1inch had positive growth across many key metrics in Q2, including daily average total volume (+12%), daily average transactions (+59%), daily average active addresses (+27%), and total 1INCH staked (+2%).
Much of this growth was driven by 1inch’s Base deployment, which saw a surge in trading activity (+280%), transactions (+677%), and active addresses (+410%).
1inch retained market share (56%) amongst all DEX aggregators on Ethereum in Q2. No other aggregator eclipsed a market share of 15%.
In June, 1inch, in collaboration with Blockaid, launched the 1inch Shield API. The API offers enhanced security benefits through various features such as AML screening, transaction simulation, and instant blacklisting.
1inch expanded outside of the EVM ecosystem after the quarter ended. 1inch, Notcoin, and Sign partnered to launch Triangle, an accelerator program for the Telegram and TON ecosystem.
Primer
The 1inch Network (1INCH) is a decentralized finance (DeFi) DEX aggregator and intent-order protocol operating on Ethereum, Arbitrum, Optimism, Polygon, zkSync Era, Avalanche, BNB Chain, Gnosis, Fantom, Klaytn, and Aurora. Launched in 2019, 1inch Aggregation Protocol (AP) allows users to route trades across various markets and realize the best available rate compared to any individual decentralized exchange (DEX). In late 2020, the 1inch Liquidity Protocol introduced a native automated market maker (AMM) to the network, which enabled users to provide liquidity and earn passive liquidity mining rewards.
The network’s third product, the 1inch Limit Order Protocol (LOP), was introduced in June 2021 to support conditional limit and stop-loss orders with no fees. In late December 2022, the 1inch Swap Engine enabled Fusion mode, which is partially based on the existing tech, including the 1inch Limit Order Protocol and the 1inch Aggregation Protocol. This new feature empowers DeFi users to place orders with a specified price and time range without paying network fees. All three protocols, and Fusion mode, are governed by the 1inch DAO using the network’s native 1INCH token.
Note: This report includes data from Ethereum, BNB Chain, Polygon, Optimism, Arbitrum, Avalanche, Gnosis Chain, Fantom, and Base. Data from zkSync, Klaytn, and Aurora are currently not included. We are working to improve access to this data.
As the leading DEX aggregator for most EVM-based Layer-1 chains and Layer-2 rollups, 1inch’s trading volumes are mainly influenced by wider market activity. According to Messari’s State of Smart Contract Platforms Q2 2024 report, average daily DEX volumes saw a slight increase in Q2, up 1% QoQ to $5.3 billion. This increase benefited 1inch, as 1inch’s daily average volume also increased, up 12% QoQ from $400.6 million to $449.8 million.
Broken down by its three protocols, the Aggregation Protocol was responsible for all of 1inch’s volume growth. For the entire quarter, the Aggregation Protocol accounted for $33.96 billion in volume, up 17% from Q1’24. Additionally, this was 74% of 1inch’s total volume for the quarter, up 5% QoQ. 1inch’s two other protocols, the Limit Order Protocol (down 1% QoQ to $3.93 billion) and Fusion Protocol (down 5% QoQ to $7.87 billion), both experienced declines in total trading volume.
The majority of 1inch Aggregation Protocol volume occurs on Ethereum. Total volume on Ethereum was up 17% QoQ from $19.73 billion to $23.06 billion. However, Ethereum’s share of Aggregation Protocol volume was flat in Q2, remaining at 68%. The biggest percentage gainer in Q2 was Base, with total quarterly volume increasing 280% from $0.70 billion to $2.68 billion. In Q2, Base emerged as a leading L2 ecosystem, benefiting from popular projects such as Degen Chain and various memecoins. This increase in trading activity greatly contributed to 1inch’s growth on Base. Base’s share of Aggregation Protocol volume for Q2 was 8%, up 226% QoQ from 3%.
The rest of 1inch’s Aggregation Protocol deployments produced mixed results. Arbitrum experienced positive growth, increasing 17% QoQ from $3.57 billion to $4.18 billion. Arbitrum had the second most quarterly volume of any 1inch Aggregation Protocol deployment, representing 12% of all volume on the Aggregation Protocol. The biggest QoQ percentage decreases occurred on Avalanche and BNB Chain, respectively. Volume on Avalanche was down 51% QoQ to $431.1 million while volume on BNB Chain was down 26% QoQ to $1.89 billion.
1inch’s Q2 growth was concentrated on blockchains where ETH is used to pay gas fees and as the base asset. One possible explanation for this is the increased volatility for ETH and other ETH-based trading pairs following the Ethereum ETF approval on May 23.
