1inch Review

What is 1inch Network?

1inch is a decentralized exchange aggregator, commonly known as a DEX aggregator, deeply rooted in the decentralized finance (DeFi) realm. Its chief mission is to offer cryptocurrency traders the optimal prices for their transactions. It achieves this by meticulously scanning various decentralized exchanges (DEXs) to pinpoint the best rates at the moment of a trade. Instead of hosting trades directly like traditional exchanges, 1inch redirects users to the DEX presenting the most favorable conditions.

Building on this foundation, the 1inch Network has emerged as a powerful conglomerate of decentralized protocols, working in tandem to optimize, expedite, and safeguard operations within the DeFi sector. 

Born from the ETHGlobal New York hackathon in May 2019 by co-founders Sergej Kunz and Anton Bukov, the network grants users access to an expansive array of liquidity sources across multiple chains. Since its inception, 1inch has unfolded a rich tapestry of tools: from the 1inch dApp that taps into deep aggregated liquidity to the Aggregation Protocol for pinpointing efficient token swaps, and a variety of other features like P2P transactions and the dedicated 1inch Mobile Wallet. 

How does 1inch Network work?

At its core, the 1inch Network operates as a decentralized exchange aggregator, ensuring that traders secure the best prices for their cryptocurrency transactions. Rather than conducting trades on its own platform, 1inch scans a multitude of decentralized exchanges (DEXs) in real-time, routing users to the one providing the most advantageous rates. This is made possible through a collection of specialized tools and protocols designed to optimize and streamline the user experience within the DeFi landscape.

To better understand the mechanics and breadth of the 1inch Network, it's crucial to familiarize oneself with its main suite of tools:

1. 1inch dApp: A web-based application providing access to deep aggregated liquidity.
2. 1inch Aggregation Protocol: An advanced algorithm, known as Pathfinder, designed to discover the most efficient routes for token swaps.
3. Fusion Swap (Fusion Mode): A unique mode that facilitates swaps by utilizing a variable exchange rate determined through a Dutch auction system. Resolvers, third-party entities, compete to fulfill these orders, optimizing gas costs and potentially offering users better rates.
4. 1inch Limit Order Protocol: A set of smart contracts enabling users to place various types of orders with high efficiency and flexibility.

What's New in 1inch v5 Router?

The 1inch v5 Router has ushered in a series of impressive enhancements, with a focal point on maximizing gas efficiency and expanding its set of functionalities. Below, we break down the pivotal advancements brought forth by this version:

1. Enhancements in Gas Efficiency: The latest iteration takes significant strides in reducing gas expenses for users. Swaps are now engineered to be approximately 5% more gas efficient than its predecessor and outpace its closest competitor in the DEX sector by approximately 10% in gas efficiency.
2. Integration with 1inch Limit Order Protocol v3: This integration not only amplifies swap efficiency but also optimizes gas costs. As a result, users can leverage the full prowess of the 1inch Limit Order Protocol, which has been gaining notable traction in the DEX arena.
3. Revamped Interaction Dynamics: A refined interaction blueprint has been adopted. With the addition of pre- and post-interactions, users can potentially experience smoother and more cohesive processes within the network.
4. Upgraded Error Processing in Smart Contracts: The system now boasts an advanced error processing mechanism within its smart contracts. The introduction of tailored errors serves to elucidate, in a gas-savvy manner, the reasons behind any operational discrepancies faced by users.
5. Transaction Execution Verification: At the heart of the protocol lies the 1inch v5 smart contract. This crucial component now embodies runtime verification for every transaction execution, further fortifying the network's security and transactional dependability.

What Is 1inch Fusion Swap?

