What Is the 1inch Crypto DEX and the 1INCH Token?

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DeFi
What Is the 1inch Crypto DEX and the 1INCH Token?

1inch crypto exchange is a decentralized exchange (DEX) aggregator; thus, it scours the crypto market while searching for the best-aggregated price for a trade. It is among the most recent innovations in the crypto space and is characterized by its zero transaction fees policy. The aggregator taps into different exchanges by scouring the crypto space for the best rates, thus benefitting from almost limitless liquidity.

In DeFi, liquidity is an essential requirement that a good exchange should meet. Decentralized Finance is meant to function better than traditional finance; thus, low liquidity undermines its core aims. Most of the upcoming DeFi projects are overwhelmed by this feature, limiting their functionality. They also lose users due to spiking slippages.

Slippages occur when a user places an order on the crypto exchange but purchases tokens at a higher price due to limited liquidity. However, 1inch crypto DEX has solved this issue by tapping into other exchanges to increase its liquidity by purchasing from them. A DEX is an exchange governed through decentralization, meaning that its users have the power to decide how it is running. 

Conversely, a CEX is an exchange whose governance falls to a few selected individuals or a single one. It takes the shape of a private institution where the leadership has sovereign power over the users. They own the trading accounts there and can even suspend, ban, delay transactions, spy, and perform other ‘Admin’ roles on the users’ accounts with or without notice.

Luckily there are some available crypto DEXs like 1inch in the market. Below is more information on how it works and what to expect in its passive earning processes.

Company Overview

1inch is a crypto aggregator that scans DEXs to generate the best prices for any trade made through them. It uses this trading method to fetch the best prices for traders while reducing slippage. Slippage occurs if a particular trade uses a higher price than initially intended due to a lack of liquidity. Since the exchange scours the crypto market and only trades within the available liquidity in each DEX, it has enough liquidity for all transactions.

The team behind the exchange is actively improving it through developments and new integrations. In November 2020, the exchange launched its V2, which increased the supported DEXs by 21 new integrations. 

The exchange also allows users to earn passively by liquidity mining of its 1inch tokens. The 1inch tokens also serve as the platform’s governance and utility tokens. The exchange is among the most decentralized ones. It has an “instant governance” procedure powered by the 1inch tokens. The platform claims that this process is among the fastest and most accomodating ones. It allows all users to vote to modify the platform how they see fit.

Key Features of 1inch

DEX Aggregator

1inch is a DEX aggregator and an AMM. The DEX aggregator feature is perhaps its biggest score since it sets it aside from its competitors. It is optimized to tap into other exchanges while looking for liquidity and then aggregate the prices of all orders placed in the exchanges. It comes up with a final offer reflecting on its user interface (UI) for the trade to be completed.

Good Liquidity That Can Serve Almost Any Size of a Transaction

1inch has liquidity that is greater than any other exchange. Its liquidity is always more extensive than the rest because it has one pool, taps into other exchanges to find liquidity, and then a finalized offer. That functionality makes it possible to settle transactions of almost any size with 1inch without high slippages as it will continuously mine for liquidity from its competitors and partners.

Passive Earning Methods

1inch has an advantage because it offers passive earning methods to its users. It allows users to stake their 1inch token or other tokens in their partners’ pools. It also allows the users to become liquidity providers (LPs). These LPs can then earn passively from the liquidity pools in liquidity mining. Some of the exchange’s pools offer ROIs of even over 100%.

Zero Fees

Although scouring for liquidity from multiple exchanges results in more fees as a user has to buy from every listed exchange, the 1inch platform does not charge any fee. That makes it one of the best exchanges in the DeFi sector. Also, considering that some trades in the DeFi sector suffer from slippages that 1inch comfortably solves, the zero fees feature stands as one of the platform’s best features.

How Does 1inch Work?

1inch crypto DEX uses API technology to trace the best routes when sourcing liquidity for a token swap. It divides the trade among different exchanges making it more profitable.

The platform is optimized to address the drawbacks of its competitors, like extensive transaction cancellation and high slippages resulting from small order books. However, it is best to note that although the crypto-to-crypto transactions on the exchange are not subject to KYC/AML requirements, fiat-to-crypto transactions through partners like Mercuryo require it.

How Does 1inch Token Gain and Sustain Its Value?

1inch token was released in December 2020 (the DeFi year). It was released by the 1inch Foundation to serve as the ecosystem’s governance and liquidity token. The release of the token converted the ecosystem to a DAO, which gave the coin a real-life use case as its use in the voting process increases its demand.

The platform offered airdrops to its active users to make sure that it reflected their push for inclusion and decentralization. Since then, 1INCH has been serving as a utility token and can also be used for staking and adding liquidity to the exchange. As a result, it has a real-life source of demand, making it one of the best coins since it is not based on speculation. 

1INCH currently trades at $1.49 with a 24-hour trading volume of around $43M. The coin is ranked number 111 on CoinMarketCap, showing that it is one of the best cryptos in the world. Although it is down by about 80% from its all-time high (ATH), 1INCH is a promising crypto token. However, it is best to DYOR  before investing in any cryptocurrency.