In Q2, the share of 1inch Aggregation Protocol volume executed through Uniswap V2 & V3 liquidity pools increased 26% QoQ to $14.15 billion or 42% of 1inch Aggregation Protocol volume (up 8% QoQ from 39%). However, growth in Uniswap V2 volumes (up 27% QoQ) outpaced growth in Uniswap V3 volumes (up 26% QoQ). This is perhaps due to the popularity of memecoins in Q2, which typically utilize Uniswap V2 liquidity pools due to their simplicity compared to Uniswap V3 pools. Other QoQ gainers were primarily Ethereum-based DEXs Curve (up 36% QoQ to $5.79 billion) and DODO (up 37% QoQ to $1.54 billion). In general, the winners continued to gain market share. The top five protocols executed 70% of 1inch’s Aggregation Protocol volume in Q2’24, up 7% QoQ from 65% in Q1’24.
Resolvers are a key part of 1inch’s Fusion Protocol, an intent-based DEX standard, as they execute the orders placed by users. Last quarter, Rizzolver surpassed 1inch Labs as the top resolver by volume. In Q2, 1inch Labs regained the top spot, increasing its total volume for the quarter by 13% QoQ from $1.55 billion to $1.75 billion. As for Rizzolver, its total volume fell 41% QoQ to $1.00 billion.
Aggregation Protocol Activity
Daily average transactions on 1inch’s Aggregation Protocol increased for the second straight quarter, ending the quarter at 177,100 daily average transactions (up 64% QoQ from 107,700). Broken down by chain, 1inch’s Base deployment was responsible for most of the growth in Q2. 1inch Aggregation Protocol transactions on Base grew 677% QoQ from 0.69 million to 5.34 million, making it the top blockchain by transactions for 1inch. Furthermore, it accounted for 32% of all transactions in Q2.
Transaction growth was further concentrated amongst 1inch deployments on L2s, with increases on Arbitrum (up 65% QoQ to 2.54 billion) and Optimism (up 64% QoQ to 679,200). Collectively, the three L2s represented 52% of all transactions on the Aggregation Protocol for Q2. This was nearly 4x higher than Ethereum’s share of 13%, showcasing the growing trend of L2 activity compared to Ethereum. For the most part, all major deployments of 1inch saw an increase in transactions in Q2, with the notable exception being BNB Chain (down 7% QoQ to 3.07 billion).
Active addresses on 1inch’s Aggregation Protocol have seen consistent growth alongside the return of broader market activity. Q2 marked the third straight quarter of growth as daily average active addresses increased 33% QoQ from 64,900 to 86,400. Similarly to transactions, lower-cost blockchains represent an outsized share of active addresses when compared to volume on 1inch.
Last quarter, BNB Chain was the leader in active addresses for the Aggregation Protocol. However, this quarter it was surpassed by Base. Daily average active addresses on BNB Chain were down 8% QoQ to 20,700 while Base was up 410% QoQ to 21,600. Base represented 25% of active addresses on the Aggregation Protocol in Q2. Furthermore, active address growth was not just constrained to Base. Ethereum, Arbitrum, Polygon, and Optimism all experienced double-digit percentage QoQ gains in daily average active addresses.
Market Share
1inch has historically been the top DEX aggregator on Ethereum. Q2’24 was no different as it accounted for 56.0% of all DEX volume on Ethereum routed through an aggregator. The only other aggregator with a market share greater than 10% in Q2 was CoWSwap (down 14% QoQ to 14.2%). Notably, aggregators KyberSwap (up 112% QoQ to 9.6%) and Odos (up 300% QoQ to 4.1%) did make significant gains in Q2. However, their gains in market share did not come at the expense of 1inch as its market share remained essentially flat QoQ. Combined, the top three aggregators (1inch, CoW Protocol, and KyberSwap) accounted for 79.8% of volumes.
Treasury and Staking
The 1inch DAO continues to be mindful of spending while still allocating to growth opportunities for all 1inch users and participants. In Q2, the DAO approved two separate payments for a total of $250,000:
[1IP-54] Recognized Delegates Program Renewal (April 8) - This proposal renewed the Recognised Delegates Program for an additional 12 months and funded it with 100,000 USDC.
[1IP-56] Launch a crowd and beta testing platform beta.1inch.io Grant Proposal (June 24) - This proposal funded the xcrwd.io team with 150,000 USDC to build a platform for Web3 bounties.
Outside of these disbursements, treasury allocations did not change, and the DAO continues to benefit from interest earned from the $1 million in sDAI and $1 million in aETHUSDC. By Q2 end, the treasury was valued at $15 million, down 6% QoQ from $16 million.
After rallying over the past two quarters, 1INCH’s circulating market cap corrected, decreasing 29% QoQ from $707.7 million to $500.7 million. Despite this correction, 1INCH is still up 67% from Q2’23.
As for staking, there was a slight bump in total 1INCH staked, increasing 2% QoQ to 203.9 million. Staking 1INCH gives Unicorn Power (UP), which can be used to vote in governance and delegate to resolvers. Staking and delegating to resolvers create an important value accrual pathway for the token: resolvers give 1INCH rewards to attract delegates so the resolvers can compete in completing Fusion transactions.
