1inch Network has launched 1inch Earn, a new investment tool that aims to incentivize liquidity providers. In a press release, the protocol stated that the new feature would allow for more efficient capital use than AMM pools.
How does 1inch Earn Liquidity pool work?
1inch Earn is a set of liquidity pools that are optimized for stablecoins. Its operating model is very similar to Uniswap’s V3 range orders. According to 1inch Network’s press release, “Earnings are from swap trades in this pool.”
The swaps can be performed by individual users, algorithmic traders bots and arbitrage traders. 1inch Earn integrates with the 1inch Pathfinder algorithm to provide “deep liquidity at all points”.
According to the DeFi protocol, the new investment tool’s earnings would be in the “range of 5-10% APR” at its launch. The market’s performance will determine the profitability of the investment tool.
Since September 2021, the 1inch Network Treasury has used the concept of 1inch earn. It was previously known as Trading Strategies.
1inch Earn, a popular aggregator for decentralized protocols, believes that it will improve governance and decentralization across the network. The project stated in its PR that it would also be an attractive income tool for users.
According to 1inch Network’s PR, “1inch Earn will be a significant step towards improving sustainability of the entire network, stepping up decentralization and community-led governance. It will also work as a lucrative earning instrument for users.”
What makes it different?
1inch Earn makes more efficient use of capital in AMM pools, according to the team. “In a standard pool all liquidity is equally distributed along with the whole price range between zero to infinity. According to the PR, the majority of liquidity is not used.”
1inch Earn allows liquidity providers to leverage smaller price intervals in order to overcome this anomaly. It could range from 0.99 to 1.01. It states that traders will have deeper liquidity at mid-price for swaps and liquidity providers will earn higher fees in such a case.
This scenario is more suitable for stablecoin pairs whose “liquidity beyond their usual price range is rarely used.”
1inch Earn also uses small movements of stablecoin prices for liquidity providers to perform additional swaps and generate additional earnings.
Once a transaction is confirmed, the user can immediately start earning yield through both tokens that have been deposited to the pool. The 1inch Earn dashboard displays regularly updated stats,” the PR from 1inch Network explains.
1inch Network on a Growth Trackory
The DEX aggregator continues its quest to “conquer DeFi space” and announced the deployment of cross-chain aggregation protocols and limit-order protocols on Gnosis Chain, Avalanche and Avalanche on January 20.
1inch closed a $175 million funding round in December 2021. It said it would use the funds to improve products and services for institutional investors.
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