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Optimized DEX Trading with the 1inch Platform

By 2sats | 2sats | 9 Aug 2021


*obligatory not financial advice*

What is 1inch?

1inch is more than just 2.54 cm, it is also a decentralized exchange aggregator. It basically compares different DEXes like Uniswap and Sushiswap to offer you the best possible trading route for your trading pair.

The 1inch interface is easy to use. It works similar to how any decentralized exchange would work but it shows you much the trade would cost you on the different exchanges and how much you could save if you use 1inch to optimize your trade for you.

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See, it not only simply uses the most profitable exchange, but it also splits the trade across multiple exchanges if needed to avoid a high slippage. The reason why a slippage can happen is because of the nature of how DEXes work. They build prices by creating liquidity pools for trading pairs and they weight both coins equally.

If you have a pool with 10,000 USDC and 10 ETH, then the DEX will trade 1 ETH for 1,000 USDC, then if there is 11,000 USDC and 9 ETH in the pool it will trade 1 ETH for 1,222 USDC. This is how prices are made in an automated decentralized way. Obviously there is often millions of dollars’ worth of coins in such pools, so the price change isn't that much after one simple trade, but if you trade in a low liquidity pool or you trade huge numbers then it can happen that the coin you are trading changes its value drastically during the trade.

If you have a pool on Uniswap with 10,000 USDC and 10 ETH, and the same pool on Sushiswap, and you want to buy 2 ETH, then you could use 1inch to split your trade across both DEXes, which would lower the slippage. It also takes gas fees into account.

1inch is an easy way to optimize your decentralized trading and it works on Ethereum, its second layer Polygon and on the Binance Smart Chain.

1inch also has its own governance token that gives its holders voting rights for possible changes to the network, much like many other DeFi protocols. Like Uniswap, they airdropped the token to early users of the protocol. However, they only gave away 6% of the entire token supply that way, another 30% will be given to token holders that participate in governance to incentivize voting on possible changes. More than 50% of the entire token supply are going to the founders and their early investors, which makes the token very centralized. While I love the 1inch platform, I really wouldn't invest into their token.

Although the token doesn't seem like a good investment in my opinion, their platform is still a great tool for trading crypto. If you want to trade in a decentralized way, and you want to trade mostly low liquidity coins then you should give 1inch a try.

 

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2sats
2sats

I am just some bored guy that likes crypto


2sats
2sats

I am just some bored guy that likes cryptocurrency

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