1inch introduces Fusion upgrade, detailing its trading mode and new Token economics

2022-12-30 15:59

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原文标题：《一文了解 1inch 新推出的 Fusion 交易模式和新代币经济学》

原文作者：蒋海波，PANews

On December 25, 1inch Network, an aggregative trading platform on the head chain, announced the launch of the Fusion upgrade, which allows users to place orders at a specified price and time range without paying network fees, which can improve the cost efficiency, security and user experience of transactions. Token economics has been updated.

The Fusion mode incorporates the price limit order and the aggregation protocol

The new trading model is called "Fusion," which means fusion in Chinese, The Fusion mode is also based on the fusion of the 1inch Limit Order Protocol (1inch Limit Order Protocol) and the 1inch Aggregation Protocol (1inch Aggregation protocol), two existing products of the 1inch trading engine.

The 1inch Trading engine combined with the Fusion model is a decentralized trading and matchmaking system that introduces centralized and decentralized liquidity through professional market makers. This seems to be similar to Hashflow.

In Fusion mode, there are three options, namely Fast, Fair and Auction. The transaction time gradually increases, and the corresponding exchange ratio may become better and better.

l If fast is selected, the user is willing to accept a less desirable transaction price in order to execute the transaction in the first few blocks.

l If the choice is fair, it means that the user is willing to wait a certain amount of time in exchange for a better transaction price. The initial price may be bad, but it may become favorable as the trade is executed.

l If auction is selected, it indicates that the user is willing to wait the longest maturity time (10 minutes) in order to obtain the best transaction price. This option is favorable for large transactions.

The biggest update to Fusion is the introduction of the Dutch auction model. Users' orders are filled by professional market makers (Resolvers) and Gas fees are paid by Resolvers, who profit from the arbitrage activities.

To become a Resolvers, enough 1INCH tokens must be pledged to the feebank contract. Resolvers are ranked according to the number and time of 1INCH tokens pledged, and those at the top of the list have first choice to execute the order. Later, 1inch DAO may charge Resolvers a fee.

Understood this way, the advantages of Fusion transactions include: no Gas fees, MEV protection, no price impact, no fees for failed transactions, and fast execution.

Resolvers can also enjoy: earn pledge incentives, earn Resolvers fees, participate in the 1inch Network Gas return plan, and obtain 1inch DAO governance voting rights.

Fusion mode versus Legacy mode

Transactions in 1inch are now switched to Fusion mode by default. As shown in the figure below, Fusion Fast, fair, and auction transactions do not require the user to pay Gas fees.

However, this does not mean that Resolvers will be obligated to pay for Gas. In the following figure, the conversion of 1 WETH to USDC under the Fusion and Legacy modes is taken as an example, respectively. The market value of the obtained tokens shown in the two modes is the same, both of which are 1198.24USDC. The Fusion mode on the left costs no Gas, while the Legacy mode costs $2.52. However, when the market price does not change, the value shown in the Legacy mode in the right figure is the value actually obtained. In the Fusion mode on the left, the actual value received is referred to Est.received below, which deducts Gas and other charges after completing the transaction.

As shown in the following figure, a quick conversion of USDC to ETH in Fusion mode is taken as an example. The smart contract directly converts USDC to 0.11261 ETH in Uniswap V2 and pays 0.10793 ETH to the user. The transaction Gas cost is 0.00359 ETH, and the arbitrage of 0.00109 ETH on the basis of the user is not beneficial to the user.

The Fusion model also has some limitations, such as not accepting transactions with small assets (less than $100), because the Gas fee is paid by the Resolvers, which can cause the Resolvers to bid much different from the actual price. In addition, Fusion does not support the trading of original tokens, ETH needs to be converted into WETH first.

Adjustment of Token economics

This update also tweaks the Token economics of 1inch Network. Under the new governance system, users can pledge their 1INCH tokens for anywhere from one month to two years to receive Unicorn Power.

Unicorn Power can be used to participate in network governance and receive rewards from Resolvers incentive programs. You can also entrust Unicorn Power to others. Fees collected from Resolvers can be divided among stakeholders according to their contribution to the network and Unicorn Power.

The 1inch Resolver incentive program has been started since December 24th. The Gas spent by the Resolvers to complete the user exchange in Fusion mode can be returned. The 1inch Foundation will allocate 10 million 1INCH Tokens for this. Each Resolver can receive up to 1 million 1INCH tokens back per month.

summary

To sum up, the 1inch Fusion transaction model does not exempt users from Gas fees, and may only be suitable for large auction transactions. At the moment, with Fusion Fast trading, Resolver simply arbitrages on top of helping the user trade on the chain, and the user trades for less assets than they would if they paid the Gas fee in Legacy mode. The Resolvers can also earn an inch rebate from the 1inch Resolvers incentive Plan in the process.