What is 1Inch?

Well, well, well, look who we have here! It's none other than 1Inch, the famous decentralized exchange that promises to help you swap your crypto faster than you can say "HODL!" And trust me, with the way the crypto market has been behaving lately, we could all use a little help swapping our coins before they go from moon to Mars and back again!

But don't worry, 1Inch has got you covered with their lightning-fast exchange and a name that sounds like it was inspired by the size of their fees (hint: they're not one inch!)

The story of 1inch Protocol begins in 2019, when two Russian software developers, Sergej Kunz and Anton Bukov, realized that DEXs were becoming increasingly popular, but they were still inefficient and difficult to use. They noticed that traders had to manually search for the best prices across multiple DEXs and execute trades one by one, which was time-consuming and costly.

So, Kunz and Bukov decided to create a solution that would aggregate liquidity from multiple DEXs and automatically execute trades at the best available price. They called it 1inch, which referred to the fact that their protocol could save traders up to 1% in fees compared to manual trading.

Initially, 1inch was launched as a simple web-based aggregator, but it quickly gained popularity and expanded into a full-fledged protocol that could be integrated into any DEX. It became known for its innovative approach to liquidity aggregation, which used a combination of Pathfinder, an algorithm that finds the most efficient routes for trades, and its own automated market maker (AMM) called Mooniswap.

Since inception, 1Inch has evolved into a collection of strong and composable DeFi instruments, which together enable both veteran and new DeFi users to maximize the financial opportunity of Web3.

Liquidity is an important factor in assessing the health of a DeFi protocol. This metric represents the amount of capital inflow and it helps stabilize the liquidity pools. More liquidity means users can exit the protocol without experiencing severe slippage. 

The average TVL on 1Inch hovered between $5M and $10M in the last year, which is impressive considering the turmoil crypto has been experiencing. 

The entire 1Inch infrastructure runs on Ethereum smart contracts. As good as it is for decentralization, code can be prone to hacks. 1Inch has several security mechanisms in place to prevent hacks.

The protocol integrates Chainlink's price feeds to prevent price manipulation. Chainlink is the biggest oracle provider in the crypto space. With price fees aggregated from on-chain and off-chain sources, users bear little to no risk of getting liquidated due to an oracle failure.

If audited code isn't enough, 1Inch is governed by a DAO formed of 1INCH token holders. To ensure that all participants in the governance process have a vested interest in the success of the project, holders of 1INCH must first stake their tokens.

The 1inch Network also has its own DAO Treasury, which is a Gnosis Safe smart contract wallet with multisig functionality. 12 multisig owners have initially been selected by the 1inch Foundation from the core contributor team and other well-known projects, such as Synthetix, Opium, NEAR protocol, and zkSync. Since its inception, 1Inch has never been hacked.

How does 1Inch work?

1Inch is a DEX aggregator that allows users to access liquidity from multiple DEXs and execute trades at the best available price. 

Rather than having to manually check and compare prices across DEXs, 1Inch collects the real time pricing data from various DEXs to allow traders to identify the optimal price across the market and capture the trading opportunity within a single platform.

Let's explore how 1Inch works under the hood!

1Inch Spot Price Aggregator

The spot price aggregator is a tool that extracts price data for tokens traded on DEXs from the blockchain. 1Inch's spot price aggregator comes as a solution to a specific problem: not all tokens aggregated by 1inch are supported by existing price information services.

Knowing the spot price of a token that is traded across multiple liquidity pools is vital. If the same token trades on a DEX that is not supported by 1Inch, this means a missed opportunity for a better price valuation. Instead of limiting their options to the existing price information services, 1Inch decided to build their own spot price aggregator. Basically, the tool consists of smart contracts that communicate with various DEXs to immediately receive a token’s liquidity-weighted spot price. 

