The upgrade aims to make swaps on 1inch yet more profitable and secure, setting new standards for cost-efficiency, security and user experience in the DeFi space.
1inch Fusion Upgrade
The 1inch Network is thrilled to announce the release of Fusion, a major upgrade centered around the 1inch Swap Engine – a unique combination of existing and new tech aiming to improve the profitability and security of swaps via 1inch.
The 1inch Swap Engine facilitates Fusion mode, which empowers DeFi users to place orders with a specified price and time range, paying no network fees. Meanwhile, the upgrade also contains major improvements to security, as well as updated staking contracts and tokenomics.
“This is a huge step forward for the entire DeFi space,” says Sergej Kunz, 1inch Network co-founder. “Fusion makes swaps on 1inch dramatically more cost efficient, as users won’t have to pay network fees, plus, an extra layer of security is added, protecting users from sandwich attacks. Our aim is to make users’ DeFi experience as smooth as never before. Thanks to the 1inch Swap Engine and Fusion mode, now, everyone gets incredible UX with a high degree of security.”
“For years, people have trusted their crypto to centralized actors, some of whom turned out to be greedy and malicious, which led to massive losses of users’ funds,” he adds. “By contrast, 1inch now empowers everyone to have top-level security for non-custodial swaps, which are executed in a totally permissionless and trustless way, with users remaining in full control of their assets.”
1inch Swap Engine
Since the outset, the 1inch’s goal has been to make DeFi a secure, user-friendly and profitable environment for everyone. Another achievement in that direction is the introduction of the 1inch Swap Engine.
Partially based on the existing tech, including the 1inch Limit Order Protocol and the 1inch Aggregation Protocol, the 1inch Swap Engine is a decentralized trading and matching system that connects DeFi users with practically limitless liquidity – both centralized and decentralized – through professional market makers. Basically, the 1inch Swap Engine offers users access to almost all available liquidity in the crypto market.
The 1inch Swap Engine revolutionizes the execution of swaps on decentralized exchanges, offering a completely new type of decentralized order matching approach that uses the Dutch auction model, while being based on market rates and taking price impact into account.
Orders are filled by resolvers – professional market makers who pay applicable gas fees, while profiting from arbitrage trading. To become resolvers, they will need to stake 1INCH tokens and deposit a sufficient balance of 1INCH into the “feebank” contract. At the initial stages, resolvers won’t pay any fees, but, later, the 1inch DAO might introduce a fee for resolvers. Top five resolvers – based on the amount and period of 1INCH staking – will have priority for filling orders.
The 1inch Swap Engine powers Fusion mode, which enables users to exchange tokens on various DEXes without paying any network fees, at the most favorable rates.
In Fusion mode, a user can choose between three options:
- Fast – With this option, the user is willing to accept a slightly less desirable rate in order to have their swap executed within the first few blocks.
- Fair – With the Fair option, the user agrees to a bit longer order execution time in exchange for a more desirable rate. The starting rate is slightly higher than the market price, and there is a chance that the rate might change during the transaction’s execution to become more favorable for the user.
- Auction – With the Auction option, the user agrees to wait for the maximum expiration time (10 min) in order to receive the most favorable rate for their trade. The starting rate is 1% better than the market, and this option is especially suitable for swapping large amounts of assets, taking advantage of arbitrage opportunities.
And, since the Swap Engine powering Fusion mode is built on top of 1inch’s Aggregation Protocol and Limit Order Protocol, sufficient liquidity for swaps is always guaranteed.
Initially, Fusion mode will be active on Ethereum, Polygon and BNB Chain. Gradually, it will be activated on all networks, on which 1inch is available.
Protection from MEV
When making swaps on decentralized exchanges, users can potentially become victims of strategies for maximum extractable value (MEV). That could lead to substantial losses of users’ funds. In 2022 alone, DEX users lost the equivalent of over $800 mln to sandwich attacks, the most common form of MEV.
In Fusion mode, professional traders who fill users’ orders use the most sophisticated and efficient ways of protecting users’ trades from MEV. So, users simply don’t have to worry about MEV.
With the Fusion release, swapping tokens directly on DEXes or on aggregators that offer no MEV protection, will no longer be a viable option.
Network Governance and Tokenomics
The 1inch Network’s governance and tokenomics have been significantly revamped, as well. Under the new governance system, users can stake their 1INCH tokens for a period ranging from one month to two years.
Users who stake 1INCH tokens receive Unicorn Power, which can be used for several purposes.
Unicorn Power could be used by 1INCH stakers to participate in network governance, it could be delegated to other users and to resolvers – in exchange for rewards from resolver incentive programs. As resolvers compete for filling the most lucrative orders, there will be prioritizing based on resolvers’ delegated Unicorn Power.
In addition, by staking their tokens, users contribute to the network’s overall stability, as malicious actors won’t be able to attack the 1inch DAO. The new system won’t allow staking tokens for periods shorter than one month, and Unicorn Power received for short-period staking won’t be sufficient to influence DAO decisions.
Meanwhile, the 1inch DAO could also create incentives for 1INCH stakers. By the DAO’s decision, fees collected from resolvers could be distributed between 1INCH stakers, based on their commitment to the network and Unicorn Power.
1inch Resolver Incentive Program
As of December 24, the 1inch Resolver Incentive Program will run, under which resolvers will be refunded for gas spent on filling users’ orders in Fusion mode. Under this program, the 1inch Foundation will distribute 10 mln 1INCH tokens as gas refund. Resolvers filling Fusion orders, as well as those using the 1inch Aggregation Protocol, will be eligible for refund. The maximum monthly size of refund is 1 mln 1INCH tokens per resolver.
As resolvers will fill orders without trying to minimize their gas costs, they will offer better swap rates to users. As a result, regular users will be the main beneficiaries of the program. Resolvers will collect their gas refunds for the final week of December 2022 and for January 2023 in early February 2023. The program will run until the entire 10 mln 1INCH fund is spent.
The existing Gas Refund Program will run through December 31, 2022.
The Fusion upgrade takes users’ DeFi experience to a completely new level, but the journey is far from over. The 1inch Network won’t stop until trading on DEXes becomes just as user-friendly and smooth as on centralized platforms, but much more secure, profitable and efficient!
Stay tuned for more 1inch Network’s news and updates!
**This article is a press release.**
What is 1inch:
1inch is a decentralized exchange (DEX) aggregator that provides the best rates by discovering the most efficient swapping routes across all leading DEXes. 1inch operates on multiple networks, including Ethereum, BNB Chain, Polygon and Optimistic Ethereum.