Decentralized cryptocurrency exchanges or DEXs have been widely touted as the next big thing in the cryptocurrency industry. These exchanges are truly decentralized as the name suggests, and no central authority controls the order books or has custody of your funds. Anyone can trade on these exchanges without disclosing their personal data. With the rise in popularity of DeFi, many decentralized exchanges have popped up recently. Uniswap, PancakeSwap, SushiSwap, etc… are some of the most reputed DEXs today.
But, since these exchanges are relatively new and function differently, there can be a few problems such as low liquidity within order books that could cause high slippage and cancellation of transactions. 1inch is a DEX aggregator that splits orders between a handful of decentralized exchanges and private liquidity providers to provide the best possible exchange rates for their users. Let’s have a detailed look at the 1inch exchange in this review.
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What is 1inch Exchange?
1inch is a DEX aggregator that brings together all the major decentralized exchanges into a single network for liquidity and pricing, making it easier to claim the best deals for trades. It was founded by Sergej Kunz and Anton Bukov in 2019. 1inch gives users access to 50 plus liquidity sources on Ethereum, 20 on the Binance Smart Chain, and 8 on Polygon. It draws on DEXs such as Uniswap, 0x, and Balancer, and 1inch’s own liquidity protocol.
Trades can be distributed between exchanges with 1inch to minimize slippage to have the best possible pricing. Also, 1inch is non-custodial, with all trades being performed from the user’s crypto wallet.
Pros and Cons of 1inch exchangePros
- No security breaches or hacking incidents yet.
- User-friendly UI.
- No trading, deposit, or withdrawal fees.
- Ensured high liquidity and excellent rates through aggregating DEX order books.
- 1inch’s CHI gas token can reduce transaction costs even further.
- 1inch Liquidity Protocol facilitates yield farming.
- Use of fiat currencies not supported.
- Even with the user-friendly UI, beginners could have some difficulties using the platform.
- 1inch’s Infinity Unlock feature which saves transaction fees and time by unlocking all tokens once could be a security risk. Unlocking each transaction individually is safer.
Features of 1inch Exchange
- 1inch exchange provides liquidity and rates of multiple decentralized exchanges on a single board.
- The exchange does not hold the funds of the user. All the funds are always kept in the user’s ERC20 wallet.
- Users have complete authority over their coins.
- There is no requirement for KYC or creating an account. You can just link your wallet and begin trading.
- The chances of cyberattacks are less because no resources are held by the platform.
Working of 1inch
Suppose you want to buy any cryptocurrency using Bitcoin or Ethereum on a decentralized exchange. If you look at DEXes such as Uniswap, PancakeSwap, SushiSwap, etc… you’ll find that the prices for the cryptocurrency and the transaction fees are different in each exchange. This is where 1inch comes in. The platform’s algorithm determines the most economical way to perform your trade-in all the various exchanges and liquidity protocols that are capable of conducting this trade. The most economical way to perform this trade may include swapping your Ethereum or Bitcoin between many diverse protocols and for different cryptocurrencies before it arrives at the cryptocurrency you want to buy. This can finally let you buy your desired cryptocurrency at a cheaper price.
The native token of the 1inch exchange is called the 1INCH token. It is used to ensure the support of 1INCH holders in the development and governance of the platform, gain funds, and for staking. These tokens can be earned by providing liquidity to 1inch’s liquidity platform by staking cryptocurrencies that other people can use while placing trades. The token is now worth $ 2.10 and has a market cap of over $377 million. Token owners have the authority to decide on various parameters such as governance reward, swap charges for the liquidity protocol, price impact fee, decay time for the exchange, etc. It has been decided that the total supply of 1INCH tokens will be limited to 1.5 billion, and 30% of that will be allocated to the 1inch community.
CHI Gas Token and Mooniswap
Gas fees are charged by the Ethereum blockchain platform for sending and receiving tokens. It is similar to transaction fees. Gas fees are determined depending on the computational effort required to perform a trade on the platform. The fee rises according to the complexity of the trade. The CHI Gas Token is an ERC20 token developed to minimize the transaction fee on the 1inch Exchange.
Mooniswap is the next generation Automated Market Maker (AMM) protocol by 1inch exchange. It is 1inch’s answer to Uniswap. Mooniswap consists of smart contracts accountable for the liquidity pool of ERC20 tokens that can effectively block slippage, providing you more control over your cryptocurrency trades.
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As the demand for DeFi is booming, DEX aggregators like 1inch will be at the forefront of the cryptocurrency world. Liquidity is the major concern regarding decentralized exchanges., and 1inch has managed to solve this. Here we have taken a detailed look at the 1inch exchange, its pros, cons, features, working, the 1INCH token, CHI gas token, and Mooniswap. CryptoSoftwares provides most Cryptocurrency Exchange Platform Development services
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