DeFi's Efficiency Push: 1inch's Aqua Protocol Gains Traction

DeFi liquidity protocols are shifting focus from attracting capital to deploying it efficiently. According to Sergej Kunz, co-founder of 1inch, 'it's all about efficiency.' The first phase of DeFi's liquidity race was about bringing in capital, but now the goal is to put that capital to work.

A July study by Dune for 1inch found that approximately $542 million in idle capital sat outside active price ranges across on-chain pools during the first half of 2023. This potential yield is substantial for liquidity providers.

Protocols like 1inch, Aave, and Uniswap are developing solutions to tackle this issue. 1inch launched Aqua, its shared-liquidity protocol, which allows a single wallet balance to support multiple positions rather than requiring separate pools. The model has seen traction with $137.6 million in trading volume since launch.

Aqua's early numbers show that it is gaining ground. Its live leaderboard showed 573 liquidity providers as of August 17, and its native token (1INCH) has gained nearly 14% over the past month.