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πŸ€” What is 1 Inch ?

There are many decentralized exchanges, that allow users to swap crypto tokens:

It is not possible for aΒ  user to explore each one of them to find out the best option for trading their tokens. 1 Inch solves this problem.

1 Inch is a decentralized exchange aggregator. It compares the rates on all the exchanges and routes the trade using the cheapest decentralized exchange. Its algorithm also takes liquidity, price slippage, and gas fees into account while finding the best exchange.

The name “1 inch” comes from Bruce Lee’s famous 1-inch punch.

Name ” 1 inch ” represents the power to find the best trade in the crypto ecosystem.

πŸ’‘ What role does 1INCH token play ?

  • Governance: 1INCH is a governance token. 1INCH holders get voting rights to govern 1 Inch protocol.
  • Staking: 1INCH token holders can stake their tokens and receive part of trading fee as reward.

πŸ“ Origin of 1 Inch

  • Anton Bukov was introduced to Sergej Kunz by a mutual friend.
  • Initially, they chatted online, and later Anton became the co-host of Sergej’s Russian Youtube channel CryptoManiacs.
  • Soon they started participating in hackathons as CryptoManiacs team. 1 Inch was founded at ETHNewYork’s Hackathon in May 2019.
  • The team released 1INCH token and their platform in December 2020.

😌 What problems does it solve ?

  • Saves time and effort: Users do not have to go to each decentralized exchange to find the best trade.
  • No trusted third party: Users are in control of their funds. Exchange of crypto assets does not involve any middleman, unlike centralized exchanges.
  • Centralized exchanges pool all the funds and cryptocurrencies in one place, presenting a lucrative target for hackers.
  • No complicated paperwork like KYC and long waiting period is involved.

πŸ€– How does it work ?

1 Inch uses a proprietary algorithm called “Pathfinder” to find best route to trade crypto assets.

It splits the order into several smaller transactions and finds the best trade for each one of them. The algorithm takes following factors into account while deciding the best route for a trade:

  • Prices offered by exchanges
  • Market depth
  • Price slippage
  • Gas fees
  • Route: It may be possible that it is better to swap your crypto for a third asset and then swap it for the desired crypto.

βš™οΈ How to use 1 Inch exchange

πŸ›οΈ Governance model

1 Inch team decided to decentralize the governance of the protocol in 2 stages:

  • Stage 1: Stage 1 was implemented in December 2020 with initial distribution of 1INCH tokens and launch of instant governance. Instant governance allows 1INCH token holders to set protocol settings like swap fee, governance reward, etc in real-time.
  • Stage 2: It is yet to be implemented. Implementation of stage 2 will completely decentralize the governance of 1 Inch protocol. The community will directly control 1 Inch protocol, making it fully decentralized, owned, and governed by 1 Inch DAO.

πŸ€‘ How much money does the project have for future development ?

  • The project has raised $20.8 million to date.
  • The project holds 21% of 1INCH tokens to fund future development.

πŸ‘ Tailwinds

  • Crypto industry is growing. So is the demand for crypto currencies.
  • Users just want the best exchange rate for swapping their crypto assets. Why will they go to just 1 decentralized exchange when 1 Inch compares all the decentralized exchanges and provides the best exchange rate.

😨 Risks and challenges

  • Trading sector is heavily regulated by their respective governments, central banks and securities & exchange commission. Many governments will try to ban/regulate 1 Inch for operating without a license.

It is still a centralized project which makes the project vulnerable to such governments crackdowns.

πŸ’° Tokenomics

1INCH token has a max supply of 1.5 billion tokens. They have been distributed as follows:

Vesting schedule

The tokens will be released as follows:

Demand pressure

Token’s price increases due to demand pressure.

Demand pressure on 1INCH token will come from:

  • Governance: Many users will buy 1INCH token to take part in 1 Inch governance.
  • Staking: Many users will acquire and stake their 1INCH token to earn rewards.
  • Speculators:Β They will buy 1INCH token for future price appreciation.

Market opportunity

Crypto exchange market is a multi-billion dollar industry growing at an exponential rate. Governance token of a project that aims to disrupt this industry will be worth a lot.

🧐 Indicators to watch out for

  • Their Twitter following is growing:
  • Number of users is growing:

πŸ‘‹Final remarks

I will not be investing in 1 Inch token because:

  • Governance is not completely decentralized:
    • US users are not allowed to use 1 Inch platform.

It is even mentioned in their terms and conditions:

No one voted this. Although the users can directly interact with smart contracts or use VPN to access 1 Inch, still it shows that the team is scared of regulations.

Currently, 1INCH token holders can only tweak just a few parameters. Team has promised to decentralize the governance in stage 2 which does not have a fixed deadline.

  • Inflation:
    • Only a small fraction of 1INCH token is in circulation.
    • 1INCH token will see massive inflation in the coming years as per their release schedule:

Use 1 Inch for swapping crypto assets because it offers the best exchange rates. However, I find it difficult for 1INCH token to increase in value at least till:

  • 2024: When all the tokens will come in circulation.
  • Their stage 2 of governance is implemented.

😊 Do further research