Qualitative Analysis
1inch Card
On April 8, 1inch launched its own Web3 debit card in partnership with Crypto Life and Mastercard. This debit card offers instant crypto-to-fiat conversion, thereby allowing cardholders to spend their crypto on both online and in-person purchases. Additionally, cardholders can withdraw cash through their 1inch card at Mastercard-supported ATMs. The 1inch card is available in the UK and EEA.
Fusion 2.0
1inch announced the release of 1inch Fusion 2.0 on May 9, which seeks to enable greater efficiency in swaps than the initial 1inch Fusion. Fusion 2.0 removes the settlement contract layer and replaces it with a lightweight settlement extension. As a result, users will be able to interact with resolvers directly and get better prices on token swaps (10-35% cheaper than 1inch Fusion 1.0). The announcement also states that the second version of 1inch Fusion has a lower expiration probability and promotes faster execution (up to 75% faster than 1inch Fusion 1.0). These benefits are a result of gas price volatility "between signing a transaction and its execution" potentially causing order expiration in the previous version. In this new version, "gas price is immediately taken into account and the price curve is adjusted based on market conditions."
1inch Shield API
In June, 1inch, in collaboration with Blockaid, launched the 1inch Shield API. The API offers enhanced security benefits through various features such as:
Transaction Simulation - Simulates all transactions prior to signing.
AML Compliance - 24/7 AML screening powered by TRM Labs that blocks addresses associated with illegal and/or suspicious activities.
Instant Blocklisting - Powered by Etherscan Pro, all suspicious addresses are automatically blacklisted.
Triangle Accelerator Program
After the quarter ended, it was announced that 1inch, Notcoin, and Sign partnered to launch Triangle, an accelerator program for the Telegram and TON ecosystem. Triangle aims to support builders and developers making consumer-focused apps on TON. Applications for the program closed on August 10, and selected projects will have a 6-week mentorship program. Furthermore, a curated group of venture capital firms and angel investors will provide access to capital.
Integrations, Partnerships, and Upgrades
The 1inch protocol has made significant strides in expanding its ecosystem and enhancing its utility through a series of strategic integrations, partnerships, and upgrades:
Magic Square Integration (April 4) - Magic Square integrated the 1inch Swap API and allocated $25,000 of SQR tokens to the 100 users with the highest swap volume through this API.
Origin Protocol Integration (April 5) - 1inch integrated with Origin Protocol to enable 1:1 stETH <> ETH redemptions.
Various Integrations in April (April) - Origami Finance, SphereOne, and Swaap integrated 1inch into their DeFi product offerings during the month of April.
Synthetix Integration (May 3) - 1inch integrated with Synthetix to enable swaps of non-USD synthetic assets issued by Synthetix on Ethereum.
TrustedVolumes Becomes a Resolver on Fusion (June 11) - TrustedVolumes launched its resolver for the 1inch Fusion protocol.
Ripio Partnership (June 14) - Ripio, a Latin American crypto company, integrated the 1inch Fusion API into its Web3 wallet.
Closing Summary
In Q2'24, 1inch achieved modest growth, with daily average volume increasing by 12%, driven mainly by the Aggregation Protocol. Ethereum and Layer-2 networks like Base and Arbitrum contributed significantly to this growth, while other chains saw declines. Despite a 29% drop in circulating market cap, staking activity increased slightly, and the 1inch DAO managed resources effectively, approving funding proposals to promote further growth.
Furthermore, 1inch expanded its ecosystem with the launch of the 1inch Card and Fusion 2.0, improving transaction efficiency and user experience. The introduction of the 1inch Shield API enhanced security and new integrations with platforms like Synthetix and Ripio broadened 1inch’s reach. Additionally, the Triangle Accelerator Program, announced after Q2, underscores 1inch’s commitment to innovation in the Web3 space.
Overall, 1inch’s strategic initiatives and technological advancements position it well for continued growth in the DeFi landscape.
This report was commissioned by 1inch Foundation. All content was produced independently by the author(s) and does not necessarily reflect the opinions of Messari, Inc. or the organization that requested the report. The commissioning organization may have input on the content of the report, but Messari maintains editorial control over the final report to retain data accuracy and objectivity. Author(s) may hold cryptocurrencies named in this report. This report is meant for informational purposes only. It is not meant to serve as investment advice. You should conduct your own research and consult an independent financial, tax, or legal advisor before making any investment decisions. Past performance of any asset is not indicative of future results. Please see our Terms of Service for more information.
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AJC is a Research Manager at Messari for the Enterprise team. His primary focuses are on Bitcoin and Consumer. Prior to joining Messari, AJC wrote an independent crypto blog.
AJC is a Research Manager at Messari for the Enterprise team. His primary focuses are on Bitcoin and Consumer. Prior to joining Messari, AJC wrote an independent crypto blog.
