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1inch – a popular decentralized exchange aggregator – has now launched “Earn”, an investment product offering APY for liquidity providers.
The first pool features a USDC/USDT stablecoin pair. This is meant to provide reliable yield at a time of intense volatility in the crypto market, while preventing slippage.
An Extra-Efficient AMM
According to a press release shared with CryptoAdventure, Earn – previously “Trading Strategies” – is a hyper-efficient AMM pool. It’s design is similar to Uniswap V3’s range orders, which provides a single asset as liquidity within a specific price range.
An AMM is an “automated market maker” that allows defi ecosystems to facilitate trades using smart contracts, rather than central intermediaries. Liquidity providers pool their assets together and allow borrowers to secure funds at a market rate. LP’s then earn a fee from those that interact with the pool.
1inch Earn uses the same incentive structure, while also increasing decentralization and sustainability of the network. At time of launch, it will roughly guarantee 5-10% APY in earnings for LPs.
However, the service should be more efficient than traditional pools due to its use of range orders. With this, users can choose to target their liquidity within more common price ranges for a specific asset. This allows for more available liquidity, thereby generating more fees and revenue for providers. This is especially important in regards to stablecoins, which very rarely trade outside of a specific range around $1.00.
That said, Earn will also take advantage of the slight price fluctuations that USDC undergoes against USDT. In a pair of the given stablecoins, the strategy will sell USDC whenever it reaches a valuation of 1.002 USDT. Conversely, it will buy USDT if value decreases to 0.998 USDT. LP’s reap additional earnings from this process as well.
The first pool has been launched on Ethereum, with additional non-stablecoin pools to be added in future.
Growth From 1inch
The platform has grown especially popular for its PathFinder algorithm, which finds the most efficient path to swap tokens across multiple DEXs and market depths. 1inch token is currently trading for $1.62, with a market cap of $763.5 million.