At its heart, Fusion Swap employs a Dutch auction mechanism. When a user places an order, the desired exchange rate begins decreasing from its initial value to a set minimal return amount. This continuous reduction in the exchange rate persists until it becomes lucrative for the Resolvers to step in and complete the order. Resolvers play an instrumental role in the Fusion Mode. They are the third-party entities that fill the order when it becomes profitable for them. The profitability can arise from several scenarios:

1. The continuous diminishing of the order rate due to the Dutch auction.
2. Savings in gas when filling orders that match.
3. Gas savings from batch processing of multiple orders.

For those keen on integrating or becoming a resolver, 1inch offers a dedicated Fusion SDK to streamline the process.

What Are the Dynamics of the 1inch Dutch Auction Filling Rate? 

Every order possesses a unique auction start timestamp. This timestamp is derived by adding a waiting period to the order's signature timestamp. This waiting period ensures synchronization across various networks with differing block generation speeds. Before the actual auction initiates, an order can be filled at its starting rate, representing the peak rate a user can attain. Post this point, the rate assigned to the order undergoes a gradual decline.

The method to determine the order filling rate is multi-faceted, relying on several parameters like swap volume, gas overheads, and the chosen mode (fast, fair, or auction). One of the strategic moves here is the division of the source token volume into smaller chunks. This segmentation leads to multiple pricing tiers, with the anticipation that arbitrageurs will stabilize the price after each resolver action. This intricate mechanism ensures users get the most favorable rates, while resolvers, on the other hand, can derive profit from every transaction.

How Does the 1inch Network Limit Orders Work?

The 1inch Limit Order Protocol stands as a comprehensive suite of smart contracts tailored to function across a multitude of EVM-based blockchains, including giants like Ethereum, Binance Smart Chain, Polygon, and others. What distinguishes this protocol is its unparalleled flexibility and superior gas efficiency, made possible through the implementation of two distinctive order types - the Limit Order and the Request For Quotation (RFQ) Order. These orders, though crafted off-chain, get their validation through the EIP-712 signature standard when executed on-chain.

At its essence, a limit order is an instrument allowing users to list an ERC-20 token for sale at a predetermined rate. RFQ on the other hand, is a formalized procedure where customers solicit price quotes from suppliers or market makers for token purchases.

The 1inch Limit Order Protocol offers an array of mechanisms for versatile trade management:

1. Partial fill: Fill only a portion of the total order.
2. Predicates: Specify conditions for order execution.
3. Single cancellation: Cancel a singular order.
4. Bunch cancellation: Mass-cancel multiple orders at once.
5. Fullness check & Validation: Ensure order completion and validate accordingly.

Execution of Limit Orders: The 1inch dApp serves as the portal through which users can place limit orders. Once these orders are signed and placed, they can be accessed by anyone via the 1inch Limit Orders Liquidity Source API to conduct trades. For an on-chain limit order execution, the signed order must be submitted to the fillOrder function on the contract.

Integration with Pathfinder: The integration of the Pathfinder algorithm ensures that the limit orders, whether from the 1inch dApp or the REST API, are readily available to the broader 1inch user base.

Unique Features:

1. Order Execution Predicate: Establish prerequisites for order fulfillment, like time-based expiration, or conditions where prices exceed oracle values for strategies like stop loss.
2. Asset Price Evaluation Helper: An auxiliary function designed for on-chain asset price sourcing.
3. Callback Mechanism: Notifies the maker once the order has been executed.

The 1inch RFQ (Request For Quotation) Order:

Application & Workflow: RFQ orders are chiefly tailored for market makers. The common practice involves market makers creating and exposing a collection of RFQ orders via an API. Traders or algorithms then request quotes, and if these match their criteria, they receive a signed RFQ order to proceed.

RFQ Order Benefits:

1. Gas-efficient design with narrowed capabilities ideal for market makers.
2. Incorporation of an expiration timeframe.
3. Order cancellation by ID.
4. A single-fill mandate with a one-time partial fill option.
5. The 1inch Limit Order Protocol displays robust compatibility with a variety of tokens, including ERC 20, ERC 721, and ERC 1155. Additionally, support for other token standards can be extended through external integration.

