In the fourth quarter of last year, 1inch, the popular decentralized exchange (DEX) aggregator, witnessed an extraordinary surge in volumes and market dominance. According to a report by Messari, the executed volume on 1inch exceeded $30 billion, solidifying its commanding position with a 64% share of the Ethereum DEX aggregator market. This exponential increase in volume from external sources indicates a remarkable adoption of 1inch as a backend solution and highlights the expansion of aggregator platforms across the industry.
The Driving Forces Behind Transaction Growth
The substantial growth in transactions can be primarily attributed to the introduction of new products within the 1inch ecosystem. The Limit Order Protocol (LOP) and 1inch Fusion experienced increased activity, contributing to the overall transaction growth during the fourth quarter. However, the Aggregation Protocol witnessed a decline in transactions. This shift in transaction patterns highlights the evolving preferences of users and their inclination towards utilizing new products offered by 1inch.
Increasing Adoption of Uniswap Versions
1inch trades conducted on Uniswap V3 and V2 saw a significant increase, constituting 40% of trades and 8% of trade volume, respectively. The volume generated by 1inch on these two Uniswap versions rose from $5.6 billion in Q3 to $10 billion in Q4, according to Messari’s report. Notably, this growth was primarily driven by the increasing popularity of Curve and Dodo, which emerged as the second and sixth most common execution venues, respectively.
Continued Collaboration with PancakeSwap
PancakeSwap, the leading DEX on the Binance Smart Chain (BSC), continued to receive substantial trade volume from 1inch for the second consecutive quarter. With a trade volume exceeding $1 billion, PancakeSwap accounted for 7% of 1inch’s total volume in Q4. This ongoing collaboration showcases the synergies between 1inch and PancakeSwap, leveraging each other’s strengths to provide enhanced liquidity and trading opportunities to users.
Market Share Expansion and Competitors
1inch outperformed its counterparts in terms of volume growth, leading to an expansion of its market share from 59% in Q3 to an impressive 63% in Q4. The only significant competitor to gain market share during the quarter was CoW Swap, which held 11% of the aggregator volume on Ethereum. Other competitors such as ParaSwap and 0x held 11% and 10% of the aggregator volume, respectively, in Q4.
The 1inch DAO demonstrated effective treasury management throughout Q4. The DAO diversified its stablecoin holdings by swapping a million USDC for DAI, aiming to optimize its capital allocation. These funds were then deployed to earn interest as sDAI, representing the first reallocation since the Q2 deposit of 1 million USDC in Aave for interest.
On the expenditure front, the DAO utilized slightly over $1 million in three distinct transactions. Notably, a significant portion of these funds, amounting to $890,000 USDC, was allocated to support services for users within the 1inch Network. This investment highlights the commitment of the 1inch DAO to prioritize user experience and ensure a seamless trading environment.
With its impressive performance in the fourth quarter of last year, 1inch has established its dominance in the DEX aggregator market. The sustained growth in volume, expanding market share, and strategic treasury management strategies all contribute to the continued success of 1inch. As the cryptocurrency market evolves and attracts more participants, 1inch is well-positioned to leverage its strengths and further solidify its position as a leading DEX aggregator.