1inch is a decentralized exchange protocol that allows traders to find the best price for their trades by aggregating liquidity from multiple decentralized exchanges (DEXs). It is one of the most popular DeFi protocols in the market, and many people wonder how it makes money. In this blog post, we will explore the various ways in which 1inch generates revenue to sustain its operations.
Trading Fees
Like most exchanges, 1inch charges a small fee for every trade that happens on its platform. The fees are charged in the form of tokens and range from 0.05% to 0.3% depending on the size of the trade. These fees are distributed to liquidity providers (LPs) who provide liquidity to the platform. This incentivizes LPs to contribute towards the liquidity pool, ensuring that users have access to the best prices for their trades.
Governance Token
1inch has its native governance token, 1INCH, that is used to vote on protocol upgrades and changes. The token is distributed to users who stake their assets on the 1inch platform. The more tokens you hold, the more voting power you have. The protocol earns revenue by taking a small percentage of the total token supply as a fee for every trade on the platform. This fee is then used to buy back and burn 1INCH tokens, reducing the total supply and increasing the value of the remaining tokens.
Liquidity Mining
1inch has a liquidity mining program that rewards LPs with its native 1INCH token for providing liquidity to the platform. This incentivizes LPs to contribute to the liquidity pool, increasing the overall liquidity and ensuring that users can trade their assets at the best prices. The more liquidity you provide, the more tokens you earn, and the higher your yield. The tokens earned through liquidity mining can be sold on exchanges to generate revenue for the platform.
Partnerships
1inch has partnered with various projects and platforms to create new opportunities for traders and generate revenue for the protocol. For instance, 1inch has partnered with Ren Protocol to provide cross-chain liquidity and with Opium Network to offer derivative trading products. These partnerships generate revenue for the protocol through various means, such as referral fees and revenue sharing agreements.
Token Swaps
1inch's primary function is to allow traders to find the best prices for their trades by aggregating liquidity from multiple DEXs. However, it also allows users to swap tokens seamlessly from the 1inch wallet. 1inch earns revenue by charging a small fee for this service. The fee is typically lower than the fees charged by other exchanges, making it an attractive option for traders.
1inch generates revenue through various means, including trading fees, governance tokens, liquidity mining, partnerships, and token swaps. These revenue streams ensure that the protocol can sustain its operations and continue to provide traders with access to the best prices for their trades. As the DeFi space continues to grow, it will be interesting to see how 1inch and other protocols innovate to generate even more revenue streams while remaining decentralized.