1IP-XX: 1inch DAO Financial Revitalization

2.1 General Proposals
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1IP-XX: 1inch DAO Financial Revitalization

Authors: Arana Digital, StableLab

Summary:

This proposal initiates a critical shift in the financial architecture of the 1inch DAO by redirecting two active revenue streams, 100% of the Fusion surplus fees and limit order taker fees, to the DAO Treasury. At present, these fees are captured by third-party infrastructure providers or routed to addresses outside DAO control, while the DAO itself operates without any recurring revenue.

By claiming these fees, the DAO can establish a sustainable, operating revenue stream that scales with usage. This realignment ensures that the value generated by 1inch products flows back to the governing body responsible for maintaining and advancing the protocol. It addresses a fundamental mismatch between the DAO’s responsibilities and its resources, ending the reliance on passive treasury management for any semblance of revenue and profligatory spending on grants that will deplete the treasury if not matched with top-line inflows.

Redirecting these revenues marks a decisive first step in transforming the DAO from a spending-only body into a self-sustaining financial entity, one capable of strategic planning, responsible capital allocation, and long-term ecosystem development.

Motivation:

The 1inch DAO has been considering several treasury disbursement-related proposals, some of which have been funded. These proposals include:

  • Event sponsorships and conference participation - $2,244,911

  • Hack victim reimbursements - $768,026

  • Development grants: Hardware Wallet - $2,000,000

  • Marketing campaigns: Bruce Lee Campaign - $1,980,107

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Source

Yet the DAO has zero incoming revenue from the 1inch protocol and products. This one-way flow, money out with no money in, is rapidly depleting the treasury. In Q2 2023, after the DAO stopped collecting swap surpluses, its main income source was removed. To those ends, it’s clear that the expenditure of the treasury far surpasses any inflows.

Treasury Address: 0x7951c7ef839e26F63DA87a42C9a87986507f1c07

As of July 2025, the DAO does not have any operating revenue; it solely earns fees through passive treasury management initiatives, instated back in 2023.

The interest earned from the above treasury management initiatives does not cover the burn rate. At the current rate of spending with no operating revenue, the DAO is estimated to have only about 2 years of runway left. A significantly larger portion of the treasury would need to be operationalized in order to cover existing costs through non-operating income. But the best method to increase the investable capital is to grow the DAO’s top-line revenue. A higher principal amount deposited into lending markets, for example, would create a stronger flywheel of sustainability for 1inch.

Equally important, the status quo creates misaligned incentives. While 1inch’s products (Aggregation, Fusion, Limit Order protocols) do generate fees and surplus value, none of that value accrues to the DAO that governs these products. Instead, third-party infrastructure providers and resolvers retain those earnings as “service fees,” or 1inch Labs internalizes fees from the stated products. This means 1INCH token holders and DAO voters see no direct benefit from the protocol’s success, while others profit from 1inch’s volume. Such a disconnect undermines governance: the DAO is expected to fund growth and initiatives, but it receives none of the financial upside. This misalignment is unhealthy and unsustainable as it incentivizes endless grant requests but offers no accountability for results.

By restoring revenue streams to the DAO, we realign incentives and instill financial discipline. The DAO will be able to plan long-term strategic initiatives, build sustainable grant programs, and operate as a true steward of a major DeFi protocol, rather than like a charity dispensing funds. In short, bringing protocol revenues back to the DAO is vital to revitalize 1inch DAO’s financial sustainability and preserve its ability to support the ecosystem for the long haul.

Revenue Source Details

Fusion Swap Surplus Fees:

Status Quo:

The 1inch Fusion Protocol allows users to submit on-chain “swap intents,” which are fulfilled by third-party resolvers through a competitive Dutch auction. Resolvers compete by offering the best price they can secure for the trade, factoring in their access to liquidity and execution strategies. If a resolver can execute the swap more favorably than the user’s limit, a “swap surplus” results. This is essentially positive slippage, an excess amount of tokens beyond what the user expected. For instance, if a user would be happy to trade 1 ETH for 1800 USDT, and a resolver finds a way to get 1850 USDT, there is a surplus of 50 USDT.

