1inch Exchange, Mooniswap and Chi GasToken: The ultimate review

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1inch Exchange is a decentralized exchange (DEX) aggregator, designed to roll liquidity and pricing from major DEXs into one platform, offering users the cheapest trades, lowest slippage, and access to a wide range of ERC-20 tokens. According to CoinGecko the exchange has support for 152 Coins and 158 trading Pairs and a Total Volume of over US$ 4 billion. We also take a look at the Exchange’s automatic market maker (AMM)-Mooniswap and their Chi GasToken.

Summary

• 1inch is a non-custodial DEX aggregator, with all trades being performed within a single transaction from a user’s Ethereum-based wallet.
• Popular DEXs integrated into the 1inch protocol include Oasis, Kyber Network, Uniswap, Mooniswap, Balancer and many more. This means that users can swap between nearly any kind of ERC-20 token.
• The native 1INCH token is both a governance and utility token.
• The platform has its own gas token “Chi” to help users, especially seasoned traders and arbitrageurs, to reduce gas costs for transactions.
• The 1inch team has also introduced Mooniswap, a next-generation automated market maker (AMM) with virtual balances, enabling liquidity providers to capture profits otherwise captured by arbitrageurs.

Let’s look at some of 1inch Exchange features in detail.

Overview

DEXs have becoming increasingly popular among users with their varied advantages over its centralized counterparts namely self-custody, increased security, listing autonomy and diversity of coins.

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However, some of the major drawbacks come in the form of thin order books with low liquidity leading to high slippage and expensive transaction cancellations. Moreover, as every order gets submitted to the blockchain, anyone can see a transaction before it gets mined. This visibility leaves every trade susceptible to interception as front runners can pay a higher gas price to incentivize the network to mine their transaction first.

1inch Exchange is a non-custodial DEX aggregator that aims to tackle the issues of the thin order book and front running.

Users can swap as well as place limit orders for a wide variety of tokens.

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It is designed to roll liquidity and pricing from all major DEXs into one platform therefore trades via 1inch can be split across exchanges, to minimize slippage and provide the best pricing possible for the desired trade. Mooniswap, Oasis, Kyber Network, Uniswap, 0x Relays and others are all integrated into the 1inch protocol.

The price and liquidity available from each platform are clearly displayed to the user, along with gas fees. This saves the user both time and clicks, avoiding the need to open multiple exchanges and assess the order books.

How Does 1inch exchange work?

1inch Exchange was founded in May 2019 by Sergej Kunz and Anton Bukov, two Russian developers who came together to audit smart contracts. Before founding 1inch, the duo participated and won several bounties at hackathons for MakerDAO, Set Protocol, and Kyber Network.

To get started, visit https://1inch.exchange/

How to swap tokens

The 1inch.Exchange will greet you with the following interface with the option to swap tokens:

You can choose which different DEXs you want to place your swap offer on. This is the defining feature that gives users access to a much bigger order book than what would otherwise be available on individual DEXs.

Users connect their Ethereum wallet, by clicking the yellow “Connect Wallet” button. Once connected, users can select which assets they would like to exchange, and the best available rates. They can also toggle on/off specific exchanges, depending on their preferences. Scrolling down, users can also view the exchange rate going at each individual platform, as well as how much it varies from the best price.

After selecting the assets and the amount to swap, to proceed with the trade, click “SWAP NOW”.

A user will then be asked to confirm their trade. Ensure that the details are correct, and then select “VERIFY”.

Finally, the user will need to approve the transaction within their wallet, and the trade will be processed on the blockchain.

How to place a limit order

Users can also choose to place a limit order on 1inch exchange by clicking on the top right option next to swap:

Staking tokens on 1inch

Moreover, by clicking on the “Earn” tab next to the limit Order, 1inch provides a platform that allows users to stake tokens and collect revenue from several liquidity pools like Aave, Compound, Uniswap, Balancer, Mooniswap, and so on.

Most decentralized applications (dApps) ask users to allow the app to interact with their wallet.

Because 1inch is a non-custodial application, it needs to continuously interact with various crypto wallets. 

1inch calls has integrated a feature called “infinity unlock,” which once unlocked, allows trading activity to occur unhinged. This saves in gas fees each time the application calls to verify an unlock. For power users who interact with DeFi protocols, this can ultimately save them a lot of money.

1inch Exchange fees

1inch exchange does not charge any withdrawal fees. The only fee is a network fee which is charged by the exchange the user is routing through (e.g. Uniswap, Kyber Network etc), the amount of which depends on the gas price at the time of transaction execution. Since this fee is charged by the other exchange, 1inch does not actually benefit from this fee in any way. However, users do have the option of saving gas fees by using 1inch’s Chi GasToken.

1INCH token: What is it?

On 26th December 2020, the independent Board of the 1inch Foundation released the 1INCH token.

Free tokens are being distributed to the community to celebrate the launch of 1INCH token. Wallets that have interacted with 1inch until 12:00a.m. on 24th December 2020 (UTC) will get 1INCH tokens provided that 1 of the 3 conditions have been met: (1) at least 1 trade before 15th September 2020; (2) at least 4 trades in total; or (3) trades for a total of at least USD$20.

The token is both a governance and utility token. As a governance token, 1INCH will be used to govern its network protocols and thus allowing it to be governed under the Decentralised Autonomous Organisation (DAO) model.

