[1IP-12] Improve Fusion Auction Resolver Competition

2.1 General Proposals
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Simple Summary

This proposal seeks to modify 1inch Fusion to allow all five of the top resolvers to fill orders during the entire duration of the Dutch Auction.

Abstract

If passed, this proposal will change the way that 1inch Fusion orders are filled by allowing all five resolvers to participate in every stage of the Dutch auction. This change will increase competition amongst resolvers and ensure that users are getting the best rates.

Motivation

Currently, the top five resolvers are given fill priority according to their Unicorn Power. For the first minute of the Dutch auction, only the resolver with the highest Unicorn Power can fill the order. Then, the resolver with the second most Unicorn Power joins them for the second minute, and so forth… This proposal will foster a more competitive auction by giving all resolvers equal priority.

This proposal aims to increase competition amongst resolvers and thus provide better rates for users when they make swaps via the 1inch Network.

Specification

This proposal serves as a signal from the 1inch Network DAO to 1inch Labs. Once passed, the 1inch Network DAO calls for 1inch Labs to modify the Fusion logic to allow all five resolvers to participate in every stage of the Dutch auction.

Above is the existing Fusion auction order structure.

Below is the modified Fusion auction order structure that this proposal calls for.

Rationale

Allowing for pure competition amongst the five resolvers, rather than giving preferential access based on staking power, will facilitate better swap rates and faster execution times.

This change will also make it more attractive for professional market makers to become resolvers, which may lead to a greater demand for 1INCH token as they accumulate the necessary Unicorn Power.

Considerations

1inch Fusion mode has already been audited and deployed. This proposal will have no negative security implications as it will only change the structure of the Dutch auction.

An increase in the number of resolvers participating in the Fusion auctions should reduce the likelihood of resolver collusion.

3 Likes
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Generally agree that getting users the best exchange rates is crucial to 1inch’s competitiveness. But two questions arise:

  1. Why does the auction time last for 5 minutes instead of shorter?
  2. Why are there 5 resolvers instead of 10 or other numbers?

What is the meaning of the design of this number?

1 Like
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Why does the auction time last for 5 minutes instead of shorter?

The 5-minute auction time gives resolvers the opportunity to arbitrage from off-chain liquidity sources. I expect that most auctions will resolve far earlier than that, but I don’t have data on that yet (there is only one active resolver at the time of writing this).

Why are there 5 resolvers instead of 10 or other numbers?

As I understand, this number is arbitrary and can be changed as the DAO sees fit. If the DAO wants to vote to expand the number of resolvers, then they have the power to do so.

The fact that top-priority resolvers need to stake 1INCH to get access to the auction before the public does adds a lot of utility to the 1INCH token imo.

4

Love this proposal. I think https://docs.cow.fi/overview/road-to-decentralization could help. Should come up with a scoring system like the highest surplus could win and execute the order or sth. Looking forward to have permissionless resolver.

1 Like
5

This alteration increases the competition amongst resolvers and makes it more appealing for resolver participation. We support this amendment.

2 Likes
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The temperature-check vote was a success. 6 votes in favor, 0 votes against.

1IP-12 Phase-4 Snapshot vote is now live!

7

nice

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Voting Update

This proposal passed successfully with 13,703,881 votes in favor and 0 votes against!

Implementation

1 Like
9

Implementation update

This proposal has been implemented – the top-5 Fusion mode resolvers now have equal priority for the entirety of the Dutch auction.

The documentation site is in the process of being updated to reflect this.