Under the current design formalized in [1IP-57], 100% of this surplus is retained by the resolver. The surplus is paid out directly on-chain via the Fusion Swap Settlement Contract (0x9cbe4b0d538d6e9b379bff5fe72c3d67a521de5) to the resolver’s wallet.

  • The DAO currently receives 0% of Fusion surplus revenue.

  • 1inch Ltd/Labs does not collect Fusion surplus either, unlike API surplus, which is explicitly retained by 1inch Ltd under the May 2025 API Terms of Service.

  • All value goes directly from the protocol to resolvers as externally captured value.

The original rationale for allowing resolvers to keep all surplus was to make Fusion competitive at launch, ensuring a healthy supply of resolvers to fulfill orders. This model was intended to bootstrap participation and offer users strong execution guarantees. Fusion is now mature, and this policy leaves a substantial recurring revenue stream uncaptured:

  • Significant onchain value is being generated through the protocol infrastructure but bypasses the DAO entirely.

  • A substantial portion of the total Fusion trading volume contains surplus opportunities, meaning millions of dollars in potential DAO revenue are currently externalized.

If we extrapolate even a modest surplus rate across Fusion’s transaction volume, the unrealized DAO revenue is considerable.

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Source: Messari

Proposed Change:

We propose redirecting 100% of Fusion surplus fees from resolvers to the 1inch DAO Treasury.

This would require modifying the Fusion Swap Settlement Contract so that when positive slippage is realized during order settlement, the surplus is automatically transferred to the DAO Treasury rather than to the resolver. The change should be applied consistently across all chains where Fusion is deployed, ensuring that surplus distribution is standardized protocol-wide. Redirecting surplus to the DAO would restore an important protocol-native revenue stream, aligning economic incentives with DAO governance and ensuring that value generated by Fusion accrues to the community rather than exclusively to private actors.

This adjustment would not impact the user experience. Users would still enjoy zero gas fees, MEV protection, and competitive Dutch auction execution, but this change would rebalance the flow of value so that the DAO can sustain long-term operations. Recognizing that resolvers currently depend on surplus as part of their revenue model, the DAO may consider complementing this change with targeted incentive programs, such as expanding 1INCH staking rewards or offering alternative participation incentives, to maintain resolver competitiveness. However, it’s worth observing resolver participation patterns before committing to a subsidization program. Over time, this redirection has the potential to generate millions of dollars in recurring annual revenue for the DAO, scaling naturally with Fusion adoption.

Limit Order Taker Fees:

Status Quo:

The 1inch Limit Order Protocol (LOP) enables users to place off-chain orders that are settled onchain when certain conditions are met. Traditionally, 1inch’s limit order system charged no protocol fees to makers or takers. Takers, resolvers who fill the orders, only paid gas. However, the protocol’s newer versions introduced an optional fee mechanism: when an order is filled, the taker can be charged a fee that is split into an “integrator fee” and a “protocol fee.”

  • Integrator fees compensate third-party frontends. They go to a frontend or interface that brought the user, like a partner wallet.

  • Protocol fees are meant to support the protocol’s development/governance and are sent to a 1inch Labs-controlled address.

In the current setup, any such taker fee, if enabled, does not flow to the DAO treasury. It is either not utilized or goes to an address outside the DAO’s control. For example, the FeeTaker contract extension calculates and transfers these fees upon settlement, but the recipient address is not the DAO’s wallet at present.

Proposed Change:

Direct 100% of limit order protocol taker fees to the 1inch DAO Treasury. We propose to enable and configure the protocol fee on the Limit Order Protocol such that whenever a limit order is filled, the fee collected from the taker is routed entirely to the DAO’s treasury address. In practice, this means setting the “protocol fee” address in the Limit Order contracts to the DAO Treasury address and ensuring the fee percentage is set appropriately. This does not introduce any fee for the maker who placed the order. It is a fee on the taker, the party executing the trade, which is common in exchange models. The fee can be relatively small per trade to maintain 1inch’s competitiveness, but given the significant volume the limit order protocol handles, even a basis-point-level fee can generate substantial revenue.

