1inch has launched its Aqua protocol for DeFi liquidity management, enhancing trading efficiency without the need for token pooling.
1inch has officially launched its Aqua protocol, designed to improve liquidity for decentralized finance (DeFi) users, following an eight-month beta testing period.
The Aqua protocol stands out as a non-custodial solution that enables liquidity providers to oversee multiple trading positions within a single wallet. This eliminates the need for users to deposit their tokens into a liquidity pool.
Operating across 13 different Ethereum Virtual Machine (EVM) networks—including Ethereum, Arbitrum, Base, BNB Chain, and Robinhood Chain—the protocol employs a registry-based approach. Liquidity providers need to connect their wallets and grant permission for specific token balances. Tokens are only deducted from the user's wallet when a trade meets predetermined criteria, ensuring that funds remain secure until needed.
1inch highlights Aqua as a significant improvement over conventional liquidity pool models, reducing exposure to only the tokens held in the wallet rather than the total assets in all open positions. For instance, a $100,000 balance can facilitate three positions with a combined liquidity of $300,000.
The protocol aims to rectify inefficiencies seen in existing models where custodial controls limit liquidity pool contributions. Recent analyses indicated that around 85% of concentrated liquidity on leading DEXs was underutilized, equating to $1.6 billion out of $1.84 billion tracked in the first half of the year. Moreover, approximately $542 million in liquidity per week has been identified as inactive across four protocols.
To incentivize participation, the 1inch Foundation has set aside 10 million 1INCH tokens for liquidity providers, supplemented by an additional 500,000 USDC from the DAO treasury. This initiative seeks to enhance active capital deployment and overall efficiency in the DeFi market.
