Add Market: 1INCH

New Markets
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Add Market: 1INCH

Simple Summary

This proposal seeks to add the 1inch Network token (1INCH) as a collateral asset to Compound.

Abstract

1inch is a network of decentralized protocols designed to provide the fastest and most efficient operations in the DeFi space. The 1inch Network was launched in May 2019 with the release of its Aggregation Protocol v1. The 1inch Aggregation Protocol is both the oldest and most trusted DEX aggregator in the DeFi space.

In addition to the benefits discussed below, adding a 1INCH market will enable efficient arbitrage between the existing Aave 1INCH market.

Motivation

1inch Overview

The 1inch Network was founded by Sergej Kunz and Anton Bukov over the course of the ETHGlobal New York hackathon in May 2019 with the release of its Aggregation Protocol V1. Since then, 1inch Network has developed additional DeFi tools:

  • 1inch Aggregation Protocol v4: The 1inch API v4, Pathfinder, is a cutting-edge discovery and routing algorithm, which offers asset exchanges at the best rates on the market. Pathfinder finds the most efficient paths for a token swap, able to split between different protocols and even different market depths within one protocol in the shortest possible time. The 1inch Aggregation protocol consistently has over 60% of the total aggregator volume.
    • Total trading volume: $206B
    • Total swaps: 7.13M
    • Total users: 1.48M
  • 1inch Liquidity Protocol: 1inch Liquidity protocol (previously called Mooniswap) is an AMM that aims to offer capital-efficient liquidity positions while protecting users from front-running.
  • 1inch Limit Order Protocol: 1inch limit order protocol is a set of smart contracts that allows users to place limit orders, and RFQ Orders, which later can be filled on-chain. Both types of orders are a data structure created off-chain and signed according to EIP-712. Key features of the protocol are extreme flexibility and high gas efficiency.
  • P2P Transactions: 1inch Peer-to-Peer allows two users to make an over-the-counter style trade of any ERC20 token.
  • 1inch Mobile Wallet: The 1inch Mobile Wallet is a fast and secure crypto wallet with a built-in DEX aggregator and an easy interface for secure storage and transactions.
  • Supported Networks: 1inch protocols are deployed on the following EVM networks: Ethereum, Binance Smart Chain, Polygon, Arbitrum, Optimism, Gnosis chain, Avalanche, Aurora, Klaytn, and Fantom.

1INCH Token

The mint function for 1INCH was recently burned by the 1inch Foundation – the future supply of 1INCH will not exceed the 1.5 billion amount described in the original distribution schedule .

In December of 2021, 1inch Labs completed a $175M funding round for 1inch Network Pro development. This was done via a direct token sale to accredited and institutional investors.

Specification & Implementation:

1. What is the link between the proposal author and the asset?

Jordan Reindl (RoundElephant) is a core contributor at 1inch Network and is focused on governance.

2. Provide a brief description of the asset

1inch Network is a decentralized set of protocols that aim to improve the efficiency of the DeFi space. 1INCH is the governance token of 1inch Network.

Here is an overview of the 1inch governance process.

3. How is the asset primarily used?

1INCH is currently used as a governance and utility tool for the 1inch Network. Since November 2021, all revenue collected from the 1inch Aggregation protocol is sent to the 1inch DAO Treasury. The 1inch DAO has full control over the treasury and the 1INCH token is used to govern the decisions made by the DAO.

Holders of the 1inch Network token may stake it in the 1inch DAO governance contract and participate in general proposals, Instant Governance, or benefit from the gas refund program.

4. Explain why this would benefit Compound’s ecosystem?

  • 1INCH governs the largest aggregation protocol in the EVM space.
  • 1INCH is highly liquid in the spot market and has perpetual markets on Binance, FTX, and a decentralized perpetuals market on dYdX.
    • A $350k ETH to 1INCH swap has less than 1% price impact using the 1inch aggregator
  • 1INCH is already listed as collateral on a decentralized lending market, so risk will not be centralized in one platform.
  • 1INCH is listed on several perpetual markets (both centralized and decentralized)
  • 1INCH has a wide set of token holders ranging from early adopters, who were airdropped the token for free back in December 2020, to accredited and institutional investors, who bought the token in the subsequent funding rounds.
  • This listing will serve to further strengthen the relationship between the protocols and their communities.

5. Where does the asset trade?

6. What are the volumes and market capitalization?

  • Market Cap: $352M
  • 24h Volume $46M

7. What are the 1INCH price Oracles?

8. What security/auditing reports have been done?

A comprehensive list of 1inch Network smart contract audits can be seen here.

Risk Assessment

As part of the July 2022 onboarding of 1INCH to Aave’s lending market, @pauljlei of the financial modeling platform Gauntlet performed an in-depth risk assessment.

Though the price of 1INCH is similar to what it was when the Gauntlet risk assessment was performed, we propose slightly more conservative risk factors:

  • Collateral Factor: 0.40
  • Reserve Factor: 0.25

Relevant Links

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We support the onboarding of 1INCH as a collateral asset to Compound. They are one of the main players in DeFi.

The 1INCH token has a strong market cap and sufficient amount of liquidity amongst various exchanges, enabling them to be a viable addition to Compound.

The 1INCH token has also been onboarded by Aave, who has a stringent onboarding framework and can act as a supplementary resource in making a decision. They were also very accommodating in their journey to be onboarded to Aave, and I am sure we can expect a similar attitude here.

Finally, we prefer using the conservative risk factors outlined in the proposal.

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