The spot price aggregator is already integrated with the 1Inch interface app. When you enter the amount of tokens you want to swap, an approximate US dollar value is displayed. To get that value, the spot price aggregator extracts the token’s liquidity-weighted price against ETH, which is subsequently converted into US dollars using CoinGecko. If no direct liquidity pair exists between two tokens, the spot price aggregator calculates rates for those coins using another token that has pairs with both of them, called a connector token.

Compared with other similar solutions, the 1inch spot price aggregator’s supports a higher number of DEXes on Ethereum, BNB Chain, Polygon, Avalanche, Optimistic Ethereum, Arbitrum and Gnosis Chain, and it also displays prices without any lag. While other price information tools could face lags of up to several minutes, 1inch’s tool displays a token’s price immediately.

1Inch Aggregation Protocol

1Inch has made its mark in the DeFi scene for its ability to find the best prices across multiple protocols and networks. Its aggregation protocol is powered by Pathfinder, an API which finds the best possible paths for a token swap in the shortest possible time. Manually doing the most efficient token swap takes an effort that no human being would be willing to do.

Before doing the swap, a regular user would be tasked with checking the price of the swap on every possible DEX, comparing the gas fees, and then go with the feasible option. All that effort for a single swap. These steps are automated and improved by 1Inch's Pathfinder.

To get the best swap rate, 1Inch continually optimizes every possible detail. From transaction fees, routing algorithm and speed, each 1Inch iteration strives to make swaps increasingly profitable. A gas fee reduction of 4% may not sound like much, however, the difference gets increasingly notable as we unpack the aggregation process.

1Inch Limit Order Protocol

Limit orders are a financial instrument that exist in traditional finance. Instead of buying an asset at the current market price (market order), with limit order you delay the transaction until the crypto asset meets a specific price. 

The 1Inch Limit Order Protocol is a feature that allows users to set limit orders on the 1Inch DEX aggregator. A limit order is an order to buy or sell a certain amount of an asset at a specific price. When the price reaches the specified level, the order is automatically executed.

The 1Inch Limit Order Protocol helps users take advantage of market movements by setting a buy or sell order at a specific price level. This is particularly useful for traders who want to enter or exit a position at a specific price and don't want to constantly monitor the market.

The protocol allows users to set both buy and sell limit orders, and it supports a wide range of assets across multiple blockchains. Additionally, 1Inch's gas optimization feature helps to reduce the gas fees associated with executing limit orders.

1Inch Liquidity Protocol

The 1Inch Liquidity Protocol is a DEX aggregator that aims to provide users with access to the best prices and deepest liquidity across multiple DEXs. It combines liquidity from different DEXs, including both centralized and decentralized exchanges, into a single platform that users can trade on.

The protocol uses an algorithm called Pathfinder to find the most efficient route for trades, taking into account various factors such as price slippage, gas costs, and available liquidity. This helps users get the best prices for their trades and reduces the amount of time and gas fees required to execute them.

In addition to its liquidity aggregator, the 1Inch Liquidity Protocol also includes an automated market maker (AMM) called Mooniswap. Mooniswap aims to reduce impermanent loss and provide better price protection for liquidity providers by using a unique pricing model that adjusts the swap fee based on the size of the trade.

1Inch RabbitHole

The 1Inch RabbitHole is a program designed to incentivize users to explore and use different dapps in the DeFi ecosystem. The program encourages users to engage with different projects and learn about their unique features by offering rewards in the form of 1INCH tokens, the governance token of the 1Inch protocol.

Users can participate in the RabbitHole program by completing various tasks on participating dapps. These tasks can range from simple actions like creating an account or making a transaction, to more complex tasks like providing liquidity or staking tokens. Each task completed earns users a certain number of RabbitHole points, which can then be redeemed for 1INCH tokens.

The RabbitHole program is designed to promote user education and engagement in the DeFi ecosystem, while also helping to grow the user bases of participating dApps. By offering rewards for participation, the program incentivizes users to explore and learn about different projects, ultimately creating a more vibrant and interconnected DeFi ecosystem.

