1inch Takes Aim at DeFi’s Idle Liquidity Problem With New Shared Layer

Aqua Rethinks How DeFi Liquidity Is Provided

1inch has publicly launched Aqua, a self-custodial shared liquidity layer that seeks to address one of decentralized finance's longest-standing inefficiencies: the need for liquidity providers to lock assets into individual pools.

After debuting for developers in November 2025, Aqua is now available to the public across 13 EVM-compatible blockchains, including Ethereum, Arbitrum, Base, BNB Chain, and Robinhood Chain.

Rather than requiring users to deposit tokens into liquidity pools, Aqua enables providers to keep assets in their own wallets while allowing the same balance to support multiple liquidity positions simultaneously. According to 1inch, the model is designed to improve capital efficiency without sacrificing self-custody.

Moving Beyond the Pool-Based Model

Traditional automated market makers (AMMs) require liquidity providers to split capital across multiple pools, trading pairs, or price ranges. That often leaves a significant portion of liquidity sitting idle while providers relinquish custody of their assets.

Aqua introduces a different architecture.

Instead of depositing tokens into pools, users authorize Aqua to access assets held in their wallets. The protocol acts as a registry, monitoring approved balances and executing swaps only when predefined conditions are met. Tokens remain in users' wallets until a trade is executed, at which point the assets, received tokens, and fees are exchanged within a single atomic transaction.

The same wallet balance can simultaneously back multiple liquidity positions, allowing providers to quote more liquidity without borrowing assets or duplicating capital across different pools.

For example, according to 1inch, a wallet holding $100,000 in assets could support three separate positions collectively quoting $300,000 in liquidity, while each swap remains limited to the assets actually available in the wallet at execution.

Capital Efficiency Has Become a Growing DeFi Challenge

The launch reflects broader efforts across DeFi to improve capital efficiency as decentralized exchanges compete for liquidity and institutional participation.

Citing research conducted by Dune Analytics on behalf of the company, 1inch said approximately 85% of concentrated liquidity across major decentralized exchanges remained underutilized during the first half of 2026. Of the $1.84 billion in liquidity tracked, roughly $1.6 billion was not actively facilitating trades, while an average of $542 million sat entirely out of range each week, contributing to an estimated $150 million in annual foregone trading fees.

According to 1inch, these inefficiencies represent a significant barrier to scaling decentralized finance and attracting more institutional capital on-chain.

"The liquidity provisioning space is broken, but you only see how broken once there's an alternative," said Sergej Kunz, co-founder of 1inch.

"DeFi doesn't just need more liquidity. It needs more useful liquidity, active wherever demand appears. We built Aqua so providers get that reach without giving up custody: your tokens stay in your wallet until the moment a swap fills."

Self-Custody and Security Remain Central to the Design

Unlike conventional liquidity pools, Aqua does not take custody of user assets.

Liquidity providers can create, modify, or close positions without lock-up periods, while their maximum exposure remains limited to the tokens actually held in their wallets. If sufficient assets are unavailable when a swap request arrives, the transaction simply does not execute.

The protocol also incorporates safeguards intended to reduce common DeFi risks, including protection against just-in-time (JIT) fee sniping by assigning each liquidity position to a single owner rather than a shared pool.

According to 1inch, Aqua has undergone eight independent security audits, including reviews by OpenZeppelin, Nethermind, Hashlock, MixBytes, Hexens, Bailsec, Theori, and Decurity.

Liquidity Incentives Aim to Accelerate Adoption

Alongside the public launch, 1inch introduced a liquidity incentive program designed to bootstrap activity on Aqua.

The initiative includes 10 million 1INCH tokens committed by the 1inch Foundation and an additional 500,000 USDC provided by the 1inch DAO. The rewards program, operated through Merkl and led by Degensoft Ltd., is intended to encourage liquidity provisioning and trading activity across supported markets.

Whether Aqua gains meaningful adoption remains to be seen, but its launch reflects a broader trend in DeFi infrastructure toward improving capital efficiency rather than simply expanding liquidity. As decentralized finance matures and seeks greater institutional participation, competition may increasingly shift from attracting more capital to making existing capital work more effectively.