1inch Exchange: DeFi's Next Hidden Gem??

Jan 05, 2021

📝 What is 1inch? 📝

1inch is DEX aggregator and Automated market maker. On the Dex aggregator side, 1inch exchange uses an advanced algorithm which searches over 33 different liquidity protocols in order to discover the most effecient swap route for your order. One which makes the most efficient trade based on a number of different variables like price, liquidity, slippage etc. The Automated Market Maker was initially launched as Mooniswap and operates much like the other AMM protocols you have come to know (Uniswap, Sushiswap etc). However, the 1inch AMM has some unique features that improve its effecieny over some of the ohter AMMs 1inch emerged from an ETH dev conference. This time it was at the ETHGlobal hackathon back in 2019. It was founded by Sergej Kunz and Anton Bukov. In August of this year they completed a Seed round from Binance Labs of about $2.8 million. Then, in early December of 2020, they managed to close a much larger $12 million funding round that was led by Pantera capital.

🖥 1inch Tech 🖥

At the most simple level, 1inch exchange is a dApp that is built on the Etheruem network. It uses smart contract technology to source liquidity from a number of different DEX protocols. These include the likes of Uniswap, Kyber, Bancor and 0x relayers. The Smart contracts are programmed to find the best order routes for the swap that you want to carry out. They are also able to split the transaction into smaller transactions in order to find the best route. This is called 'Pathfinder' and was one of the releases that was included in their version 2 upgrade. When it comes to the AMM, it improves on the "Constant Product" forumla that is used by a whole bunch of other DEX's like Uniswap etc. There are a number of flaws with this. One of these of course impermenant loss. This is the loss that liqudity providers suffer given that they have no control over the composition of the pool where they are supplying liquidity. 1inch released Mooniswap AMM. A simple explanation of how it works is that builds in a 5 minute time delay between updates of price feeds. It still uses the invariant algorithm but applies it slowly in order to reduce the profits for the arbitrage traders.

📈 1inch Tokenomics 📈

There is a 1.5 billion total supply of 1inch tokens. These will be unlocked over a 4 year period to numerous stakeholders. These include 30% for community incentives, 14% for R&D and the rest to the core backers, contributors and advisors. That means 56% of the tokens will be going to those early on the protocol who backed the project. These are the whale wallets which could one day lead to a flood of supply. On a plus side, it seems as if the token unlock schedule for these early investors and contributors occurs in later years. On the demand side you have to remember that these are governance tokens and those who hold them can vote on important decisions that take place in the ecosystem. These include how fees are generated which impact the return for the token holders themselves.


📜 Disclaimer 📜

The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading Forex, cryptocurrencies and CFDs poses considerable risk of loss. The speaker does not guarantee any particular outcome.