1inch —— DEX Aggregator and Liquidity Protocol
- 1inch consists of the exchange DEX Aggregator as well as the 1inch Liquidity Protocol (formerly called Mooniswap).
- Exchange DEX Aggregator: employs an advanced algorithm that searches over 33 liquidity protocols (as at 25 Dec 2020) to discover the most efficient swap paths so traders can receive the most efficient trade prices.
- 1inch Liquidity Protocol: an Automated Market Maker (AMM)that makes use of a new mechanism called Delayed Price Updates to protect swappers from front-running, and to increase Liquidity Provider (LP) earnings and reduce arbitrageurs' profits.
1inch is a decentralized exchange (DEX) aggregator, connecting several DEXes into one platform to allow its users to find the most efficient swapping routes across all platforms. In order for a user to find the best price for a swap, they need to look at every exchange — DEX aggregators eliminate the need for manually checking, bringing efficiency to swapping on DEXs.
DEX aggregators work by sourcing liquidity from different DExs, meaning that they are able to offer users better token swap rates than they could find on any single DEX, in the shortest time possible.
1inch launched in August 2020 after a $2.8 million funding raise from Binance Labs, Galaxy Digital, Greenfield One, Libertus Capital, Dragonfly Capital, FTX, IOSG, LAUNCHub Ventures and Divergence Ventures.
In December 2020, 1inch raised another $12 million in Series A funding, led by Pantera Capital, with others including ParaFi Capital, Blockchain Capital, Nima Capital and Spartan Group. The funding round was conducted through a SAFT sale (simple agreement for future tokens).
1inch in winter 2020 also launched Mooniswap, its own automated market maker (AMM).
In December 2020, 1inch launched its 1INCH governance token, and the 1inch Network began to be governed by a decentralized autonomous organization (DAO).
The total 1INCH token supply is 1,500,000,000, with token allocations as follows:
a) Core Backers and Contributors: ~53.3%
b) Community Incentives: 30.0%
c) Protocol Growth and Development: ~14.4%
d) Advisors: 2.30%
1inch was founded by Sergej Kunz and Anton Bukov over the course of the ETHNewYork hackathon in 2019. The two had earlier met during a live stream of Kunz’s YouTube channel (CryptoManiacs), and began entering hackathons together, winning a prize at a hackathon in Singapore as well as two major awards from Ethereum Global.
Prior to 1inch, Kunz worked as a senior developer at product price aggregator Commerce Connector, coded at communication agency Herzog, led projects at Mimacom consultancy, and then worked full time at Porsche in both DevOps and cybersecurity.
Bukov, currently the CTO of 1inch, had worked in software development since 2002, and worked in decentralized finance (DeFi) since 2017 on products including gDAI.io and NEAR Protocol.
1inch introduces a new governance framework called Instant Governance, in which 1INCH token holders and key stakeholders of the agreement (such as LP) can directly vote on the agreement parameters. One of the key functions of Instant Governance is that token mortgagers or LPs can continuously and dynamically vote to change protocol settings without waiting for the proposal to be submitted or ended.
Generally speaking, 1inch's governance is divided into two parts: aggregation governance (Aggregation Protocol) and liquidity governance (Liquidity Protocol). In aggregate governance, the 1INCH token holder decides the distribution plan and proportion of the remaining undistributed value (mainly generated by the surplus of the transaction fee spread). Liquidity Protocol allows its token holders and LP (liquidity providers) to jointly participate in various fee adjustments in each liquidity pool. The adjustment will take effect directly 24 hours after the vote, without any subsequent deployment.
The specific adjustable parameters of 1inch protocol governance include:
- Swap fee: Transaction fee, a fixed fee charged for each transaction.
- Price impact fee: Slippage fee is a dynamic slippage fee charged in each transaction and is charged according to the price impact generated.
- Decay period: Protect traders from "sandwich" attacks and prevent arbitrage traders from easily extracting value from the pool.
- Governance reward: Participate in 1inch governing the dividends of mortgagers. The source of the reward is transaction fees and slippage fees.
- Referral reward: A part of the transaction fee and slippage fee will be used exclusively for referral incentives.
- Voting procedure: mortgage 1inch to vote on the above protocol parameters. Liquidity providers can directly use their LP tokens to participate in liquidity pool governance. The protocol uses the weighted average of all votes and is applied linearly within 24 hours. Liquidity providers without voting rights will automatically delegate their voting rights to its token stakers.