Built on the Ethereum blockchain, 1inch was founded in May 2019 by Surjey Kunz and Anton Bukov during an ETHGlobal hackathon. Kunz previously worked as a software engineer for Porsche, while Bukov was a developer who previously worked on the NEAR Protocol. In December 2020, the 1inch founders secured a $12 million funding round with participation from many notable firms including Pantera Capital and ParaFi Capital. The team went on to launch the platform’s own 1INCH token later that month. As part of its launch, the 1inch governance token was airdropped to anyone who had used the 1inch exchange platform before that date, with some conditions.

1inch Exchange operates in a similar way to many popular travel booking websites. Just as these sites aggregate prices from hundreds of airline, hotel and travel provider websites, 1inch compares cryptocurrency prices and trading fees across several decentralized exchanges. Some of the popular exchanges that 1inch aggregates data from are Uniswap, SushiSwap, 0x, Kyber Network and Balancer.

How it works:

• Aggregation Protocol

1inch automatically routes trades to the platforms with the best prices and lowest fees, allowing traders to use a single platform while comparing prices and executing trades across the entire DEX landscape. 1inch’s latest evolution, Pathfinder, identifies the best trading routes across multiple markets, while also taking gas fees into account. With Pathfinder, single trades can be broken into smaller portions across multiple DEX platforms, in order to deliver the most price efficient option. As an example, say a 1inch user wants to trade $100 worth of the DAI stablecoin for Ether on the 1inch platform. 1inch may find that the users will pay the lowest fees if the DAI is first converted to a different stablecoin such as USDC, before USDC is then exchanged for ETH. Additionally, 1inch may find that it would be most cost effective to exchange $30 worth of DAI for ETH using the 0x exchange and $70 worth of DAI for ETH using the Balancer exchange. 1inch traders still perform a single transaction without having to worry about the complex discovery and routing processes happening behind the scenes.

• Liquidity Protocol

1inch liquidity protocol, which was initially launched under the name Mooniswap, allows users to earn passive income on their crypto assets by depositing them in 1inch liquidity pools. The cryptocurrencies held in liquidity pools can then be used as the opposite side of transactions by traders who place trades using the 1inch decentralized exchange. In return, liquidity providers earn ‘LP tokens’ which can then be staked or exchanged for other cryptocurrencies. 1inch liquidity protocol also adopts a feature called virtual rates, which aims to address trade front running issues. Front running occurs when a malicious trader, miner or bot, observes a transaction being broadcast to the network and bids a higher fee to have their transaction be placed before that observed pending transaction. Virtual rates introduce an adjustment to the fees in the liquidity pool that makes this unprofitable to execute for malicious actors.

• Limit Order Protocol

1inch’s limit order protocol allows traders to place more advanced, conditional orders beyond standard swap orders. Using the limit order protocol, 1inch traders are able to place orders such as stop-loss orders and trailing stop orders in order to automatically lock in their profits at certain prices or prevent losses.