Understanding 1inch: the DeFi aggregator that revolutionizes Token swaps

The Essentials About 1inch

1inch is a decentralized liquidity aggregation protocol that connects you to multiple DEXs (decentralized exchanges) on a single platform. Instead of manually searching for the best price across different exchanges, 1inch automatically selects the ideal routes for your transactions, ensuring more competitive fees and lower price impact (slippage).

The protocol uses a proprietary algorithm called Pathfinder, which analyzes liquidity, token prices, and network fees in real time before fragmenting and routing your trade across various liquidity pools. This means that a single swap can be executed across multiple DEXs simultaneously, optimizing the results.

How 1inch Works in Practice

The Aggregation Mechanism

The Aggregation Protocol is the engine of 1inch. When you initiate a swap, the Pathfinder maps all available liquidity sources, compares prices, and calculates the best execution route. The system can split your order across different platforms in the same transaction, significantly reducing slippage.

All trades operate as atomic transactions through smart contracts. This means that your operation either completes fully or is not executed at all – you do not run the risk of partial execution or intermediate failure that could jeopardize your funds.

Limit Orders: Total Control Over Your Trades

In addition to the instant swap, 1inch offers the Limit Order Protocol, which allows you to set specific conditions for your transactions. You can, for example, specify that you want to sell a token only when its price reaches a desired level.

These orders are stored in an off-chain database until the conditions are met. When this occurs, any mechanism ( including the Aggregation Protocol) can execute the order. 1inch does not charge additional fees for this service – whoever executes the order assumes the gas costs.

The protocol also supports advanced features such as auctions and RFQs (Request for Quotes), providing maximum flexibility for professional traders.

Main Tools of the Ecosystem

Spot Price Aggregator

This tool was developed to provide accurate token quotes in decentralized markets. It collects on-chain data directly from multiple EVM-compatible DEXs, filtering pools with low liquidity ( more vulnerable to manipulation ) and normalizing wrapped tokens to their underlying assets.

The system calculates weighted averages by liquidity, providing a reliable view of the market. By operating off-chain, it avoids exposure to manipulations that would affect smart contracts.

1inch Wallet: Your New Mobile Companion

The 1inch Wallet is a non-custodial mobile wallet that centralizes swaps, staking, and portfolio monitoring. It supports hardware wallets like Ledger and includes fraud protection with automatic domain verification.

When you access a dApp through the integrated browser, the wallet checks for suspicious activities. Although this protection adds security, you should still exercise caution with unknown sites.

The 1INCH Token and Its Utility

1INCH is the native token of the protocol with a maximum supply of 1.5 billion units. It plays three main roles in the ecosystem:

Governance: 1INCH holders can vote on critical decisions, from protocol upgrades to treasury management and operation of the Fusion Mode.

Staking: By staking, you contribute to the security of the protocol and receive rewards distributed by the DAO or resolver programs (resolvers).

Delegation: You can delegate your voting power to trusted representatives or resolvers, maintaining influence over the protocol's activities.

Step by Step: How to Make a Swap on 1inch

The process is intuitive and follows these steps:

1. Connect your wallet – Open the 1inch app and connect your preferred wallet.

2. Select and insert tokens – Choose which token you want to sell and which one you want to receive, specifying the amount. A quote will display the estimated value to be received.

3. Approve the token – If the token has not been approved yet, you will need to perform an approval transaction (with a small gas fee).

4. Adjust settings – Here you set your preferences: gas fee strategy, slippage tolerance, and whether you want additional protection against front-running for large trades.

5. Confirm the swap – Review all the details, approve the confirmation in your wallet, and wait for the completion.

6. Receive your tokens – After processing on the blockchain, the new tokens will appear in your wallet.

History and Governance

1inch emerged in 2019 during an ETHGlobal hackathon, created by Sergej Kunz and Anton Bukov with the goal of solving liquidity fragmentation in DeFi – where prices differ significantly between different DEXs.

Today, the protocol is managed by the 1inch Foundation, responsible for the token and growth of the ecosystem, and by the 1inch DAO, where token holders actively participate in the decisions that shape the future of the platform.

Why This Matters to You

1inch democratizes access to competitive prices by removing the need to manually check multiple platforms. Its Pathfinder algorithm works behind the scenes to find the best possible execution, saving on fees and slippage with every transaction.

The combination of automatic aggregation, flexible limit orders, and decentralized governance positions 1inch as a robust solution for those seeking efficiency and complete control over their operations in DeFi.