As the DeFi space is booming, more and more newcomers are taking a stab at crypto trading. 1inch is a perfect place to start off in the crypto industry for those who have little or no experience with cryptocurrency.
As the leading aggregator of decentralized exchanges (DEXs), 1inch offers users better rates for cryptocurrency swaps than any single crypto exchange could. Moreover, 1inch saves users time – as they no longer have to manually check each exchange for the best swap prices.
In this post, we’ll introduce to you what is 1inch crypto and provide a step-by-step guide on how to use 1inch exchange, which should come especially handy for newcomers.
What is 1inch Crypto?
1inch is a radical new decentralized exchange platform that’s actually two things in one:
1. Decentralized exchange platform
2. Decentralized exchange aggregator
The DEX platform side of 1inch refers to how you can easily buy and sell cryptocurrencies on the exchange using a format similar to Uniswap. It's the DEX aggregator component that sets 1inch apart from its rivals. 1inch works by aggregating the liquidity across popular DEXes like Uniswap, Sushi, Balancer, Bancor, and others.
Aggregating, in this case, means 1inch searches the pairs you're trading across all available exchanges for the absolute best prices possible. When it comes time to complete the trade, 1inch splits your order and spreads it across several exchanges. However, you experience the trade as a single transaction on the user end.
How 1inch DEX Works
Everyone using a DEX in 2021 has hit the same roadblock: gas fees. Because of increased congestion on the ETHereum network, gas costs for DEX trading have gone through the roof. That's why you must factor gas fees into DEX trades when searching for the best crypto prices. Some exchanges have the token you want, but the transaction could be more expensive than it's worth after factoring in gas.
1inch was created to solve this dilemma by efficiently spreading your trade across exchanges using micro-transactions. Besides lowering overall gas costs, spreading transactions across exchanges helps 1inch assemble the best return possible for your trade. Reducing the cost of gas isn't all 1inch is about. Because the exchange routes your transaction across multiple DEXes, it also reduces slippage.
To understand slippage, you should know how pooled liquidity works. If a liquidity pool for ETH-CRV is illiquid, the pool can't efficiently absorb a large swap or high-volume trading. The result is the price of the token slips, meaning it gets more expensive, netting you less CRV than quoted.
Large traders, known as whales, love 1inch for its slippage-reducing superpowers by sourcing tokens across pools to mitigate slippage. All in all, even if you aren't a whale by definition, 1inch can help lower your trading costs – especially if you're buying a high traffic token.
Key Features of 1inch
1inch has pioneered a decentralized exchange that essentially solves liquidity shortages. However, that's not all the team has accomplished. Check out 1inch's key features below.
Liquidity Protocol
At first, 1inch focused on aggregating liquidity from other DEXes. It didn't take long before the team went ahead and built a liquidity protocol to attract native liquidity to 1inch itself. Anyone can stake assets in 1inch liquidity pools forming the basis of 1inch and its Mooniswap AMM.
Despite launching its liquidity protocol with a liquidity mining program, 1inch has struggled to attract LPs from popular AMMs like Uniswap and Sushi. Today, 1inch liquidity pools contain around $8 million in total value locked — a far cry from the billions on Uniswap.
Aggregation Protocol
In March 2021, 1inch unveiled its v3 aggregation protocol with upgraded smart contracts. The update made a good thing even better, bringing faster and more efficient aggregated trades to the exchange.
Besides the added unicorn power, 1inch v3 connects to more DEXes than ever before via ETHereum and Binance Smart Chain. With a simple click, you can access liquidity on both Ethereum and BSC's largest DEXes.
Limit Order Protocol
Advanced trading tools are woefully lacking across DEXes like Uniswap. Not so with 1inch, thanks to the team's innovative limit order protocol. 1inch gives DEX traders complex order types like stop-loss orders, trailing-stop orders, and auctions using the protocol's dynamic pricing mechanism. Besides the conditional order features, the 1inch limit order protocol doesn't charge fees – a big difference from competitor 0x.