Passive Earning With the 1inch Crypto DEX

1inch crypto DEX allows its users to earn passively from cryptocurrencies through staking and liquidity mining. Below is how staking and liquidity mining works on the protocol.

1inch Staking

1inch also offers staking option to its users with a handsome reward of around 21.71%. The exchange offers 38% of all fees to the users who have staked their 1INCH tokens.

The staking process in 1inch is simple and almost similar to its competitors. To stake (original process from 1inch):

  • Go to the ‘DAO’ section on the 1inch dApp;
  • Connect your wallet by clicking on the ‘connect wallet’ button in the upper right corner. Make sure this is an address in which you have 1INCH tokens;
  • enter the number of tokens you want to stake in the field ‘amount’;
  • then submit the approval by clicking “Give permission to stake 1INCH”, then sign the transaction within your connected wallet
  • After the approval/permission transaction has been mined, click on the ‘stake token’ button, then confirm this second transaction within your connected wallet.

Once the staking process is done, the holdings will reflect st1INCH in the wallet and the block explorer. If they do not reflect on the wallet, the user should manually add the token’s address.

1inch Liquidity Mining 

The exchange offers its users the chance to earn passively from their crypto holdings through liquidity mining. Users are only required to add their 1inch tokens to the liquidity pools, and they are paid in 1INCH tokens.

It is best to compare the ROI generated in different pools to maximize the leaped returns from the 1inch Liquidity mining protocol. Some offer over 100% ROI, while others offer much lower rates. Like all other DEXs, it is advisable to read the set guidelines and follow them well while adding liquidity to 1inch as an error may lead to permanent loss of funds.

During the launch of the 1inch token, the exchange announced that it would allow its users to become LPs, and they could earn 1inch tokens in return. Since then, the LPS has earned over $28M, with 89.9 M+ 1inch tokens being distributed through the liquidity mining program. It also has liquidity of over $53.7M in its pools.

The process of participating in the liquidity mining of the 1inch platform is relatively simple (original process):

Step 1: Select a 1inch liquidity pool

  • Go to 1inch liquidity protocol
  • Connect a supported wallet
  • Choose a liquidity pool and click on the Provide liquidity button 

Please note that assets for each pool pair are provided in equal amounts. Therefore, you need to make sure you have a sufficient balance of both assets.

Step 2: Selecting amount and unlocking assets

  • Select the amount of liquidity you want to add to the pool by entering the value in the ‘enter LP token amount to mint’ or ‘value in USD’ field. A user can also settle for the maximum number of tokens that can be minted by clicking ‘max.’
  • Click the ‘unlock’ button and select from the provided options. After that, sign the transaction in the crypto wallet and wait for the mining process to complete.

Note: a user may be needed to unlock both assets in the pool.

Step 3: Providing liquidity

  • Click on the ‘Provide Liquidity’ button and sign the transaction on the wallet.

Now, the LP tokens of the pool will be transferred to the connected wallet and represent the user’s share in the involved liquidity pool.

Step 4: Select 1inch liquidity pool for farming

  • Go to the 1inch Liquidity protocol;
  • Click the ‘farming’ tab, find the pool where you have provided liquidity, and click ‘deposit.’

To participate in liquidity mining programs and earn 1INCH tokens, you need to be a liquidity provider to one of the 1inch pools supported by the program.

Step 5: Selecting the amount and unlocking the LP tokens

  • Enter the maximum number of LP tokens by clicking on the ‘balance’: in the upper right corner of the field;
  • Click on ‘unlock token,’ select one of the two unlocking options;
  • Confirm the transaction in your wallet and wait for it to be mined;

Step 6: Take part in liquidity mining

  • Click on the ‘deposit’ button;
  • Sign the transaction in your wallet application.

After the transaction has been mined and the liquidity providing process completed, you will start earning 1inch tokens from the pool.

Is It Safe to Use a 1inch Protocol?

1inch crypto exchange is one of the safest there is. It has several security measures to ensure that the funds locked in the staking and liquidity pools are safe from cyber attackers. However, it is advisable to be cautious when using the platform and follow its security protocols.

Final Word

1inch is among the best protocols to use in crypto swapping and for earning passively. It allows its users to enjoy the ample liquidity it provides by scouring for the best prices across the crypto market. The protocol also allows its users to earn from their holdings through staking and liquidity mining.

The crypto market varies very considerably. Therefore, it requires every trader to research the most suitable projects. Every trader should focus on the reliability and fees charged by the projects before selecting any. Also, it is best to learn about passive income in the crypto space. The essence of passive income methods like staking, yield farming, and liquidity mining is to hedge against inflation and sharp market variations.

These options are primarily available in the DeFi projects. 1inch is a project where traders can invest their money in the staking and liquidity pools. However, it is best to research other alternatives since some may offer better ROIs. Also, crypto projects come with risks requiring extensive research to prevent them. 

Samuel Mbaki Wanjiku

Samuel is an adventurous person who likes to explore topics in-depth and learn new things each day. His passion lies in gaining knowledge to help transform the world through his writing skills. He also believes in blockchain technology and its potential to usher in a cashless society. Currently, he is pursuing a Computer Science Bachelor’s degree driven by his fascination with emerging technologies. He has writing experience of about three years in different fields and two in blockchain technology.