By capturing this value for the DAO, we align the protocol’s success with DAO income. Every filled order contributes to funding 1inch’s future.

We are curious to hear 1inch Labs’ suggestion regarding the take rate, along with what entities are charged the stated fees. This would help for a more coordinated effort around setting fees for LOP integrations. At present, it is unclear on which chains or deployments the Limit Order Protocol’s protocol fee mechanism is currently active. The FeeTaker contract supports collecting taker fees and splitting them between integrators and a protocol fee recipient. There is no publicly available record of where these fees are specifically enabled.

To ensure the DAO can effectively oversee the implement this proposal, we recommend coordinating closely with 1inch Labs to:

  • Identify all current Limit Order Protocol deployments across supported chains.

  • Determine where the taker fee is active and the current protocol fee recipient addresses.

  • Establish a clear path to redirect all LOP fee revenue to the DAO Treasury.

This coordination will provide the necessary transparency to scope the technical changes, activate the revenue stream where it is currently dormant, and ensure the DAO receives the intended benefits of this proposal.

Revenue Estimates

Redirecting these revenue streams to the treasury would immediately give the DAO significant income. To gauge the impact, we examined recent onchain data for Fusion surplus fees and LOP taker fees. In the last two months alone, these streams generated approximately $893,415.65 in revenue that could have gone to the DAO. Annualized, this equates to over $5.3M per year in potential revenue for the treasury, a sum that would far exceed the DAO’s current passive earnings (interest on stablecoins) and would substantially extend the DAO’s runway.

Below is a breakdown of the roughly $893k in revenue by blockchain, covering a recent two-month sample. This illustrates where the fees are coming from across 1inch’s multichain deployments:

Blockchain

Fusion Surplus + Taker Fee Revenue (Last 2 Months)

% of Total

Projected Annual Revenue

BNB Chain

~$732,000 USD

~81.9%

~$4.39 million USD

Ethereum (mainnet)

~$65,000 USD

~7.3%

~$0.39 million USD

Base

~$64,500 USD

~7.2%

~$0.39 million USD

Arbitrum

~$12,300 USD

~1.4%

~$0.07 million USD

Ethereum*

~$7,900 USD

~0.9%

~$0.05 million USD

Total

~$893,000 USD

100%

~$5.36 million USD

*Note: There appear to be two Ethereum entries, possibly representing different contract addresses or time periods.

The data above was aggregated from onchain transfers to known fee-collector addresses. Two Ethereum entries were observed, possibly due to multiple fee collector contracts or addresses on Ethereum. Combined, they sum to roughly $73k or ~8.2% from Ethereum in this period. The key insight is that a majority of the revenue currently comes from BNB Chain usage, with Ethereum and Base also contributing meaningful portions. This reflects heavy usage of 1inch via BNB Chain integrations. These proportions may shift over time as usage patterns change, but it’s clear that significant revenue is being generated across multiple chains, all of which could be accruing to the DAO.

Even a conservative projection shows on the order of $5M+ per year flowing into the treasury under this proposal. To put this in context, $5M/year is enough to cover a wide range of DAO expenses (grants, operations, incentives) or to simply grow the treasury for future large initiatives. It would make 1inch DAO one of the better-funded DAOs in DeFi on an ongoing basis. Importantly, this revenue scales with usage: if 1inch’s trading volumes grow, the surplus and taker fee revenue would grow in tandem, providing automatic budget growth for the DAO. The table above also signals where growth efforts could be focused, like attracting more volume on Ethereum could increase the DAO’s revenue share, as Ethereum volumes are large but currently much of it is via the main UI which doesn’t charge surplus fees, an opportunity if the DAO chooses to enable it in the future.

