There are several ways to put your tokens to work on the 1inch Network. These methods consist of:
As it sounds, liquidity providing is the act of sending a pair of tokens to a liquidity pool and locking them for any period of time. Rewards are distributed in the form of the underlying tokens (i.e. 1inch and WXT tokens). The APY for a liquidity pool varies based on the number of transactions going through the pool, in addition to the total amount of liquidity provided to it.
Please note: The displayed APY for all liquidity pools can be calculated with:
(current_liquidity/(current_liquidity - profit_last_24_hours))^365
Liquidity rewards can begin accruing immediately upon locking the tokens in the pool; however, know that impermanent loss could offset gains and may cause a negative rate of return.
As a provider, you’ll need an equal ratio (50/50) of each token to provide to the pool, in addition to any ETH or BNB needed for transaction gas fees. Liquidity pools operate indefinitely (as long as they have liquidity) and there are no time limits for deposit or withdrawal. Once the liquidity is provided, you will receive “LP Tokens” as a placeholder for your liquidity.
Liquidity Mining, more commonly referred to as “Yield Farming”, is the process of staking LP Tokens that were produced from providing liquidity. Token projects offer these collaborative programs as a means of increasing community involvement and further incentivize the provision of liquidity. For the token holders, this is another strategy to supercharge capital which is already allocated to liquidity pools and help offset any impermanent loss experienced from providing liquidity. Unlike a liquidity pool, the lifespan of a 1inch yield farm is finite and will typically expire on a specific date.
Rewards for yield farming are distributed in the form of additional LP tokens, which can then be withdrawn from the pool for the underlying token pair.
The APY for yield farming can vary widely, and is based on the following variables:
Amount of tokens (denominated in USD) left to be distributed
Total amount of LP tokens staked (denominated in USD)
Time remaining before the farm expires.
The displayed APY for all liquidity mining / farming programs can be calculated with:
(amount* to be distributed/amount* staked/8 days left) *365
* in USD terms
Farming rewards begin accruing immediately after staking the LP tokens. Also, any rewards and capital can be claimed and unstaked at any time after the farm has ended.
With governance staking, you can stake your 1inch tokens in exchange for both rewards (in the form of 1inch tokens) and the right to vote on various parameters of the 1inch Network. Any amount of 1inch tokens can be staked, and as a placeholder, you will see “st1inch” tokens in your wallet balance.
The APY for staking is highly variable, and is based on the total number of tokens staked, time, and other parameters which are dictated through community voting.
The displayed APY for governance staking can be calculated with:
(rewardRate * seconds per year) / total staking tokens * 100
The voting privileges allow a governance stakers to cast their vote on:
Swap fee %
Governance reward % (part of ‘rewardRate’)
Price impact fee %
Referral reward %
Ratio of referral reward to governance reward distribution
Referral rewards are another way to earn passive income while promoting the growth of the 1inch network. Once you connect your wallet, a unique link will be created that you can share with family, friends, Twitter followers, or anyone else who might be interested in swapping on 1inch. Each time they make a swap, a small % of their trading fee will accumulate (in the form of 1inch tokens) for you to claim.
The referral reward amount is voted upon by the community, and is distributed to referrers on a weekly basis. If a referee’s trade was routed through other protocols (Liquidity Sources), you may also receive a part of the spread surplus if available.
Anyone can get their own referral link by simply connecting a supported wallet to the 1inch interface.