The 1inch Network stands out in the decentralized finance (DeFi) space by aggregating multiple decentralized exchanges (DEXs) into a single platform. This allows users to find and execute token swaps at the most favorable rates available across the entire DeFi ecosystem. By streamlining the process of comparing liquidity and prices, 1inch significantly enhances efficiency and saves valuable time for cryptocurrency traders.
What Is the 1inch Network?
The 1inch Network operates as a DEX aggregator, a type of decentralized exchange that sources liquidity from numerous other protocols. Unlike traditional finance, where intermediaries like market makers and brokers can create conflicts of interest, DeFi utilizes automated market makers (AMMs). These are decentralized protocols that enable direct peer-to-peer trading through pre-programmed, transparent smart contracts, eliminating the potential for corruption or collusion.
1inch runs on multiple blockchains, including Ethereum, Binance Smart Chain, and Polygon. Its core innovation is its ability to connect over 50 different liquidity pools across these networks. This includes its own native liquidity protocol, which was originally known as Mooniswap and was rebranded to the 1inch Liquidity Protocol in late 2020.
How Does the 1inch Aggregator Function?
When a user wants to swap one cryptocurrency for another, 1inch’s algorithm scans dozens of connected DeFi protocols simultaneously. It does not rely on a single source for liquidity. Instead, it compares the asset prices and network fees across all integrated DEXs to find the most cost-effective trade route.
For example, if a user wants to convert Bitcoin into Wrapped Bitcoin (WBTC) to use it on Ethereum-based DeFi applications, the price for this swap can vary significantly from one DEX to another. Manually checking each exchange would be impractical. The 1inch aggregator automates this process, instantly identifying the best possible execution price and saving the user both time and money.
The Founders and History of 1inch
1inch was co-founded by Sergej Kunz and Anton Bukov. The project began its life at the ETHNewYork hackathon in 2019. Sergej Kunz, who had a background in software development for major corporations, had previously created an arbitrage bot. This bot laid the foundational idea for a platform that could provide users with better deals than any single DEX.
Although their hackathon project only won a minor prize, the concept proved powerful. Anton Bukov, now the CTO, brought valuable experience from working on other DeFi projects. The platform secured $2.8 million in an initial funding round from notable investors like Binance Labs and Galaxy Digital, followed by a $12 million Series A round led by Pantera Capital later in 2020.
To drive adoption, the 1inch Network conducted several large token airdrops targeting active users of other DeFi platforms like Uniswap, liquidity providers, and users of specific smart contract wallets. These strategic distributions helped rapidly expand its user base.
Understanding the 1INCH Token
The native utility token of the network, 1INCH, was launched in December 2020. It serves multiple purposes within its ecosystem:
- Governance: Token holders can participate in the decentralized governance of the protocol, voting on key parameters such as swap fees, reward structures, and other network settings.
- Utility: The token can be used to pay for transactions on the platform.
The total supply of 1INCH is fixed at 1.5 billion tokens. The distribution allocates 30% for community incentives and 14.5% for ecosystem development, both released over a four-year period. The founders have explicitly stated that the 1INCH token is designed for utility and consumption within its network and is not intended to be a security or an investment vehicle.
👉 Explore advanced DeFi trading strategies
Frequently Asked Questions
What is the main advantage of using 1inch over a standard DEX like Uniswap?
The primary advantage is access to aggregated liquidity. Instead of being limited to the liquidity on one exchange, 1inch scans many DEXs to find you the best possible price for your trade, often resulting in less slippage and better rates.
How does the 1inch Network generate revenue?
The protocol charges a small fee on swaps that are executed through its aggregator. A portion of this fee is used to reward users who stake their 1INCH tokens and participate in the network's governance.
Is it safe to use the 1inch Network?
1inch is considered one of the most extensively audited projects in the DeFi space, which helps mitigate smart contract risks. However, as with any DeFi protocol, users must be aware of the inherent risks associated with blockchain technology, including market volatility and potential software bugs.
On which blockchains can I use 1inch?
The 1inch Aggregation Protocol is deployed on multiple leading networks, including Ethereum, Binance Smart Chain, Polygon, Avalanche, and several others, making it widely accessible.
Do I need the 1INCH token to use the 1inch exchange?
No, you can use the 1inch aggregator to swap tokens without holding or using the 1INCH token. The token is primarily used for governance and offers additional utility features for those who choose to hold it.
What is the difference between the 1inch Aggregation Protocol and the 1inch Liquidity Protocol?
The Aggregation Protocol is the technology that finds the best prices across other DEXs. The Liquidity Protocol is 1inch's own native automated market maker (AMM) that sources liquidity directly, which the aggregator also utilizes.
The Future of the 1inch Network
1inch's future appears secured by its core value propositions: simplifying DeFi trading for users and offering immediate governance participation. Its commitment to security through regular audits addresses a critical need in an industry prone to exploits. By expanding its multi-chain presence beyond Ethereum, 1inch has positioned itself as a fundamental piece of DeFi infrastructure, likely to remain a key player as the ecosystem evolves. Its design philosophy prioritizes user benefit through efficiency and security.