With the release of 1INCH token, 1inch Network will be managed by DAO.
Original title: “1INCH Token Official Release”
Written by: 1inch team
The independent board of directors of the 1inch Foundation released 1INCH, a governance and utility token. The 1inch Foundation intends to support the adoption of 1INCH tokens through a permissionless and decentralized 1inch network.
1INCH tokens will be used to govern all 1inch network protocols, which will elevate the management of the DeFi field to a new level.
Groundbreaking governance program
DeFi is a rapidly developing field, but most of the governance model designs cannot adapt to the rapid changes in the agreement to cope with the rapid development of the market. In order to solve this problem, 1inch Network has introduced a new function of “instant governance”. Under the decentralized autonomous organization (DAO) model, the community can vote on specific protocol settings in a transparent, friendly and efficient manner.
Instant governance is a new type of governance. Under this governance method, the community can participate, benefit, and vote on specific protocol settings, without any barriers to entry.
In instant governance, the vote of each user is very important.
From the 1inch aggregation protocol governance module to the 1inch liquidity protocol governance module, 1INCH tokens will be used for all current and future protocols in the 1inch Network.
Aggregate protocol governance
The Aggregation Protocol module allows 1inch token staker to vote on the Spread Surplus setting in the 1inch aggregation contract. When the execution price is slightly better than the quoted price, the transaction will generate a spread surplus.
It should be noted that the 1inch Pathfinder algorithm always provides users with the latest and best transaction prices. However, the transaction price sometimes fluctuates between the quotation time and the time the transaction is mined, resulting in a surplus in the spread. The spread surplus dedicated to 1inch stakers will be initially set to 0%, and all surplus will be attributed to the recommender. This can be changed by 1inch governance. The spread surplus can be collected by governance participants and recommenders with 1INCH tokens.
Liquidity Agreement Governance
Version 2 of the 1inch Liquidity Agreement has been launched. This is an upgrade and revision of our first version of AMM (Mooniswap).
The main feature of the 2nd edition of the 1inch Liquidity Agreement is the price impact fee. This is a fee that increases as the price drops to ensure that liquidity providers and 1INCH token staker get more benefits in terms of volatility.
Users with 1INCH tokens and liquidity providers in the 1inch liquidity protocol can directly vote on the main protocol parameters such as price influence fees, transaction fees, governance rewards, recommendation rewards, and decay period. All voting will be conducted with 1INCH tokens, which have no financial value. The community will determine the agreement fees and reward distribution.
There are two types of governance: pool governance and factory governance. Collective pool governance will include the configuration of parameters specific to each pool, such as transaction fees, price influence fees, and decay periods. Factory governance is responsible for the parameters shared by all pools, such as default transaction fees, default price influence fees, default decay period, recommendation rewards and governance rewards.
I transaction fee
The transaction fee is a fixed fee charged for each transaction in the agreement.
II Price Impact Fee
The price impact fee is a dynamic transaction fee charged for each transaction based on the price impact that occurs. In the first version of Mooniswap, the system added a decay period (time delay) when adjusting asset prices, which made arbitrage more competitive and added protection against “preemptive trading”. In the past four months, 1inch verified this view, in other words, it reduced the profits of arbitrageurs and increased the profits of liquidity providers. The price impact fee adds an extra dimension to our AMM design.
According to the simulation of the 1inch team, price impact fees can increase the income of liquidity providers several times (compared to existing solutions). This is possible even in a market where the trading volume is fairly fragmented.
III Decay period
The decay period is a unique feature that can protect traders from front-end attacks and prevent arbitrage traders from easily extracting value from the pool. A longer decay period will cause the spread in the pool to widen after the transaction. 1INCH staker can set a decay period from 1 minute to 5 minutes.
IV Governance Reward
The launch of the governance reward is to compensate the stakeholders who participate in the governance of the 1inch liquidity agreement. The source of the reward is transaction fees and price influence fees, and the DAO manages the amount of these two fees.
V referral reward
The reward is part of the transaction fee and price influence fee, and will be dedicated to recommenders (dApps and wallets that attract users and transaction volume). The referrer can then claim his own 1INCH token share from all pools in an efficient miner fee transaction.
Voting procedure
Each 1INCH token holder can use their own 1INCH token to vote on the above protocol parameters. Liquidity providers can directly use their LP tokens to participate in the governance of their capital pools. The voting weight of each user is proportional to the number of tokens they use to vote. The protocol uses the weighted average of all votes and is applied linearly within 24 hours. Liquidity providers without voting rights will automatically delegate their voting rights to 1INCH token stakeholders.
1Inch token distribution
All users who have used the 1inch wallet before 08:00 on December 24th, Beijing time, can obtain 1inch tokens as long as one of the following conditions is met: At least one transaction before September 15th, or a total of at least 4 transactions, Or the total transaction amount is at least $20.
1inch liquidity providers will also receive their 1INCH tokens in accordance with the first and second phases of the liquidity mining plan announced earlier this fall.
In addition, a new liquidity mining plan for 6 liquidity pools will be launched. These liquidity pools are designed to guide the 1inch liquidity protocol by using 1INCH tokens as utility connector tokens, not for speculative purposes.
1INCH tokens will be additionally allocated to users who provide liquidity for these 6 pools:
- 1INCH-ETH
- 1INCH-DAI
- 1INCH-WBTC
- 1INCH-USDC
- 1INCH-USDT
- 1INCH-YFI
In the first two weeks of the current incentive plan, another 0.5% of the total supply of 1INCH tokens will be allocated to liquidity providers. The subsequent liquidity mining plan will be decided by 1INCH holders and community members.
In order to ensure a fair start and give users enough time to prepare, the 1inch working capital mining plan will start at 8:00 on December 26, Beijing time.
1INCH circulation
The initial issuance on the issuance day will be 6% of the total issuance, plus 0.5% in the first two weeks of the liquid mining plan, and the current total supply is 1.5 billion 1INCH tokens.
Token unlock schedule
Community incentives
30% of the total token supply has been allocated to the community as incentives, and they will be unlocked and distributed in the next 4 years. The purpose is to strengthen the degree of decentralization of DAO, so that every community member has the opportunity to participate in the governance of the agreement, and affect the security of the agreement.
Agreement Growth and Development Fund
14.5% of the supply unlocked in 4 years will form an agreement growth and development fund. The fund will be used to issue grants, attract developers to establish and improve 1inch agreements, provide funds for audits, and compensate users for losses caused by any unexpected circumstances.
Looking to the future
This is the first iteration of 1inch governance. The more users stationed, the higher the efficiency and transparency of the governance process. We invite all community members to submit their valuable feedback and suggestions related to any governance issues in our new Github repository to make 1inch improvement suggestions (1IP).
