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The 1inch Network is designed to be an all-in-one decentralized finance (DeFi) service provider operating on Ethereum, Arbitrum, Optimism, Polygon, Avalanche, BNB Chain, Gnosis, and Fantom. Launched in 2019, 1inch’s 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 enables 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. All three protocols are governed by the 1inch DAO using the network’s native 1INCH token.
There have been many unprecedented events that occurred in Q2 2022 driving fear, uncertainty, and doubt (FUD) in the crypto markets. Crypto endured adversity brought on by mounting regulation exacerbated by the failure of centralized financial lending institutions (CeFi), the implosion of Three Arrows Capital, and the collapse of UST.
Contrary to the overall market downturn, 1inch’s growth in trading volume signals a strong demand from users to reposition their portfolios to weather the market. Ethereum continued to facilitate the majority of the activity on 1inch, whereas tokens denominated in stablecoins USDC and USDT along with stETH were key drivers of volume quarter-over-quarter.
This report includes data from Ethereum, BNB chain, Polygon, and Optimism which contribute the majority of activity on 1inch. Data from Avalanche, Fantom, Arbitrum, and Gnosis are currently not included. Additionally, the Liquidity Protocol has been omitted due to a lack of high-quality data from publicly available sources. We will be working in the coming months to improve access to this data.
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As Q2 2022 wrapped up, the 1inch Network amassed $47 billion in total network volume, up 8% from $44 billion in Q1. 1inch managed to exceed $40 billion in total volume each quarter since Q4 2021, despite the negative shift in sentiment since the end of the year. Total volume was mostly driven by activity on Ethereum, followed by BNB chain and Polygon. Ethereum had over $42 billion in total network volume, making up a staggering 89% of total volume for the Aggregation and Limit Order Protocols. The spike in volume corresponds with the volatility in the market from the UST and stETH depeg events. Whereas BNB chain and Polygon represented a meager 6% and 5%, respectively.
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In Q2, the 1inch Network processed 4.2 million transactions across its four largest chains. This value is relatively consistent compared to previous quarters and represents less than a 1% decrease from Q1. Polygon processed 52% of total transactions, dominating total transaction activity. Additionally, Polygon transactions quarter-over-quarter grew 35% to 2.2 million transactions, from 1.6 million.
BNB chain and Ethereum processed the second and third most transactions on the network. The BNB chain transaction activity declined by 37% quarter-over-quarter, reflecting 1.1 million in transactions compared to 1.7 million in Q1. Total transactions on Ethereum fell by a modest 2% to 896,000, compared to 914,000 in Q1. There is something optimistic about Optimism, despite representing under 2% of total transactions. In Q2, total transactions on Optimism grew by an eye-opening 719%, or 56,000 from 7,000 transactions in the prior quarter.