Do you know where a growing challenge to decentralised exchanges (DEX) is coming from? Hint: It’s not from centralized exchanges (CEX). In fact, it’s something from within the space – DEX aggregators. DEX aggregators typically source liquidity from different DEXs, thus offering users better token swap rates than they could get on any single DEX. One such DEX aggregator is the 1inch Network.
1inch Network is a decentralised exchange (DEX) aggregator that helps users discover the best trade prices for tokens. It draws liquidity from its own liquidity pools as well as from Uniswap, Kyber Network, Balancer, Bancor, 0x protocol, and curve.fi to name a few. Officially launched in August 2020, 1inch has raised a total of $14.8M in funding since. The release of the 1INCH token in December 2020 marked the onset of the governance of the 1inch Network by a decentralised autonomous organization (DAO). Besides the 1inch DAO, the 1inch Network ecosystem consists of four other interoperable components – 1inch Aggregation Protocol, 1inch Liquidity Protocol, 1inch Labs and the 1inch Foundation.
A market leader in the DEX aggregators space, 1inch Network has grown to occupy a place in the top 10 decentralised exchanges measured by trading volumes. The 1INCH token is currently valued at $3.5, valuing the project at a $629 million market capitalization.
Read on to know more about 1inch Network, the technology behind the platform, the team and what you can expect by staking tokens on the 1inch platform.
Background
1inch Network was conceived by Russian developers Sergej Kunz and Anton Bukov in 2019. Both, skilled in smart contract security, partnered together to create the 1inch Aggregation Protocol, the network’s blueprint, at ETHNewYork’s Hackathon while experimenting with arbitrage bots and strategy.
Sergej and Anton had previously collaborated and participated in a number of hackathons globally, many winning them accolades and laurels. What’s ironic though is that the 1inch Aggregation Protocol, in the words of the founders, turned out to be one of their least successful hackathons.
The two, though, kept improving the solution developed in New York, eventually leading to the launch of the decentralised exchange (DEX) aggregator 1inch Network, as we know it today, in August 2020.
About Sergej Kunz:
Sergej started to study programming while he was teen. He has a professional experience of around 15 years within software engineering, architecture and security. Prior to 1inch, he worked for Porsche in both DevOps and cybersecurity.
About Anton Bukov:
Anton Bukov has been involved in software development since 2002, having learned to program at the age of 12. He got involved with blockchain in 2017, working on products including gDAI.io, Synthetix and NEAR Protocol.
We spoke to Sergej Kunz earlier this year, in a wide-ranging discussion around the 1inch Network platform, roadmap, and staking. Click here to listen to the chat.
Launch & development of the 1inch Network
In August 2020, 1inch officially launched their automated market maker (AMM) Mooniswap, also known as the 1inch Liquidity Protocol. Mooniswap was pegged as the next generation of automated market makers enabling liquidity providers (users) to capture profits otherwise captured by arbitrageurs. Coinciding with the release of Mooniswap, in the same month 1inch announced a $2.8 million funding round from investors, including Binance Labs, Galaxy Digital, Greenfield One, Libertus Capital, Dragonfly Capital, FTX, IOSG, LAUNCHub Ventures, Divergence Ventures, Loi Luu, the Founder of Kyber Network, and Illia Polosukhin, the Co-Founder of NEAR Protocol.
It wasn’t too much later that the 1inch Network launched 1inch V2. Released in November 2020, the main component of the 1inch V2 release was Pathfinder, comprising of a new discovery and routing algorithm. The version promised users “the best rates”, also accounting for improved gas consumption. As per the team, thanks to improved quotes, the upgrade offered a rate for 1 sBTC-sUSD that bettered Uniswap’s comparative offering by almost 98%.
In March 2021, the team unveiled V3 of the 1inch Aggregation Protocol, which aimed to facilitate lower gas fees. V3 claimed to upgrade 1inch to be the fastest and most advanced DEX aggregation protocol in the market, allowing the swap of ETH for DAI at nearly 10.3% less gas than that required on Uniswap.
In the following month, the network’s governance tool 1inch DAO was set into implementation. Envisaged as a two-step process, the first phase, currently in place, allows 1INCH token stakers to vote for various protocol settings. The second phase, scheduled to start in early 2022, aims to introduce a full-fledged DAO functionality with the intent to completely decentralize the 1inch network, thus being owned by the community.
Security
To ensure all users’ funds and transactions are safe, 1inch smart contracts have been audited by platforms including OpenZeppelin, Consensys diligence, SlowMist, Haechi Labs, Coinfabrik, Certik, Hacken, Scott Bigelow, Mix Bytes and Chainsulting. The most recent, 1inch V3 audit, is available here.