Analysis Methodology

The SQL query tracks ERC-20 transfers to specific addresses:

  • Primary Address: 0xb01F8f528702d411d24c9bB8Cc0e2ffF779ec013

  • Fusion Settlement: 0x9CbE4B0d538D6e9b379bFF5fE72c3d67A521De5

  • Limit Order FeeTaker: 0xc0dfdb9e7a392c3dbbe7c6fbe8fbc1789c9fe05e

The query filters for transfers within the last 2 months and calculates the USD value using SQL:

TRY_CAST(t.value AS DECIMAL) / POWER(10, p.decimals) * p.price

Implementation Details

Enabling these revenue redirects will require targeted smart contract modifications across the Fusion and Limit Order Protocol systems. The sections below outline the changes required for each stream.

Identify and update fee recipient addresses:

  • Fusion Swap Settlement Contract: 0x9cbe4b0d538d6e9b379bff5fe72c3d67a521de5 (handles intent-based Fusion order settlements and currently retains surplus).

  • Limit Order FeeTaker Contract: 0xc0dfdb9e7a392c3dbbe7c6fbe8fbc1789c9fe05e (the contract extension that collects taker fees on limit order fills).

All of these should be updated to route fees directly to 0x7951c7ef839e26F63DA87a42C9a87986507f1c07, the 1inch DAO Treasury.

1. Fusion Surplus Fees

Currently, any positive slippage (“surplus”) generated when resolvers fulfill a Fusion order is fully retained by the resolver. The surplus is paid out via the Fusion Swap Settlement Contract and bypasses the DAO entirely. To redirect this value to the DAO:

  • Update Surplus Distribution Logic: Modify the Fusion Swap Settlement Contract so that surplus from order settlement is transferred to the DAO Treasury instead of to the resolver’s address.

  • Apply Changes Across All Chains: Ensure that this update is applied consistently to all chains where Fusion is deployed so that surplus revenue is captured protocol-wide.

  • Maintain Resolver Participation: Given that resolvers currently depend on surplus as part of their profit model, the DAO may need to adjust participation incentives (like through 1INCH staking rewards or other reward programs) to keep the system competitive after the change. However, this is a consideration that should be accounted for after collecting empirical data on resolver participation after fees are redirected.

2. Limit Order Taker Fees

The Limit Order Protocol includes a FeeTaker contract extension that calculates and splits taker fees between integrators and the protocol. However, the current protocol fee recipient is not the DAO Treasury.

  • Identify and Update Protocol Fee Address:

  • Contract to update: 0xc0dfdb9e7a392c3dbbe7c6fbe8fbc1789c9fe05e

  • Action: Replace the existing protocol fee recipient with the DAO Treasury address.

  • Clarify and Address Fee Activation:

  • In many deployments, the protocol fee parameter may currently be set to 0%, meaning no revenue is being collected for the DAO. We request a review of active Limit Order Protocol deployments across supported chains to determine:

-  Where the protocol fee is currently active and its configured percentage.
   
-  Where it is disabled or set to zero.

  • Our immediate goal is to ensure that all existing active protocol fee flows are redirected to the DAO Treasury. Where the protocol fee is disabled, we recommend evaluating the activation of a low basis-point-level fee to maintain competitiveness while generating sustainable DAO revenue.

  • Close coordination with 1inch Labs will be essential to fully map the current state of LOP fee activation, implement the necessary contract updates, and ensure the fee is harmonized across all chains.

3. Treasury Management of Captured Funds

Reporting and Transparency: After implementation, we recommend establishing a monthly revenue report tracking collected surplus and fees by chain and mechanism. The DAO is happy to take on this responsibility.

4. Timeline

  • Week 1-2: Developer scoping, contract review, and backend feasibility analysis on the forums during the RFC phase

  • Week 3: Temperature Check

  • Week 4: Snapshot Vote

  • Week 5-6: Deploy new routing configurations

5. Implementation Budget

To support any potential contract upgrades and configurations, we recommend a one-time budget of $50,000, allotted to relevant development contributors from the 1inch Labs team. This amount is minimal relative to the $5M+ in projected annual revenue from this redirection.

