Decentralized exchange 1inch launches governance token

Ethereum-based decentralized exchange aggregator 1inch launched its new 1INCH token on Christmas Day, which will be used for the decentralized autonomous organization’s governance.

According to a Dec. 25 announcement, 1inch’s independent board launched its governance and utility token, 1INCH. This development is a major step forward in the decentralized finance (DeFi) organization’s progress towards becoming a full-fledged DAO, or—as the announcement puts it—take “governance in the DeFi space to a new level.” The announcement reads:

“The 1INCH token will be used in all current and future protocols within 1inch Network, starting with the 1inch governance Aggregation Protocol and the 1inch Liquidity Protocol governance modules.”

The announcement claims that “most governance models are not designed to adopt protocol changes quickly to respond to the rapidly evolving market.” 

DEX aggregation, which basically means sourcing liquidity from many decentralized exchanges in order to get the best swap rate, is becoming a crowded field. Despite that, 1inch raised $12 million in a funding round led by Pantera Capital this month.

In order to remedy this issue, 1inch developed an instant governance system that allows the community to vote for specific protocol settings through the DAO in a faster way. 

1INCH token holders will be able to vote on the fees that the DeFi protocol imposes on the trades that the decentralized exchange’s (DEX) users make. Furthermore, the on-chain governance will also determine the governance reward, the referral reward, and the decay period.

Each 1INCH token holder can stake their tokens to vote and the weight of each user’s vote is proportionate to the number of tokens they have staked. The result is calculated using a weighted average of all votes and applied within 24 hours. Liquidity providers can also vote or delegate their votes to 1INCH holders.

DAO token-based governance systems are meant to decentralize the administrative power that determines how a protocol runs. Still, how well this objective is accomplished largely depends on how the governance tokens are distributed.

As Modern Consensus reported in late September, decentralized exchange Uniswap also launched a governance token, but some suggested that it just gave control over the protocol to Binance.