[RFC] Upgrade 1INCH to Collateral Tier

  • Title: Upgrade 1INCH to Collateral Tier
  • Author(s): Jordan Reindl (RoundElephant)
  • Submission Date: 30.08.2022

Upgrade 1INCH to Collateral Tier

Simple Summary

This proposal seeks to upgrade the 1inch Network token (1INCH) to a Collateral Tier asset with a collateral factor of 0.30 and a borrow factor of 0.76 (with cross borrowing enabled).


1inch is a network of decentralized protocols designed to provide the fastest and most efficient operations in the DeFi space. The 1inch Network was launched in May 2019 with the release of its Aggregation Protocol v1. The 1inch Aggregation Protocol is both the oldest and most trusted DEX aggregator in the DeFi space.

In addition to the benefits discussed below, upgrading the asset tier of 1INCH will enable efficient arbitrage between the existing Aave 1INCH market.


1inch Overview

The 1inch Network was founded by Sergej Kunz and Anton Bukov over the course of the ETHGlobal New York hackathon in May 2019 with the release of its Aggregation Protocol V1. Since then, 1inch Network has developed additional DeFi tools:

  • 1inch Aggregation Protocol v4: The 1inch API v4, Pathfinder, is a cutting-edge discovery and routing algorithm, which offers asset exchanges at the best rates on the market. Pathfinder finds the most efficient paths for a token swap, able to split between different protocols and even different market depths within one protocol in the shortest possible time. The 1inch Aggregation protocol consistently has over 60% of the total aggregator volume.
    • Total trading volume: $206B
    • Total swaps: 7.13M
    • Total users: 1.48M
  • 1inch Liquidity Protocol: 1inch Liquidity protocol (previously called Mooniswap) is an AMM that aims to offer capital-efficient liquidity positions while protecting users from front-running.
  • 1inch Limit Order Protocol: 1inch limit order protocol is a set of smart contracts that allows users to place limit orders, and RFQ Orders, which later can be filled on-chain. Both types of orders are a data structure created off-chain and signed according to EIP-712. Key features of the protocol are extreme flexibility and high gas efficiency.
  • P2P Transactions: 1inch Peer-to-Peer allows two users to make an over-the-counter style trade of any ERC20 token.
  • 1inch Mobile Wallet: The 1inch Mobile Wallet is a fast and secure crypto wallet with a built-in DEX aggregator and an easy interface for secure storage and transactions.
  • Supported Networks: 1inch protocols are deployed on the following EVM networks: Ethereum, Binance Smart Chain, Polygon, Arbitrum, Optimism, Gnosis chain, Avalanche, Aurora, Klaytn, and Fantom.

1INCH Token

The mint function for 1INCH was recently burned by the 1inch Foundation – the future supply of 1INCH will not exceed the 1.5 billion amount described in the original distribution schedule .

In December of 2021, 1inch Labs completed a $175M funding round for 1inch Network Pro development. This was done via a direct token sale to accredited and institutional investors.

Specification & Implementation:

1. What is the link between the eIP author and the asset?

Jordan Reindl (RoundElephant) is a core contributor at 1inch Network and is focused on governance.

2. Provide a brief description of the asset

1inch Network is a decentralized set of protocols that aim to improve the efficiency of the DeFi space. 1INCH is the governance token of 1inch Network.

Here is an overview of the 1inch governance process.

3. How is the asset primarily used?

1INCH is currently used as a governance and utility tool for the 1inch Network. Since November 2021, all revenue collected from the 1inch Aggregation protocol is sent to the 1inch DAO Treasury . The 1inch DAO has full control over the treasury and the 1INCH token is used to govern the decisions made by the DAO.

Holders of the 1inch Network token may stake it in the 1inch DAO governance contract and participate in general proposals, Instant Governance, or benefit from the gas refund program.

