Before we get started, this is not a recommendation or endorsement to buy any token mentioned.
Once upon a time, we all yearned to trade on DEXs (decentralized exchanges) for free! Just a year ago, gas prices were unimaginably painful on Ethereum Mainnet. As early DeFi adopters, we received some relief from the network congestion offloading to Polygon, Optimism, Arbitrum and alternative L1s like Avalanche. However, it’s a rare moment when we can choose to trade certain tokens on any L2 or L1 and so we find ourselves most reliant on better trading experiences powered by multichain DEX aggregators like 1inch.
Previously, we covered another favored DEX aggregator–CoWSwap. This meta DEX aggregator allows you to swap tokens using gasless orders, paid in the underlying token, that are settled peer-to-peer or into any on-chain liquidity source while providing MEV protection. CoWSwap was an instant hit since its launch in April 2021 because of the combined benefits to trade at the best rates, avoid paying gas fees in ETH, and avoiding becoming victims of MEV (maximal extractable value) with failed swaps. Ever since CoWSwap’s launch, the UX of the leading DEX aggregator by trade volume (1inch) felt subpar in comparison.
Thankfully, as of December 22, 2022, 1inch has deployed a new product called Fusion, which mirrors many of the benefits we love on CoWSwap. 1inch users can still swap tokens on various DEXes at the most favorable rates, but without paying network fees and with MEV protection. The Fusion upgrade should be well received by the 3.7M wallets executing over 24.9M trades.
In Fusion mode, for trades of $100 or more on Ethereum, Polygon, and BSC, a 1inch user can choose between three options below.
- Fast: Willing to accept a slightly less desirable rate in order to have their swap executed within the first few blocks.
- Fair: Agrees to a bit longer order execution time in exchange for a more desirable rate. The starting rate is slightly higher than the market price, and there is a chance that the rate might change to become more favorable.
- Auction: Agrees to wait for the maximum expiration time (10 min) in order to receive the most favorable rate for their trade. The starting rate is 1% better than the market, and this option is especially suitable for swapping large amounts of assets, taking advantage of arbitrage opportunities. [To learn more about how 1inch uses a Dutch auction model, while being based on market rates and taking price impact into account, check out this post.]
Fusion mode is not available for trading with a “native source token” such as ETH on Ethereum, MATIC on Polygon, or BNB on BSC. It has to be an ERC20 token or equivalent standard on another chain.
Another inherited benefit of Fusion by 1inch points back to why many of us adopted using CoWSwap–for its MEV protection. When making swaps on DEXs, users can potentially become victims of strategies for MEV. This maximal extractable value (MEV) refers to the maximum value that can be extracted from block production in excess of the standard block reward and gas fees by including, excluding, and changing the order of transactions in a block. In 2022 alone, DEX users lost the equivalent of over $800M to sandwich attacks, the most common form of MEV. In Fusion mode by 1inch,…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