Financial Prudence Going Forward

Redirecting Fusion swap surplus fees and limit order taker fees is a promising starting point of the DAO’s financial revitalization effort. Fusion mode’s benefits remain extremely strong, even with surplus going to DAO, and limit order takers are already often sophisticated arbitrageurs or resolvers who expect to pay a fee to fill orders. Thus, these changes realign 1inch in a way that benefits the entire community. This current proposal is the foundation, aimed at restoring and redirecting existing value flows. Long-term financial resilience will depend on broadening revenue capture, aligning incentives, and embedding DAO-aligned monetization into many layers of the 1inch stack. We are looking forward to having this conversation with interested 1inch stakeholders, ensuring that the model with the most robust terms is implemented and continually iterated with financial prudence in mind.

3 Likes
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This proposal solves a fundamental problem: while the DAO faces treasury depletion (2-year runway), third parties capture $5.3M+ annually in fees from protocols the DAO actually governs and funds. The solution is elegantly simple, redirect existing Fusion surplus and limit order taker fees to the DAO treasury through basic contract modifications, instantly transforming a “spending-only charity” into a self-sustaining entity with revenue that scales with protocol usage. What makes this exceptional is the combination of concrete data ($893k captured in just two months), minimal risk (just changing fee recipients, not creating new mechanisms), zero user impact, and sophisticated implementation planning across multiple chains. This represents the maturation from experimental DAO to professional financial stewardship.

3

1/n We fully share the ambition to ensure that 1inch DAO becomes financially sustainable and strategically independent. However, we believe the core challenge today lies not in revenue redirection alone, but in the absence of established operational capacity, governance processes, and mainly infrastructure ownership and its maintenance within the DAO.

At present, the DAO relies almost entirely on external infrastructure contributors including 1inch Labs and other technical teams to develop, operate and maintain critical protocol components. As such, the idea that “value generated by 1inch products flows back to the governing body responsible for maintaining and advancing the protocol” does not yet reflect the actual structure or readiness of the DAO. That governing body has never held operational responsibility for the underlying infrastructure and it remains unclear why, or how, it would take on that responsibility now.

Redirecting 100% of protocol revenues to the DAO Treasury without a clear operating plan, roadmap, or technical accountability could disrupt the infrastructure that sustains the entire ecosystem. These fees are not “profits,” but minimum operating cost offsets essential to keeping systems performant and secure. Without alternative mechanisms in place to fund the required engineering, monitoring, security and upkeep, such a shift could unintentionally fracture critical service delivery.

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2/n It’s also important to note that the DAO Treasury already receives revenue from 1INCH token staking mechanisms, which were designed to align incentives between protocol usage and governance participation. This existing stream supports DAO sustainability in a way that reflects actual governance value creation.

The proposal suggests this would allow the DAO to fund long-term strategic initiatives, but no such initiatives or execution plans have been articulated, nor has the DAO demonstrated such capability historically. Financial autonomy must be matched by operational responsibility to be sustainable. Creating a “self-sustaining financial entity” requires clarity on what is being sustained, who will be accountable, and how delivery will be managed in practice.

1inch Foundation has long advocated for aligning DAO responsibilities with its actual capabilities. In fact, we’ve been considering formalizing a separation whereby the user-facing dApp, a resource-intensive product, is managed independently by contributors able to guarantee performance, risk management, and innovation. In turn, the DAO would retain stewardship over its core assets: open-source protocols, governance mechanisms, and the 1INCH token, staking and delegation.

In fact, this proposal has accelerated our thinking. We intend to return with a structured approach that reflects these operational realities and offers a path forward that strengthens the DAO’s long-term viability without compromising the broader ecosystem’s health.

Nevertheless, we welcome the intent to bolster DAO sustainability. However, sustainability begins with capacity. We believe the most constructive next step is to clarify roles, gradually expand DAO capabilities, and explore revenue mechanisms that reflect actual cost structures and accountability, not just treasury accumulation.