How to make money on 1Inch?

1inch is a flexible dapp that can be used alone, or in combination with other DeFi protocols. Strategies on 1inch are centered around providing liquidity to its various pools.

In a bid to offer as much flexibility as possible, 1inch is offering additional tools you can use to maximize your money making strategies. The degree of complexity increases as you combine its features, so you may want to take it slow at first. That being said, let's get into it!

1Inch Swaps

Making a swap on 1inch is the simplest operation, as implies exchanging a crypto asset for another. The benefit of doing a swap with 1inch is that you often get the best rate for your swap. 

Here's how you perform a swap on 1Inch: 

1. Go to the 1inch app

2. Select the tokens you want to swap and type in the amount in the "you sell" field. You will then see a quote of the amount you will receive under the "You buy" field

3. Approve the token by clicking on "Give permission to swap" button

4. Click the "Swap" button, and confirm on the next screen

5. Once everything looks good, click "Confirm Swap"

6. Congrats! You just made your first swap 🎉

Swaps can be profitable if you take advantage of a market movement. For example, you have USDT or ETH in your wallet and the price of a token unexpectedly drops. If you believe the price will recover, you can do the swap on 1Inch and gain exposure to that asset.

Another indirect way of profiting form 1Inch swaps is by swapping for a token which can then be provided as liquidity. As a liquidity provider (LP), you get paid in the transaction fees for the respective liquidity pool. 

1Inch Limit Order Protocol

Placing a limit order can help you buy an asset for a lower price than the current market can offer you. The biggest advantage is that you get to set the price, and if the crypto asset reaches the target, the order will be fulfilled. Typically, you set the limit order weeks or months in advance so you don't compulsively check the charts.

The drawback with limit orders it that your order may get fulfilled, but the price of the crypto asset may move in a different trajectory than expected. Imagine ETH makes an announcement and the price spikes from $1400 to $1700, while you have n order limit set at $1550. Unless you watch the news closely, you might end up selling for $1550 when you could have made more profits. The reverse is possible with a limit order to buy when bad news break out, such as a protocol hack. In this scenario, you may end up buying ETH for a much higher price than you otherwise could have.

Limit orders are a useful tool when you want to specify a price, or when you trade with a high number of tokens. It places you in control of your risk management and it's also a good strategy for DCA.

Here's how you place a limit order on 1 Inch:

1. Go to the 1inch app and switch the tab to "Limit"

2. Connect your wallet

3. In the section "You pay," select the asset you want to sell and enter the amount

4. In the "You receive" field, type or select the asset you would like to buy, and enter the amount desired

5. In the "Price" field, enter the price at which you want your order to be executed

6. Then set the validity period in the "Expires in" field

7. Click on "Give permission to use (token)" and confirm the transaction in your wallet (this is only an approval, and requires a small gas fee)

8. Click on "Review Limit Order," verify the order, and sign it in your wallet

9. The order will now appear on the UI in the "Active Orders" section

1inch Liquidity Protocol

Another easy way of making profits with 1inch is by providing liquidity to the protocol. On top of the trading fees, you can get rewarded in 1INCH tokens for providing liquidity to newly formed pools.

Make sure to check the updates on 1inch for subsidized liquidity pools. New liquidity pools often boost the rewards in order to bootstrap liquidity early on.

Here's how to provide liquidity on 1Inch:

1. Go to the 1inch app, click on the "Earn" tab and select "Pools"

2. Select the pool  you want to provide liquidity to and click on the "provide liquidity" button (the ‘plus’ symbol on the right side of the screen)

3. Adjusting the amount of each asset you want to provide by changing the number of LP tokens in the "enter LP tokens to mint" field

4. Unlock assets if needed by clicking on either the "lock" symbol in each asset field, or the "unlock"/"infinite unlock" button at the bottom of the window

5. Confirm the transaction in your wallet 

6. Click on the "provide liquidity" button, and again confirm the transaction in your wallet

Once you have provided liquidity, you can check the performance of the pool. A cool feature of 1inch is the ability to vote on adjusting the parameters for the pools you joined. While in the liquidity pool menu, click on the "Settings" symbol, and you will be transferred to the pool parameter page, from which you can vote on each parameter by using your LP tokens.  

