeping your coins in a “liquidity pool” after you’ve connected your wallet. These are essentially a means to ensure that when people want to trade, there is enough currency accessible. Each time someone uses that liquidity pool, you’ll get paid a tiny amount, and in some situations, you’ll get paid interest.

Remember that you’ll have to pay gas fees when you put money into a liquidity pool, so make sure they don’t exceed the amount you’ll receive in interest. If you’re not familiar with AMMs & Liquidity pools, it might be more cost-effective to look into other interest-earning possibilities.

Works with an array of wallets:

Using 1inch’s exchange is straightforward. All you must do is link your wallet, and it will take care of the rest. 1inch is compatible with the following wallets, depending on your browser: 1inch Wallet, MetaMask, Ledger, WalletConnect, MEW (MyEthereum Wallet), Portis, Torus, Fortmatic, Bitski, Authereum, and Arkane.

Several Cryptocurrencies available:

On 1inch, you can trade all ERC-20 tokens, which are Ethereum-based currencies. You can add an ERC-20 token to the list if it isn’t already there. Ensure that all of the facts are correct; else, you risk losing your money.

The 1inch market has roughly 400 tokens available, but there are a few popular tokens that you can’t acquire. You can only buy synthetic token versions (including Bitcoin) that don’t operate on Ethereum, if you use the Ethereum network. To make full use of 1inch, you’ll need a strong understanding of how dex work.

Working of 1inch

On the surface, 1inch appears to be more straightforward. You link your wallet, select the currencies you’d like to trade, and it find the best rate for you. It’s a decentralised exchange aggregator, which means it works with several exchanges to find the best price. Fees and gas expenditures are also taken into account. Check out more details about Decentralised Finance from our blog.

1inch is a non-custodial exchange, as we mentioned earlier. This means that to access its services, you’ll need your wallet. Before you begin, double-check that your wallet is 1inch compliant.

When you start digging further, 1inch becomes more challenging to understand. If you want to use features like generating interest and providing liquidity, you may need further study.

Overview of Fees:

The only expenses you’ll have to pay on 1inch are the exchange and gas fees associated with your transactions. These differ depending on the trade. You will not be charged for the deal, nor will you be trusted to deposit or withdraw money from 1inch.

Cryptocurrency selection:

1inch has a large number of cryptocurrencies to choose from. Near about 400 ERC-20 standard tokens, which are currencies housed on the Ethereum network, are available. You can add the ERC-20 token you want to trade if it isn’t already there.

Another point worth mentioning is that many of the site’s sophisticated functions require you to own 1inch’s native token: 1INCH.

Required Improvements

Gas Fee:

1inch does not levy any costs of its own, although it is not free. From boosting liquidity to trading your cryptocurrency, every action you take requires you to pay a charge.

The Ethereum, Polygon networks, and Binance Smart Chain are all used by 1inch. To cover the costs of processing transactions, each one charges transaction fees, often known as gas fees. Depending on the traffic of the network, the charge changes. Fees will be substantially higher if a large number of people try to use the platform.

You can also pay your gas fees in Chi Gastoken (CHI), 1inch’s Ethereum-based token designed to lower transaction costs.

Not ideal for newbie investors:

The platform is not readily useful if you are new to DEX. For example, while you can buy a wide variety of coins, you may not be able to find the currencies you’re looking for.

Putting coins into a liquidity pool isn’t for the faint of heart. You must understand what you are doing. And, because you have to pay gas fees each time you use the site, the cost of experimenting can quickly add up.

Options for fiat money are limited:

Until recently, you couldn’t buy crypto on the 1inch site using standard (fiat) money like US dollars. You may now purchase a crypto token with a debit or credit card. However, there is a catch: the processing fees are high, and the rate could be higher.

Although it’s fantastic that 1inch provides this service, you’re better off purchasing your cryptocurrency from an exchange that is set up to deal in fiat currency at a lesser rate.

Is 1inch a safe place to store your cryptocurrency?

There’s no risk of your cryptocurrency being stolen from 1inch because none of it is stored there.

The site has been cloned rather than being hacked. People have been known to link their wallets to bogus 1inch websites. Look for missing letters in the URL (for example, an ‘L’ instead of an ‘I’). It’s also better to bookmark the correct website and avoid any promotional links you come across online. Correct link: https://1inch.io/

Finally, if you want to invest in new cryptocurrencies, you need to conduct your homework beforehand. New / Meme coins are riskier, so research the team, purpose, and potential of the currency before purchasing.

The 1inch Token

1inch released its cryptocurrency, the 1INCH token, on 2020’s Christmas Day. It is a “governance token,” meaning that you can vote on how the 1inch platform is run with it. This was dubbed “instant governance” by 1inch.

In an airdrop near the end of 2020, 1inch issued a large number of tokens. If you provided money to 1inch’s liquidity protocol (previously known as Mooniswap) or if you used it before December 24, 2020, you might claim 1inch tokens.

Providing liquidity to the liquidity platform of 1inch is the most common way to earn 1INCH tokens. It entails staking currency that others can use to make deals. You may earn other cryptocurrencies in the same way.

1inch tokens can also be traded on exchanges. The token is valued at $5.28 (As of 28th October 2021) and has a $2.79 billion market cap. Out of the total amount of 1.5 billion 1inch tokens, 671.19 million are in circulation.

Contract Address: 0x111111111117dc0aa78b770fa6a738034120c302

Latest Developments

The V2 platform, launched in late 2020, made things faster and cheaper while also introducing sophisticated deals to keep prices down, such as re-routing money set aside as collateral for loans on the decentralised lending protocols Aave and Compound. Read more about the DeFi protocols here! It was followed by launching 1inch’s v3 aggregation protocol in March 2021, which claimed to cut gas expenses by 30% over 1inch v2.

One of 1inch’s seasonal marketing pushes took place in February 2021, with the exchange airdropping 6 million 1INCH tokens to Uniswap members who hadn’t used its platform. 1inch added Binance Smart Chain support in the same month, with Polygon support in May 2021.

Mooniswap AMM got replaced by the fully integrated 1inch Liquidity Protocol in December 2020, extending the project’s initial aspirations to provide a DEX aggregator. The 1inch Wallet app for iOS was released in April 2021, and it merges the web app’s feature set into a mobile wallet.