Our latest partner, 1inch, is a DEX aggregator. Their platform combines offers from decentralized exchanges so that users get the best price when they buy or sell crypto. Now it’s also possible for Pillar users!
Who is 1inch?
1inch is a decentralized exchange aggregator — not exchange. This is an important distinction, Sergej, 1inch’s Chief Executive Officer insists.
1inch’s goal is to provide users with the best prices in the market when they want to buy or sell cryptocurrency. It does this by splitting trade orders among multiple decentralized exchanges and token swap services, into one single transaction.
Currently, 1inch aggregates its prices by dipping into the liquidity pools of Bancor, Uniswap, Kyber, Compound, Fulcrum, Curve, Aave and Oasis — amongst others.
What’s a DEX then? ⛓
Using the same technology that allows cryptocurrency to exist without the need for banks, decentralized exchanges allow users to securely trade their tokens in real-time, without needing to go through a centralized entity to process the transaction on their behalf.
DEXes look and feel like centralized exchanges, except they’re completely automated, meaning they don’t rely on a centralized server to execute trade requests.
When you make an order on a decentralized exchange, it uses blockchain technology to automatically process your trade, taking tokens directly from your wallet, and sending them directly to the person you’ve traded with.
The same thing happens on their end, and boom, you’ve traded your tokens without needing to go through any middle man.
This puts traders in the driving seat, making the entire experience faster, safer and cheaper.
Since trades are processed through the blockchain and don’t rely on a centralized server to process them, fees for decentralized trades are much lower than on centralized exchanges.
Orders generally process much quicker too, reducing the chances of “slippage” — where a delay in the order causes a difference in the cost of the final trade.
Decentralized = User in control
The purpose of a DEX is to put users back in control of their money. When users trade on centralized exchanges, they have to trust the exchange to look after their assets.
As the decentralized finance ecosystem continues to grow, switching from centralized exchanges to DEXes seems like it should be a natural progression.
Like all decentralized platforms though, DEXes are still in their infancy. One of the major teething pains is that they lack the liquidity of their centralized counterparts.
Because centralized exchanges have a higher user base, they have more money moving through them, meaning they’re more “liquid”. The more liquidity an exchange has, the more trades a user can make without the price of their asset being affected.
Since they’re more liquid, centralized exchanges can offer their users better rates. The downside to using them is that you need to go through a middle man to complete the transaction. This means that chances of slippage increase (when the price of a trade increases because of a delay in processing time), as do the chances of having your crypto or personal details compromised (centralized platforms are inherently less secure, and therefore more prone to hacks and breaches).
Solving the liquidity problem 💱*
1inch is trying to solve the liquidity problem with decentralized exchanges, by combining the liquidity pools of a variety of different DEXes and token swap services and tapping into all of them. By doing this, 1inch can offer customers a competitive price.
In other words, 1inch users get access to the combined liquidity of all decentralized exchanges that are compatible with their aggregator.
“We combined all the small liquidity pools into one just by aggregating among them, by using our dynamic algorithm which can detect the best price in the market.” — Sergej
What’s in it for #Pillaristas? 📲
Pillaristas will now be able to see offers from 1inch directly within the Pillar app.
Our Offer’s Engine acts as a decentralized marketplace, pulling in the best offers and deals from our partners to our users, rather than them having to go exploring for them on the internet. This makes swapping tokens easy, simple and above all safe.
1inch is bringing the Offer’s Engine inception to Pillar by aggregating offers from multiple DEXes in a single transaction.
Basically, now our users are able to buy, swap and sell tokens through 1inch, without needing to leave the app at all.
What’s next?
1inch is working hard on integrating more and more exchanges into its aggregator. The more platforms it integrates, the better value traders get for their coins.
“I would love to work with Binance and Coinbase. They can also get benefits from us, swapping USTC to DAI on our liquidity.”j
According to Sergej, there are several techniques and architect proposals that would allow 1inch to provide the liquidity from centralized exchanges to users who only want to go through decentralized exchanges or platforms.
Ultimately, 1inch’s goal is to provide the best price in the market to users of decentralized platforms — and now Pillar users will benefit from it.
“Keep swapping on 1inch, and keep swapping on Pillar — they have the best price on the DEX market, and even sometimes on the centralised exchanges as well!”