To catch up with the farming phase, 1inch has also started a new liquidity mining program with 6 liquidity pools (1INCH-ETH, 1INCH-DAI, 1INCH-WBTC, 1INCH-USDC, 1INCH-USDT and 1INCH-YFI). This is to bootstrap the 1inch Liquidity Protocol by using the 1INCH token as a utility connector token. To incentivise people to participate, 1INCH tokens will be distributed to users that provide liquidity to these pools. Furthermore, during the first 2 weeks of this program (i.e. until 9th January 2021) an additional 0.5% of 1INCH’s total supply will be distributed to liquidity providers.

1INCH tokenomics

The current total supply is 1.5 billion 1INCH tokens.

On 26th December 2020 (i.e. launch day), 6% of the total supply will be issued. Other tokens will continue to be released over time as follows:

• 30% has been allocated to community incentives which will be unlocked and distributed over 4 years.
• 14.5% will go towards protocol growth and a development fund, also to be unlocked over a 4-year period.

Is 1inch Exchange safe?

1inch Exchange is a non-custodial DEX aggregator. This means your cryptocurrencies are not held by the Exchange at any time, unlike some centralised exchanges where your cryptocurrencies are stored in their wallets for trading. It is also worth noting that 1inch Exchange so far has a spotless record of not suffering any hacks or vulnerabilities so far.

Chi GasToken

Chi Gastoken, known as “Chi” was launched by 1inch in June 2020.

The innovative project placed first at DeFi’s “Hack Money” event in May 2020 and was made available to users thereafter.

Gas is similar to fees banks charge on money transfers. Unfortunately, it’s nearly impossible to predict the exact size of the gas fee due to market volatility. You can monitor the Ethereum network’s gas fee on a daily basis on Eth Gas Station.

What is the Chi GasToken? Does it really help save transaction fees?

The Chi GasToken is an ERC20 token meant to be used on 1inch exchange to pay transaction costs. Chi is pegged to the Ethereum network’s gas price. When the gas price is low, the Chi price is also low, and the vice-versa.

The idea is similar to the GasToken token concept but with some improvements: Buying (minting) Chi saves you 1% in comparison to minting GasToken (GST2). Whereas the selling (burning) of Chi saves you 10%, compared with GST2.

Mooniswap: What is it?

Automated market makers (AMM) are smart contracts that create a liquidity pool of ERC20 tokens, which are automatically traded by an algorithm rather than an order book. This effectively replaces a traditional limit order-book with a system where assets can be automatically swapped against the pool’s latest price.

Unfortunately, traders conducting front-running can steal from liquidity providers by trading on the price swings making this problem undeniably important.

In August 2020, the 1inch team released their novel automated market maker (AMM), Mooniswap. This new AMM can keep most of the slippage revenue in the pool by maintaining virtual balances for different swap directions. When a swap happens, a market maker does not automatically apply the invariant algorithm and displays the new prices for upcoming trades. The AMM improves exchange rates for arbitrage traders slowly, over approximately a 5-minute time period. As a result, arbitragers can collect only a portion of slippage, while the rest remain in the pool shared among liquidity providers. By such a delay in price updates, the market maker creates a highly competitive environment for arbitrageurs forcing them to perform trades at less profitable prices, which in turn add value to the liquidity providers.

The team has done multiple simulations of Mooniswap performance based on real-world data and compared the results with Uniswap V2. Below, you can find the charts that display trading volume, cumulative price slippage, the income of Uniswap V2 liquidity providers, along with the prediction of Mooniswap liquidity providers income.

On average Mooniswap is expected to generate 50% to 200% more income for liquidity providers than Uniswap V2 due to redirection of price slippage profits.

Conclusion: Pros and cons of 1inch Exchange

Here are some pros and cons of 1inch exchange based on our user experiences:

Pros

• The Exchange’s interface is very clear and intuitive with a good track record without any hacks so far.
• 1inch exchange does not charge any withdrawal fees, except for the network fee.
• Liquidity is a significant issue on decentralized exchanges. Not only is liquidity low on DEXes in general, but this liquidity is further fragmented across several different DEXes, worsening the problem making large-volume trades susceptible to significant slippage. 1inch solves this by splitting orders across exchanges yet keeping the trade within one transaction.
• Chi GasTokens help users, especially those who trade on a daily basis and arbitrageurs, to reduce gas costs for their transactions.
• Their novel automated market maker (AMM) used in Mooniswap capitalizes on user slippages and protects traders from front-running attacks.

Cons

• Even with helpful tutorials by the 1inch team, there is still a steep learning curve to make use of the many features the Exchange has to offer. New crypto investors are restricted from trading in this platform since it does not accept any deposit method other than cryptos.
• The infinity unlock feature might act as a potential point of attack for hackers. Even though unlocking transactions one at a time is slightly more expensive, it is more secure as users aren’t always linked to the protocol should it be compromised.
• We have seen the dominance of Uniswap grow tremendously over a small time period. If a single DEX ends up becoming far more significant than its competitors, the role of DEX aggregators could diminish.

In conclusion, we find that the benefits of the 1inch Exchange far outweigh the drawbacks as it attempts to solve some of the direst issues plaguing the growth of the DeFi ecosystem. The platform is definitely geared towards traders with a bit more experience, particularly those who trade the major cryptocurrencies and across multiple DEXs. Over time as users overcome the initial learning curve and user experience improves in this industry, 1inch might emerge as one of the most important trading platforms for the rapidly expanding DEX ecosystem.

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