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What is 1inch (crypto)Exchange? Beginner’s Guide

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In 2021, there are more decentralized exchanges to choose from than ever before.

Between Uniswap, Sushi, Curve, Loopring, Kyber, 0x, Balancer, Bancor, and lesser-known DEXes like DODO, how do you choose?

1inch Exchange (1INCH) is a DEX aggregator that checks prices across exchanges then figures out the cheapest route for your trade. So, instead of picking a single exchange, 1inch lets you use them all to come up with the best bang for your buck.

This guide to 1inch Exchange explains the DeFi platform in detail, including its key features. We also break down the 1INCH token along with Chi Gastoken, its little-known relative.

History

Founded in May 2019, 1inch Exchange is the brainchild of Russian developers Sergej Kunz and Anton Bukov. Kunz and Bukov both have strong backgrounds in smart contract auditing. In September 2018, Kunz began live streaming Ethereum smart contract security audits on YouTube.

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Kunz partnered with Bukov and the pair have since attended several hackathons worldwide. Kunz and Bukov secured sponsored bounties from MakerDAO, Set Protocol, and Kyber Network.

The 1inch Exchange blueprint was created ahead of the ETH NewYork convention as Kunz and Bukov were experimenting with arbitrage bots. During the event, the first medium viable product (MVP) was created for 1inch Exchange. This iteration aggregated liquidity from decentralized exchanges (DEXs) Bancor, Kyber, and Uniswap.

What is 1inch?

The 1inch Network is a decentralised exchange (DEX) and liquidity aggregator that enables users to trade digital assets across several exchanges, giving access to a wide range of trading options through a single interface.

It’s not just a standard automated market maker (AMM) which prices assets based on a mathematical formula, but rather a liquidity aggregator that enables users to simultaneously gain access to pricing from a number of liquidity providers (LPs) and pools.

The 1inch Network does this by using smart contracts to reroute user trades between various DEXs. This allows 1inch to leverage the most optimal token and gas prices for transactions on the Ethereum, Polygon and Binance Smart Chain (BSC) blockchains.

How 1inch Exchange Works

Everyone using a DEX in 2021 has hit the same roadblock: gas fees. Because of increased congestion on the Ethereum network, gas costs for DEX trading have gone through the roof.

That’s why you must factor gas fees into DEX trades when searching for the best crypto prices. Some exchanges have the token you want, but the transaction could be more expensive than it’s worth after factoring in gas.

1inch Exchange was created to solve this dilemma by efficiently spreading your trade across exchanges using micro-transactions. Besides lowering overall gas costs, spreading transactions across exchanges helps 1inch assemble the best return possible for your trade.

To test 1inch out for yourself, head over to the app, then populate the swap interface with tokens you want to trade. We tried the interface out by inputting an ETH —> CRV trade. As you can see, 1inch gets you the most CRV for the trade compared to other exchanges.

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Reducing the cost of gas isn’t all 1inch is about. Because the exchange routes your transaction across multiple DEXes, it also reduces slippage.

To understand slippage, you should know how pooled liquidity works. If a liquidity pool for ETH-CRV is illiquid, the pool can’t efficiently absorb a large swap or high-volume trading. The result is the price of the token slips, meaning it gets more expensive, netting you less CRV than quoted.

Compounding the problem is the possibility that several exchanges lack the liquidity to absorb a large purchase or high volume for a given pair of assets.

But remember that 1inch aggregates liquidity across DEXes. 1inch’s stroke of genius is sourcing tokens across pools to mitigate slippage.

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Large traders, known as whales, love 1inch for its slippage-reducing superpowers. Even if you aren’t a whale by definition, 1inch can help lower your trading costs — especially if you’re buying a high traffic token.

WHY USE 1INCH? WHAT ARE THE BENEFITS?

1inch provides a number of stand-out benefits to its users; let’s take a look at some of the main advantages of using this platform to make crypto exchanges.

