At first, the DeFi world can seem quite complicated for newer users. Here are five commonly encountered issues in decentralized finance that can catch you off-guard:
1. A low balance of native tokens (ETH, BNB, MATIC, etc.):
This is a very common issue, and has only become more prevalent due to high gas fees on Ethereum. By design, the blockchains that 1inch Network supports require gas fees to be paid for any transaction. Generally speaking, it is good to have a little more than the transaction cost displayed in the swapping window.
For example, this transaction requires an estimated gas fee of 0.0213 ETH:
2. Using a low slippage tolerance when swapping a volatile token pair
When trading a token that has low liquidity or significant price movement, the rate might change between the time a transaction is sent and confirmed. If the rate changes beyond your allotted slippage tolerance, then the transaction may fail, causing a loss of gas fees.
Thankfully, 1inch Network provides users with the ability to increase their slippage tolerance up to 49%, and also offers a "partial fill" setting, to prevent this issue from happening.
3. Misunderstanding of the approval/unlock mechanism
A large number of users don’t understand why they have to pay a fee for an action that doesn’t move any funds, then pay another fee to swap. This one-time approval transaction grants a smart contract access to a specific token in your wallet, and is an action that is recorded on the blockchain. The fees go directly to the validators of the network, and cannot be refunded.
Approval Button (Step 1)
Swap Button (Step 2)
4. Sending tokens to the wrong wallet application
With multiple chains, things can get confusing quickly when transferring tokens. Many users send BNB Chain tokens to an 'Ethereum specific' wallet, or vice versa. In this case, the only solution is to import the private key from the Ethereum wallet into a BNB Chain compatible wallet.
***Note the 1inch iOS wallet is compatible with Ethereum, Binance Smart Chain, Polygon, and Optimism.
5. Lack of liquidity awareness
Users who are in a rush to swap (usually due to fast moving prices) are susceptible to overlooking price impact warnings and often lose money trading tokens with low liquidity. Before swapping, it is always good to check liquidity of the token pair on sites like DexTools.