DeFi – How to Access Multiple Liquidity Sources

Cryptocurrency exchanges are the backbone of the crypto industry. Serving as the ultimate liquidity providers, they allow the whole ecosystem to thrive and serve as an entry point for millions of people to join the crypto movement.

Among exchanges are also some of the most iconic projects and brands in the crypto space. The recent success of the highly anticipated Coinbase initial public offering (IPO) is a perfect example, one which set a major milestone as the first crypto company to be listed on the Nasdaq stock market.

The 1inch Network

While the popularity of crypto exchanges continues to reach a more mainstream audience, there hasn’t been any other project as impactful as 1inch Network in recent times. Having launched only in December of last year, 1inch Network has quickly earned its place amongst the most recognizable and distinct brands in crypto.

As the leading decentralized exchange (DEX) aggregator, the 1inch Network has changed the industry with its unprecedented technology and quickly climbed the ranks to become one of the top 100 crypto projects.

But before looking into the immense potential of DEX aggregators, or how the 1inch Network acts as a major liquidity provider for the DeFi ecosystem, let’s dive into the history of crypto exchanges in order to better understand how innovative projects like the 1inch Network can help drive a whole industry forward.

The Evolution of Crypto Exchanges

Previously used to trade Magic the Gathering trading cards, MtGox was one the first-ever Bitcoin trading platforms. It was the world’s number one crypto exchange between 2013 and 2014, handling over 70% of all Bitcoin transactions until a hack saw over 850,000 Bitcoins stolen. This event resulted in several lawsuits, some of which are still ongoing today. It also tarnished the already frail reputation Bitcoin had at that time, signaling the start of a long bear market.

Although a major setback, centralized exchanges grew safer and more sophisticated as a result. Over the next few years, Binance would steal the show and dominate the crypto exchange industry. Just 5 months after its ICO in 2017, Binance became the leading exchange by volume and the pioneer launch of the Binance token (BNB) popularized the concept of exchanges having their own native utility token.

The dissemination of crypto derivatives followed suit, led by BitMEX perpetual swaps and leverage trading margins. Together with the launch of CME bitcoin futures, crypto derivative products helped usher in a new wave of institutional money.

The New Era of DEXs

We are currently witnessing a surge in the liquidity and adoption of DEXs, but in reality, the DeFi ecosystem was already booming before the beginning of the current bull market. The rapid growth of DeFi protocols and the emergence of DEXs became noticeable during the summer of 2020. Value locked in DeFi protocols shot up and DEXs like Uniswap registered tremendous trading volume, to the point of even surpassing Coinbase.

DEXs currently offer a wider variety of DeFi services under a better user interface. They are a far cry from the first generation of DEXs, where making a simple trade would be an excruciating process due to the lack of liquidity. The 1inch Network, in particular, is part of a new breed of DEXs aggregators that are driving DEX adoption and have the potential to make it more than a niche market.

1inch Network Liquidity Solutions Play a Major Role in DeFi

Before the 1inch Network, DEX liquidity was fragmented, and it was an incredibly complex process to find the best rate for a given trade. Acting as a sort of search engine for trading, the 1inch aggregation protocol is able to check prices across all DEXs and ensure users are always given the best rate for a swap. A single trade can also be split over different DEXs, further optimizing the process.

Although the aggregation protocol is its most defining feature, the 1inch distributed network also offers users multiple other DeFi services under the same intuitive and easy-to-use interface. Among these services are the liquidity mining programs, where users can stake 1INCH and other tokens in exchange for rewards. The 1inch Decentralized Autonomous Organization (DAO), a decentralized governance model allows token stakers to vote on key changes to the platform, and the 1inch labs, where the next generation of innovative open-source protocols is developed.

The 1inch Network relies on multiple liquidity sources to ensure the efficiency of its algorithm. The liquidity is pooled from both private liquidity providers as well as a wide range of industry-leading DEXs and DeFi projects, which include Aave, SushiSwap, UniSwap, Curve, Bancor, and yearn.finance, among others. Providing both a native source of liquidity, via its revolutionary Automated Market Maker (AMM), as well as external sources, the 1inch Network has quickly become the number 1 liquidity solution for DEXs and DeFi in general.

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