How to use 1inch Network?

Connecting Your Wallet to 1Inch:

1. Visit the dApp.
2. Click on the 'Connect wallet' button in the upper right corner.
3. Read and accept the Terms of Service, Legal Disclosure, and Privacy Policy.
4. Choose your wallet (e.g., Metamask) in the popup window and hit the ‘Connect’ button​​.

Basic Settings:

1. Select the cryptocurrency you have and the one you want to swap it for from the dropdown menus.
2. Choose between 'Maximum return' for the best rates or 'Lowest gas cost' for fewer fees, especially useful for smaller trades​​.

Advanced Settings:

1. Click on 'Advanced settings' in the upper right corner of the swap console.
2. Here, you can activate the CHI gas token to reduce gas costs, disable partial fill, set slippage tolerance, choose the gas price, and see a comparison table and routing for your swap​​.

Swapping:

After configuring the settings, proceed to swap your cryptocurrencies to enjoy the best rates and shortest possible response time​​.

Limit Orders:

Click on the 'Limit' tab, select the network, choose the asset to sell and set the price at which you want to sell. Confirm and sign the limit order in your wallet​2​.

Using Different Networks:

On 1inch, you can also switch between different networks like Ethereum, Arbitrum, Polygon, etc., though not all features may be available on all networks​​.

Bridging Assets:

1inch allows you to bridge your cryptocurrency from one blockchain to another, expanding the utility and accessibility of your assets​.

Ensure to have a basic understanding of cryptocurrency trading and associated risks before using the platform. It's also advisable to stay updated with the latest features and updates from 1inch Network for a better user experience.

What is the 1INCH token?

The 1INCH token is the native utility and governance token of the 1inch Network. The token was launched on December 26, 2020, with an initial distribution of 6% out of a total issuance of 1.5 billion tokens.These tokens were made initially available, with the remainder set to be released gradually over a period of four years, ending in 2024. On the release day, 90 million tokens were distributed to the community through an airdrop to wallets that had interacted with 1inch before December 24, 2020.

Initial Allocation:

1. Team: 22.50%
2. Advisors: 2.30%
3. Community Incentive Programs: 30%
4. Growth and Development Fund: 14.5%

Funding Rounds:

1. Seed Round: August 11, 2020, raised $2.8 million.
2. Series A: December 2020, raised $12 million.
3. Series B: December 2021, raised $175 million, bringing the project's valuation to $2.25 billion.

What is the 1INCH token utility?

The 1INCH token is an integral part of the 1inch Network, facilitating a range of activities that contribute to the platform's decentralized and community-driven nature. Through various incentive programs and governance mechanisms, the 1INCH token empowers users to actively participate in the protocol's development and benefit from its growth.

Protocol Governance: Token holders can propose and vote on changes, impacting decisions like fee structures.

Liquidity Mining: By contributing to liquidity pools, users earn liquidity mining rewards and a share of the 1INCH DEX transaction fees.

Staking: 1INCH holders can stake their tokens to participate in the network's DAO governance, including managing the 1inch DAO Treasury.

Is 1inch safe?

1inch has cemented its place in the DeFi space with a robust security framework aimed at safeguarding users' funds and data. Here's an outline of some of the key security measures employed by the platform:

The smart contracts on 1inch are crafted to be unupgradable, bolstering security by thwarting unauthorized alterations to the code and access to funds secured in the contracts.

Serving as a DEX aggregator, amalgamating various decentralized exchanges (DEXes) under one roof, 1inch allows users to trade without granting access to funds in their wallets, thereby alleviating risks tied to individual DEXes' security lapses. When executing swaps via 1inch, token approvals are managed within the heavily audited and unupgradable 1inch smart contract, providing an added layer of security compared to approving tokens across multiple smart contracts of different DEXes.

