1inch (1INCH) Protocol Analysis

As the leading DEX aggregator for most EVM-based Layer-1 chains and Layer-2 rollups, 1inch's trading volumes are largely correlated with overall market volume.

The total daily average volume across all protocols and deployments grew 42% quarter-over-quarter (QoQ) from $350.9 million in Q3 to $497.8 million in Q4. This volume was distributed across three protocols—Aggregation, Limit Order, and Fusion—operating on 10 chains: Ethereum, BNB Chain, Polygon, Base, Optimism, Arbitrum, Avalanche, Gnosis Chain, Fantom, and zkSync Era. Volumes are reported as they were announced by 1inch. For clarity, the protocols and chains are defined as follows:

* Aggregation Protocol: A DEX aggregator that compares prices from multiple DEXs to find the best rate for users’ token swaps

* Limit Order Protocol: Enables users to place and manage limit orders on multiple DEXs

* Fusion Mode: Combines the Aggregation and Limit Order protocols to offer users advanced trading options, such as optimal price routing and the ability to trade on multiple DEXs simultaneously

* Fusion+ Mode: Extends Fusion to enable cross-chain atomic swaps and is powered by a network of competing resolvers who fulfill 1inch Fusion and Fusion+ orders and compete via a Dutch auction mechanism

Of the three protocols, the Aggregation protocol is responsible for the majority of volume routed through 1inch. In Q4, daily average volume on the Aggregation protocol increased 37% QoQ from $269.7 million to $369.7 million. Of the 10 chains on which the Aggregation protocol operates, Ethereum still had the majority (66%) of the volume. Base was the second largest chain in Q4 (11%), flipping Arbitrum, whose market share declined from 14% to 10% as daily average volume fell by $1 million to $38 million. Together, these three chains accounted for 87% of the volume on the Aggregation protocol.

The highest volume day on the Aggregation protocol occurred on December 5, a highly volatile trading day with nearly $1 billion in liquidations in crypto markets as Bitcoin crossed $100,000 for the first time and reached an all-time high of more than $104,000 before crashing to nearly $90,000 that same day.

In Q4, the execution destination concentration on the Aggregation protocol remained largely unchanged. Last quarter, 57% of all volume was routed through Uniswap V2/V3 and Curve, as opposed to 56% in Q4. Fluid, which launched on Oct. 29, had the biggest gain in market share finishing the quarter with the sixth-highest daily average volume. Of DEX’s launched prior to Q4, Maverick’s market share increased the most (+420%) followed by Uniswap V2 (+33.65%). In contrast, Uniswap V3, Curve, PancakeSwap, and DEX’s collectively measured in the Other category all lost market share in the fourth quarter.

Daily average transactions on the Aggregation protocol increased by 21% from 114,700 to 138,900. By chain, Base had the most daily transactions at 47,300 (+24% from last quarter). BNB Smart Chain saw the biggest increase in daily average transactions from last quarter (+43% to 30,200) as it flipped Ethereum for the second-highest total. Daily average transactions on Ethereum increased 14% from 23,200 as gas fees on the network have continued to decrease since EIP-4844 was implemented in March, making it more affordable for smaller trade sizes.

Daily average active addresses on the Aggregation protocol increased 25% from 53,000 to 66,100. Of the 10 protocols and deployments that Messari tracks, BNB Smart Chain had the most daily active addresses at 18,670. With Aggregation protocol volumes relatively low on BNB Smart Chain (daily average of $15.2 million in Q4), most active addresses on BNB Smart Chain were likely smaller retail users. All deployments of the Aggregation protocol except Arbitrum saw an increase in active addresses in the fourth quarter.

In contrast to the Aggregation protocol, which saw its highest volume day in Q4 on December 5, the Limit Order protocol saw its highest volume day on December 30, with $447 million in volume. Of this total, 98% came from the Ethereum deployment, which is notable given that Ethereum had an average of 87% of all Limit Order protocol volume in the fourth quarter.

Daily average volume on the Limit Order protocol increased 52% from $87.7 million to $132.9 million. Of the eight protocols and deployments that Messari tracks, seven saw a QoQ increase in volume