Understanding the 1INCH token
The 1INCH token was launched in December 2020 by the 1inch Foundation, primarily aimed to govern all 1inch Network protocols. Pipped as “instant governance”, the token has since been used for all protocols within the 1inch Network, starting with the 1inch governance Aggregation Protocol and the 1inch Liquidity Protocol governance modules.
Of the total supply of 1.5 billion, the 1INCH token launched with an initial circulating supply of 90 million, 6% of the total supply. The rest of the supply is set to unlock over a four-year period until December 2024. Currently, 180.5 million tokens are in circulation.
The initial token distribution happened to wallets that had interacted with 1inch Network until December 24, having completed a defined set of trades. Besides, tokens were also distributed to liquidity providers.
The allocation of the token distribution (Source: https://1inch.io/token/) over the period is as shown in the chart below.
Staking 1INCH
As a 1INCH token holder, one can stake tokens on the 1inch protocol and collect governance rewards. Staking 1INCH can yield around 21.71%, and has no lockup times mandated. To know more about the 1INCH staking program, check out our easy-to-use guide here. Don’t forget to try out the handy calculator within to estimate your potential gains. What’s more, you can even estimate gains in a bearish or bullish scenario.
Currently 48.4 million tokens, or nearly 27% of the circulating supply is staked. As seen from the chart below, the number of 1INCH holders who opted for staking has grown 35.04% over the past 90 days.
As for the process of staking, we tried staking 1INCH tokens on 1inch.exchange and found the process extremely easy. The APY compared favorably to similar projects in the market. Providing liquidity was easy as well. For a detailed guide on the staking process, click here.
As noted earlier, the 1inch smart contracts, including the staking contract, has been audited by a handful of well respected auditing firms and is considered to be safe. There is no lockup time required when staking 1INCH. Accordingly, we do not consider there to be any risk for staking 1INCH at this time.
Community
1inch Network has a strong following across its social platforms. Prominent among its social channels are Twitter with a following in excess of 250K, and Telegram with 16,294 members. One thing worth highlighting here is how active the team is in keeping the community informed. Blog posts are nearly weekly, while social media posts and discussions are daily.
Competitors and valuation
Being a decentralised exchanges aggregator, some of the closest competitors to 1inch Network are 0x API, Matcha, Paraswap, and Tokenlon. However, as seen from the chart below (Data sourced from Dune Analytics), the gap between 1inch Network and its closest competitor, 0x API, is significant.
One measure of valuation for DEX’s is the ratio of Mcap (market capitalization) to TVL (Total Value Locked). At the current price of $3.51, 1inch enjoys a market cap of $636.9 million. The current TVL is $48.5, resulting in a Mcap / TVL ratio for 1inch of 13.24. This is high as compared to regular DEX’s. For example, Uniswap has a Mcap to TVL ratio of 3.08. However, looking at other DEX aggregators, the Mcap / TVL ratio does provide a perspective: 0x has a Mcap / TVL ratio of 15.8 (Source: Defi Llama).
Besides the TVL, another measure worth highlighting is the average volume traded. 1inch enjoys approximately 7.5% of the market share by volume, occupying a space in the Top 5 DEX / aggregators by trading volume. However, based on market capitalization, 1inch, with a current Mcap of $636.9 million, ranks 12th among DEX coins.
Summary
Something that’s encouraging for the prospects of 1inch Network is the fact that DEX aggregators have been growing their share of the overall DEX trade volumes, currently at 21.8% (Source: Dune Analytics). Given the leadership 1inch Network enjoys in this space of DEX aggregators, it seems well positioned to capitalize on this trend, were it to continue.
For a project to be successful within crypto, there are a few essential elements that matters – team, utility, developments and roadmap. With an experienced team at the helm, led by the co-founders Sergej Kunz and Anton Bukov, and backed by a strong set of investors, 1inch network has put together a working product that has so far been well received by users. The team has consistently delivered milestones along its roadmap, establishing essential partnerships along the way. 1inch, as per co-founder Sergej Kunz, aims to “open the floodgates of liquidity in the decentralised finance ecosystem”. While the platform has done well so far, the path ahead remains challenging, given competition within the DeFi space remains high across segments. This is no different for decentralised exchanges. DEX’s are competing for a share of the users wallet, by constantly upgrading the offering to ensure a smooth and hassle-free experience.
To set out on your journey to stake 1INCH, click here.