Decentralized exchanges (DEXs) are crypto exchanges that do not require a centralized group or third party to govern them. No single entity maintains the order book or custody of funds in a decentralized exchange. Any user can trade on a decentralized exchange; they only need to connect their crypto wallets to start trading crypto. SushiSwap, Uniswap, and PancakeSwap are some examples of decentralized exchanges. Each of these exchanges is structured differently and sells crypto at slightly different rates, creating arbitrage opportunities. So ETH might sell for a different amount on Sushiswap than it does on Uniswap. Each crypto exchange might also charge different fees.
What is 1inch crypto?
1inch is a decentralized exchange aggregator platform. It provides users with the best price and lowest fees on their crypto transactions. Crypto prices and transaction fees can vary considerably at any given time across decentralized exchanges. Instead of manually checking and comparing prices, 1inch retrieves real-time pricing data from multiple DEXs to allow users to identify the optimal price and take advantage of a trading opportunity within a single platform. 1inch aggregates pricing data from many popular DEXs, such as SushiSwap, Uniswap, Balancer, and Kyber Network.
How does 1inch work?
1inch functions similarly to many travel booking websites. These travel websites aggregate prices from hotels, airlines, and travel providers; similarly, 1inch also compares crypto prices and fees across many DEXs.
Aggregation Protocol
Pathfinder is 1inch’s latest version; it identifies the best trading routes across multiple crypto markets and considers gas fees. Pathfinder breaks single trades into smaller portions across several decentralized exchanges to deliver the most optimal price option. For example, a 1inch user wants to trade $50 worth of USDC for ETH on the 1inch platform. 1inch may discover that users will pay the lowest fees if USDC is first converted to DAI before it is exchanged for ETH. In addition, 1inch can also suggest that it could be cost-effective to exchange $20 worth of USDC for ETH using the 0x exchange and exchange $30 of USDC on the Balancer exchange. 1inch users can perform a single transaction and need not worry about the complex processes behind the scenes.
Liquidity Protocol
The liquidity protocol for 1inch was originally launched under Mooniswap. This protocol enables users to earn passive income from their crypto by depositing it in liquidity pools. With the 1inch decentralized exchange, crypto coins held in liquidity pools can be used to place trades. Liquidity providers earn LP tokens in return, which can be staked or exchanged for other crypto tokens.
The liquidity protocol also employs a feature called virtual rates. This feature aims to solve trade-front-running issues. Front-running is when a malicious miner, bot, or trader finds out about a transaction being sent to the network. Next, they bid a higher fee to have their transaction placed before the observed transaction. The virtual rates feature automatically adjusts the fees in the liquidity pool which makes front-running unprofitable for malicious traders.
Limit Order Protocol
The limit order protocol enables users to place advanced and conditional orders beyond standard trade orders. Using this protocol, 1inch users can place orders such as trailing stop orders and stop-loss orders. This way, 1inch users can automatically lock in their profits at specific prices.
How does 1inch make money?
1inch does not make money as it is decentralized and not run as a for-profit company. Liquidity providers (LPs) can earn returns on this network by providing funds. The 1inch network does not charge any fees of its own.
How to Earn 1inch Coin?
Users can earn 1inch tokens by investing in liquidity pools. Users can collect crypto rewards in the form of 1inch tokens by becoming LPs.
Does 1inch have a future?
1inch does provide a vital service in the DeFi ecosystem. 1inch use cases will continue to rise as long as the DeFi space continues to thrive.
Conclusion
So is 1 inch a good investment? The success of the 1inch platform depends on the future of the DeFi ecosystem. Decentralized exchanges are still slow and expensive compared to centralized exchanges. But, the unique service of 1inch cannot be found on other DeFi platforms. Multipath swaps are a unique method deployed by 1inch to automatically find the best prices for crypto trades. 1inch has a market cap of about $500 million. It offers traders an innovative and cost-efficient service to find the best prices for their crypto trades.
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Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay or the author’s employer or other groups or individuals. ZebPay shall not be held liable for any acts or omissions, or losses incurred by the investors. ZebPay has not received any compensation in cash or kind for the above article and the article is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.