Multi-Chain Integration
Decentralized exchanges and applications built on ETHereum pride themselves on their home blockchain. Maximalism of this kind has boxed several DEXes into Ethereum's high-cost ecosystem while rival blockchains achieve scaling milestones.
This might explain why 1inch shocked the crypto world after it announced a Binance Smart Chain integration. After witnessing the astonishing rise of the BSC DeFi ecosystem during the first half of 2021, 1inch correctly sought to replicate its success on another chain.
1inch's BSC deployment gives you the same functionalities available on its ETHereum version. Instead of routing to Uniswap and Sushi, 1inch on BSC routes to PancakeSwap, Venus Protocol, and BakerySwap. Not long after deploying on BSC, 1inch deployed on Polygon, a blockchain for scalable Ethereum transactions. Right now, 1inch on Polygon has limited aggregation powers restricted to Uniswap, Sushi, Aave, and Curve
Low Trading Fees
1inch doesn't charge trading fees no matter the size of your trade. That's a huge pro in our book. Please keep in mind this doesn't mean no trading fees of any kind. When 1inch routes your trade through other exchanges, the trade will incur their fees, which 1inch passes onto you.
That's not to say 1inch trades end up being more expensive than going directly to Uniswap or Curve. It's often the case that your fees end up just as low, if not lower, with a good exchange rate to boot.
How to Use 1inch Exchange?
Step 1: Сonnecting your wallet
- Go to 1inch’s website
- Click on the ‘Connect wallet’ button in the upper right corner
- Choose your wallet (e.g. Metamask) in the popup window
- Hit the ‘Connect’ button.
Once the wallet has been connected, your ETHereum address will be displayed on the top of the page. By clicking on it, you can always check your transaction history, copy the address or disconnect the wallet.
Step 2: Basic settings
Choose the coin you have and the coin you want to get in the dropdown windows. You can also choose between the ‘Maximum return’ and ‘Lowest gas cost’ options. If you choose the ‘Maximum return’ option, the algorithm will use complex routes for the swap to make sure that you get the best rates.
Alternatively, you can go for the ‘Lowest gas cost’ option. In that case, the pathfinder algorithm will find the best option in terms of gas costs. This option comes in handy for small trades when you don’t want to pay substantial fees, like, for instance, swapping 10 USDT to WETH. Small trades optimize less liquidity sources and thus the lowest gas cost option will most likely deliver the best end price.
Step 3: Advanced settings
1inch enables you to do more advanced settings. Hit the ‘Advanced settings’ button in the upper right corner of the swap console.
The ‘Activate CHI’ button allows you to activate the CHI gas token. Burning the CHI gas token can reduce gas costs by 43%. To activate and receive the benefits of CHI, the user should begin with a CHI balance of at least 5 CHI.
The ‘Disable partial fill’ button disables the particle fill feature, which is enabled by default. The partial fill feature can fill a swap order only partially — in case the rate in one or more routes has changed, becoming less attractive for the user. Thanks to the partial fill feature, any route can be easily canceled, and the user’s unswapped coins will return to their wallet.
The advanced settings also allow a user to see a comparison table, charts and the entire routing for the swap they want to do. With the advanced settings, the user can set slippage tolerance, the gas price and choose between the 31 liquidity sources 1inch offers.
The slippage tolerance feature allows the user to select their swap’s level of slippage. The user can choose: 0.1 %, 0.5%, 1 %, 3% or they can enter a custom amount. If the rate changes more than the selected percentage of “slippage tolerance” during the execution of the transaction, the transaction will be partially filled or reverted to save user funds
Step 4: Swap
Do the swap and enjoy the best rates and shortest possible response time!
Closing Thoughts
The 1inch Network relies on two key advantages over other DEXs – it simplifies the process of finding the best token prices, and it gives users instant governance abilities. Furthermore, it is one of the most audited DeFi protocols, which is a major advantage considering the space tends to be prone to hacking and exploits.
After spreading beyond ETHereum, to Binance Smart Chain and Polygon, its availability and usefulness is likely to secure its future as a significant DeFi player for years to come. And the best part is that you now know how to use 1inch exchange for its convenience as a power crypto user!