4. Explain why the eIP would benefit Euler’s ecosystem?

  • 1INCH governs the largest aggregation protocol in the EVM space.
  • 1INCH is highly liquid in the spot market and has perpetual markets on Binance, FTX, and a decentralized perpetuals market on dYdX.
    • A $350k ETH to 1INCH swap has less than 1% price impact using the 1inch aggregator
  • 1INCH is already listed as collateral on a decentralized lending market, so risk will not be centralized in one platform.
  • 1INCH is listed on several perpetual markets (both centralized and decentralized)
  • 1INCH has a wide set of token holders ranging from early adopters, who were airdropped the token for free back in December 2020, to accredited and institutional investors, who bought the token in the subsequent funding rounds.
  • 1inch Aggregation protocol is used by Euler’s swap module – this asset upgrade will serve to further strengthen the relationship between the protocols and their communities.

5. Where does the asset trade?

6. What are the volumes and market capitalization?

  • Market Cap: $374M
  • 24h Volume $23M

7. What is the liquidity like in the Uniswap V3 liquidity pool versus ETH?

This proposal assumes that [RFC] Change the 1INCH price oracle to Chainlink will already be passed and that the Chainlink oracle will be used for 1INCH pricing.

8. What security/auditing reports have been done?

A comprehensive list of 1inch Network smart contract audits can be seen here.

Risk Assessment

As part of the July 2022 onboarding of 1INCH to Aave’s lending market, the financial modeling platform Gauntlet performed an in-depth risk assessment.Important to note that Gauntlet is a risk-adverse, third-party. They were not directly compensated by 1inch, so their assessment is impartial.

Though the price of 1INCH is similar to what it was when the Gauntlet risk assessment was performed, we propose slightly more conservative risk factors:

  • Collateral factor: 0.3
  • Borrow factor: 0.76


  • Yes – The 1INCH asset should be upgraded Collateral Tier with a collateral factor of 0.30 and a borrow factor of 0.76. Cross borrowing should be enabled.
  • No – the 1INCH asset should stay as an isolated asset.

Relevant Links

Hi all! I know the Euler team was busy making sure the protocol was ready for the Ethereum PoS transition. Seeing how the merge has went through successfully, I wanted to revisit this proposal and get some feedback form the community.

Since I initially wrote this proposal, the required 1INCH Chainlink oracle update has been made as part of @euler_mab’s eIP18 – 1INCH now has an excellent oracle rating.

Also wanted to point out that it has been about 6 weeks since the 1INCH market has opened on Aave and that market has grown to a supply of ~$10M.

I was hoping I could get some insight into the community’s thoughts on this proposal. I’ll be available to answer any specific questions, and will work with the 1inch DAO and Foundation address any issues. Thank you!

I personally think it wouldn’t create a strong use case for the protocol. When the DAO listed MATIC, LINK and UNI as collateral, it led to practically no non-EUL mining-related inflows. That’s because most of the trading activity in DeFi is related to the biggest, most liquid assets like USDC, USDT, DAI, WETH, WBTC or interest-bearing assets like stETH and wstETH (used for leveraged basis trading).

There is imo little to no use case in borrowing against non-interest bearing blue chips apart from exit liquidity. By listing 1inch as collateral, we’d increase the risk for the protocol (esp since 1inch is not the most liquid of assets) while not adding much activity for the DAO members. That’s my take.


Thanks for the response! Very fair points you bring up.

There is imo little to no use case in borrowing against non-interest bearing blue chips apart from exit liquidity.

The current utility for the 1INCH token is pretty much limited to the Gas Refund program and Voting.

There are talks, in the 1inch DAO, of revamping 1INCH tokenomics and utility. If those get incorporated, I believe they will drive actual demand for the non-speculative borrowing of 1INCH imo.

By listing 1inch as collateral, we’d increase the risk for the protocol (esp since 1inch is not the most liquid of assets) while not adding much activity for the DAO members.

Curious what a good rule-of-thumb for on-chain liquidity would be?

Sorry for the late response, I was traveling last week.