1inch Earn 

1inch Earn is a new investment product offering liquidity providers attractive APYs. The concept was introduced in a governance proposal in September 2021 as a way to step up protocol decentralization. Basically, 1inch Earn is a set of liquidity pools operating on a model similar to Uniswap V3 range orders and optimized for stablecoins. Earnings come from fees on swap trades in the pool.

The idea behind 1inch Earn is the more efficient use of capital in AMM-based pools. In a standard pool, all liquidity is distributed equally along the entire price range between zero and infinity. As a result, most of the liquidity is never used. This is especially typical of stablecoin pairs, in which the two assets’ relative price stays constant most of the time.

In a pool consisting of two stablecoins, liquidity outside their typical price range is hardly ever used. So, 1inch Earn enables liquidity providers to concentrate their assets to smaller price intervals than between zero and infinity. For instance, it could be in a range between 0.99 and 1.01. In that case, traders get deeper mid-price liquidity for swaps, and liquidity providers earn more fees.

In addition, 1inch Earn uses slight movements in stablecoin prices to facilitate extra swaps and, consequently, bring additional earnings for liquidity providers. For instance, in a USDC/USDT pair, the strategy would sell USDC if it costs more than 1.002 USDT and buy USDC if it costs less than 0.998 USDT. Once a transaction has been confirmed, a user immediately begins earning yield in the form of both tokens deposited to the pool. Regularly updated stats are viewable on the 1inch Earn dashboard.

Price Prediction for 1Inch — Can it hit $100?

Buying and hodling 1INCH — the native token of the 1Inch protocol — is one way of potentially making money on 1Inch.

1INCH is used as the governance token and staking reward token. This means more 1INCH tokens will enter in circulation as the number of stakers increase.

One way for 1INCH to grow in value is to balance out the staking rewards over time, to the point where all tokens are in circulation. The full 1 INCH token supply will be in circulation by 2024. 

As a DeFi protocol, 1Inch already made a reputation for itself, and it's expected to drive more users thanks to its routing services. 

By looking at its current price, it’s natural to think about the chance of 1INCH hitting $100 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.

Let’s examine the potential growth of the 1INCH token by analyzing its tokenomics. 1INCH Chain’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} 1INCH tokens being in circulation today, that means a price of {PRICE} per 1INCH.

How did we come to that calculation? It’s quite easy, the price of a 1INCH token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each 1INCH coin. 

By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of 1Inch at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for 1INCH to hit that price.

At a price of $100 per token, that means the current market cap of 1Inch would equal ${{CIRCULATING_SUPPLY} * 100}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $100.

Now let’s shift our attention to the fully diluted market cap.

Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.

The fully diluted market cap represents the total value of a coin if all tokens were in circulation. In the case of 1INCH will be issued by 2024, making the circulating supply equal to the total supply.

How does this impact the price of 1INCH? While not solely determinant, it helps the future price growth of a 1INCH token. To be more specific, it doesn’t lower the value of the 1Inch protocol through inflation. If no more tokens will ever be created then no selling pressure can exist due to this specific factor. 

We can now take the result we arrived at before when calculating the 1INCH market cap at $100 per coin and use it as our guide. To make things easier we’ll remind you that the total 1INCH market cap would be equal to ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 100}, so that’s the number.

These are all crucial details to know when calculating if 1INCH can reach the price of $100 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.

The future of 1Inch depends solely on its growth as a network used by tens and hundreds of millions of users. Technically, it is possible for the price of 1INCH to reach $100 by 2030.

If you’re looking to add some 1INCH to your portfolio, the most trusted places to get some are Binance and Coinbase.