Trading via 1inch reduces the need for users to interact with multiple decentralized apps (dApps) and websites, thereby lowering the risks of phishing attacks. Additionally, the minimum return parameter in the aggregation router smart contract ensures that all DEXes a user trades via 1inch return a token amount not lesser than the set minimum return, guarding users against malevolent DEXes.

Has 1inch been hacked?

No, 1inch hasn’t been hacked so far. Furthermore, the project has even played a role in identifying and warning about vulnerabilities in other projects within the DeFi space, reflecting a proactive stance toward security. Here are some instances where 1inch has been involved in security-related matters in the broader ecosystem:

Profanity Vulnerability Warning:

1inch discovered a severe vulnerability in an Ethereum vanity address generating tool called Profanity. This vulnerability had the potential to put millions of dollars in user funds at risk. 1inch issued a warning about this vulnerability, advising users against using Profanity due to the identified risks. Despite this warning, hackers were able to exploit the vulnerability in Profanity, leading to a loss of $3.3 million worth of cryptocurrencies​​.

Assistance in Recovering Stolen Funds:

In a separate incident, a hacker attacked a Chinese lending platform Lendf.me, part of the dForce ecosystem, exploiting a vulnerability and stealing roughly $25 million. 1inch contributed to efforts aimed at recovering the stolen funds, although this incident did not directly involve the 1inch platform itself​​.

Who is the 1inch core team?

Anton Bukov, one of the two co-founders of 1inch, had prior development experience with NEAR and Synthetix derivatives liquidity protocols. The other co-founder, Sergej Kunz, previously worked at Porsche AG in Germany, but is now fully dedicated to developing 1inch. The complete list of contributors to 1inch can be accessed here.

Partners

In 2023, 1inch embarked on a series of partnerships to bolster its ecosystem and enhance user services. One notable collaboration was with Bitquery, with the aim of bringing advanced trading tools to the market through its DEX aggregator. To simplify user transactions, a partnership with Unstoppable Domains was formed, allowing 1inch Wallet users to conduct transactions using domain names instead of complex addresses. 

Earlier in 2023, 1inch announced a partnership with Beefy Finance, enabling the 1inch API to power ZAP V2 in this multi-chain yield optimizer. During Paris Blockchain Week 2023, a partnership with Wirex was announced, integrating 1inch’s Aggregation API into Wirex's non-custodial wallet to facilitate token swaps. Another significant partnership was initiated with Ren, launching a joint farming program to foster a long-term collaborative relationship. 

Lastly, 1inch partnered with Giveth to form the Public Goods Router, offering a flexible donation percentage range on trades, capped at 1% but also allowing for lesser donations. Collectively, these partnerships underscore 1inch's continuous efforts to foster growth and improve user experience in the DeFi sector.

What’s Next for 1inch?

1inch is actively engaging in various initiatives to broaden its network and improve its offerings in 2023. Here are some of the key focal points of their roadmap for this year:

Expansion to zkSync Era:

1inch has announced its aim to expand into the zkSync Era, a Layer-2 solution catering to Ethereum scalability. This expansion is set to involve the deployment of the 1inch Aggregation Protocol and the 1inch Limit Order Protocol on zkSync Era.

1inch Foundation Grants:

The 1inch Foundation has unveiled grants to fund a range of solutions aimed at bolstering the 1inch ecosystem and enhancing user experience. These grants cover various areas including fiat gateways and browser extension development, with a total of $585,000 in 1INCH tokens allocated for distribution to the selected grant recipients.

Fusion Upgrade:

1inch has launched the Fusion upgrade centered around the 1inch Swap Engine, with the goal of enhancing the profitability and security of swaps via 1inch. The Fusion mode is designed to empower DeFi users to place orders with specified parameters.

Governance Implementation Stage 2:

1inch has marked the initiation of its Network governance implementation stage 2, as a stride towards decentralization. This stage follows the initial distribution of 1INCH tokens to protocol users and the launch of Instant Governance, aiming to advance the process of decentralization.

Links

https://docs.1inch.io/