A FASTER WAY TO EXCHANGE

As you might expect from a comparison platform, one of 1inch’s key benefits is that it saves you time. Whereas previously, finding the best deal for your exchange meant laboriously sifting through multiple exchanges, 1inch does this instantly by leveraging its algorithm across more than 80 decentralized exchanges. This means you accomplish the same objective with less time invested.

SLIPPAGE FADES AWAY

In case you’re not familiar with the term slippage, let’s start with a brief summary – it’s the movement in price of a commodity between the moment you confirm the transaction and the moment the trade actually takes place. This creates a lack of certainty for traders who, ultimately, can’t be completely sure how much they will pay for their exchange by the time it’s processed.

Slippage is particularly problematic in crypto markets due to the volatility of crypto prices, the time it takes for new transactions to be validated and, sometimes, delays caused by lack of liquidity for larger trades, all of which contribute to pricing uncertainty.

By splitting trades across multiple pools, it is less likely that lack of liquidity will hinder your transaction, bringing better transparency and accuracy to transaction pricing.

BETTER RETURNS ON TRADES

If you’ve ever made a crypto transaction, you’ll be well aware of our old friend, gas fees – these are the payments required each time you send your crypto to another wallet, rewarding the network validators for maintaining the blockchain.

A nifty feature of the 1inch interface is that it allows you to reduce your transaction costs by locating the trading routes with the lowest gas fees; alternatively, you can also prioritise the routes with the higher overall returns.

With all results easily sorted and displayed on one interface, 1inch makes it easy for you to locate the best deal.

SECURITY AND OWNERSHIP OF YOUR KEYS

Just in case you’d forgotten, let’s say it again: not your keys, not your coins.

One of the key benefits of using 1inch is that you retain full ownership of your coins while you trade. As a non-custodial platform, using 1inch means your funds will always be tied to your own private key, and not that of the exchange. This empowers you with maximum control and security while you’re exchanging.

What is 1INCH token?

On Christmas Day, 2020, 1inch launched its own cryptocurrency, 1INCH token. It’s a “governance token,” meaning that you can use it to vote on the way that the 1inch platform is run. 1inch called this “instant governance”.

1inch distributed a lot of tokens in an airdrop at the end of 2020. You could claim 1inch tokens by providing money to 1inch’s own liquidity protocol (then known as Mooniswap) or if you’ve used it before December 24, 2020

The main way to earn 1INCH tokens is by providing liquidity to 1inch’s liquidity platform. This involves staking cryptocurrencies that other people can use when placing trades. You can earn other cryptocurrencies this way, too.

You can also trade 1INCH token on exchanges. As of January 27, 2021, the token is worth $2.41 and has a market cap of $175 million. There are 72 million 1inch tokens in circulation out of a total supply of 1.5 billion.

How to get 1INCH Token?

One can claim the 1INCH token by providing money to the Mooniswap, the 1inch’s own liquidity protocol.

The main way to earn 1INCH tokens is by just providing liquidity to the 1inch’s liquidity platform, which involves staking of cryptocurrencies that other people use when placing trades.

You can also trade 1INCH tokens on exchanges. There are about 72M 1inch tokens in circulation out of which 1.5B is total supply.

The current Price of a 1inch token (while writing this blog) is $3.95 with a market cap of $569,508,485.

You can also buy 1inch tokens on 1inch, KuCoin, Huobi Global, OKEx, and more.

Is 1inch Exchange safe to use?

All the platforms that rely on smart contracts have their own risks. 1inch exchange is a non-custodial DEX aggregator, which works using cryptocurrency and smart contracts.

There are no bugs or breaches spotted in the 1inch exchange to date and still many use 1inch exchange for crypto trading.

The future

The future of 1inch depends on the future of decentralized finance. Decentralized exchanges are still expensive, slow and relatively insignificant compared to mighty centralized exchanges such as Binance. But with centralized exchanges suffering repeated bouts of downtime during periods of crypto price volatility, the appetite for DEXs is growing—and aggregators like 1inch are there to pick up the slack.

Some of the 1inch token supply is earmarked for development, which has seen the exchange integrate new liquidity protocols at a rapid clip. So long as the market doesn’t bottom out, there’s no reason to suspect that the pace of development will slow any time soon.

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