Unlike Uniswap, 1inch DEX binds multiple DEXs into one so that users can find and exchange their tokens at the best rates available across all available DEXs. This makes 1inch a valuable DEX aggregator, saving time and bringing crypto-asset swapping efficiency to a new level.
What Is 1inch?
As the GameStop saga demonstrated, it is highly problematic when a market maker (MM) — Citadel Securities — is also the primary source of income for a broker — Robinhood — from which the MM buys its order flows. In the blockchain space, users can avoid these organizations thanks to automated market makers (AMMs).
Instead of centralized clearinghouses, market makers, and brokers, there is only a decentralized protocol that directly connects the trading parties, foregoing any previously needed mediators. Therefore, there is no corruption or potential collusion possible, as everything is preprogrammed and transparent. 1inch exchange is one such decentralized exchange, and runs on the Ethereum, Binance Smart Chain, and Polygon blockchains.
Moreover, 1inch goes beyond the likes of Uniswap or PancakeSwap by being a DEX aggregator. It links at least 50 liquidity pools across Ethereum, Polygon, and Binance Smart Chain (BSC), including its own liquidity protocol, previously dubbed as Mooniswap, rebranded as simply 1inch Liquidity Protocol in December 2020.
How Does 1inch Work?
Instead of relying on a single DeFi protocol to buy a crypto asset, 1inch's protocol scrapes many DEXs to find the cheapest platform, accounting for fees and the price of the asset itself. So, for instance, if you wanted to employ your Bitcoin (BTC) to good use as a source of passive income, you would first have to convert it into Wrapped Bitcoin (WBTC). In this form, considering the synthetic Bitcoin equals the value of one real BTC, WBTC tokens can run on an Ethereum-compatible blockchain, available for further conversion into other tokens and altcoins. However, the price of WBTC would vary across DEXs. While you could manually check the prices of WBTC across dozens of exchanges, this is no longer necessary with 1inch's exchange. This DEX aggregator automatically pinpoints the cheapest trade to execute, making it a valuable tool for any trader.
Who Founded the 1inch Exchange?
1inch was created by Sergej Kunz and Anton Bukov, launching as a direct competitor to Uniswap. In 2019, they participated in the ETHNewYork hackathon event, which honed the protocol into the DEX aggregator it is today. Kunz had previously done coding work for large corporations via Mimacom consultancy, which served Porsche, Siemens, and Bosch, to name just a few.
In late 2017, Kunz launched his YouTube channel CryptoManiacs, serving as a meeting ground with his future business partner and co-host Anton Bukov. During the 60-hour course of New York's hackathon, they developed 1inch as a DEX aggregator. However, they had not built it from scratch during the event. Previously, Kunz had coded an arbitrage bot that seeded the idea for a platform that gives users better trade deals than a single DEX.
Although their project only won a minor prize in the competition, it has grown to become much more successful than other projects. Bukov currently serves as 1inch's CTO, continuing on his past experience with DeFi protocols such as NEAR and gDAI.io. After receiving $2.8 million in its initial funding round from Binance Labs, Galaxy Digital, FTX, and other FinTech firms and venture capitalists, 1inch launched in August 2020. At the year's end, the platform surpassed the initial funding with another $12 million Series A funding round thanks to Pantera Capital, Blockchain Capital, ParaFi Capital, Spartan Group, and Nima Capital.
Due in part to the ample amount of available funds, the 1inch Network was able to engage in many generous 1INCH token airdrops:
- 6 million airdropped to Uniswap traders who had a high activity history.
- 3.57 million across 1,308 liquidity miners.
- 310,000 airdropped to limit order users.
- 375,000 airdropped to users with smart contract wallets: Gnosis, Authereum, Argent, and Pillar.
These efforts served to accelerate the popularity and adoption of the 1inch Network.
What Is 1INCH's Native Token?
The 1INCH token launched in late December, after which it had been airdropped in order to gain popularity and a portion of Uniswap's traffic. 1INCH token holders can not only use it to pay for exchange fees, but also use it to gain voting rights. Through this mechanism, users have instant access to the network's governance, with the ability to vote on swapping fees, price impact fees, governance reward, referral reward, and the token's decay period.
The total supply of 1INCH tokens is 1.5 billion, out of which 30% of the tokens will be distributed as community incentives over a four-year period. Likewise, 14.5% of tokens will be used for further development, dApps, and grants, taking place within the same four years.
In May 2021, the 1INCH token achieved its ATH price of $7.58.
The co-founders themselves, Kunz and Bukov, made it clear that the 1INCH token should not be viewed as either a security or as an investment.
"The 1INCH tokens are not intended to be securities […] or an investment. The 1INCH tokens are intended to be used for their consumptive purposes on the 1inch Network, the 1INCH token protocols, and other applications that third parties may develop utilizing the 1INCH tokens and/or the permissionless blockchain-based decentralized 1inch Network."
The 1inch Network relies on two key advantages over other DEXs — it simplifies the process of finding the best token prices, and it gives users instant governance abilities. Furthermore, it is one of the most audited DeFi protocols, which is a major advantage considering the space tends to be prone to hacking and exploits.
After spreading beyond Ethereum, to Binance Smart Chain and Polygon, its availability and usefulness is likely to secure its future as a significant DeFi player for years to come. In fact, its design philosophy is much the same as Komodo's AtomicDEX platform - both are build with security as a top priority and with a vision to unite various blockchain projects together via a single protocol.