[Fast Track] [1IP-103] Aqua Launch Framework: Aqua Interface Authorization, Protocol Fee Activation & LP Incentives_v2

Simple Summary

Degensoft requests authorization from 1inch DAO to deploy and launch Aqua and SwapVM and to operate the official Aqua interface for the 1inch Network; activates 100% of protocol fees, accruing to the DAO Treasury; and allocates up to 500,000 USDC to a three-month maker incentive program.

Abstract

Aqua and SwapVM are live at the protocol layer following the November 2025 developer release, and the DAO has approved the surrounding framework: the Aqua Revenue Stream Incubator [1IP-93] and the Aqua/SwapVM operational license confirmation under the Degensoft Aqua Source License 1.1 [1IP-102]. This proposal completes the launch by settling, in one governance action, the protocol's production deployment, who operates the user-facing layer, how protocol fees are handled, and how the DAO supports initial liquidity.

Motivation

The DAO has funded Aqua's audits, confirmed its operational license, and incubates strategies on it, but no protocol fees currently accrue to the Treasury, and no official interface exists to bring it users. Meanwhile, operating a global non-custodial interface requires 24/7 coverage, incident command, and continuous iteration, responsibilities suited to a single accountable operator, as established in the dApp transfer proposal [1IP-88].

Aqua shifts competition from TVL acquisition to strategy innovation, but shared liquidity still needs seeding. Incentivized makers deepen strategy liquidity, deeper liquidity attracts taker volume through 1inch aggregation, volume generates protocol fees for the Treasury, and the Treasury directs those resources to further growth — the same flywheel logic the DAO endorsed in the Incubator proposal, now applied at the liquidity layer.

Specification

1. Protocol Deployment & Interface Authorization

The 1inch DAO consents to and authorizes Degensoft Ltd (BVI) ("Degensoft") to deploy and launch the production Aqua and SwapVM protocol contracts, and to build, deploy, operate, and maintain the official Aqua interface of the 1inch Network, covering LP onboarding and position management, strategy discovery (including a listing track for Incubator strategies), virtual-balance management, analytics, and access to Aqua/SwapVM liquidity.

Protocol deployment: the DAO expressly consents to Degensoft deploying and launching the production Aqua and SwapVM contracts; deployments made under this consent are DAO-authorized deployments for the purposes of the Degensoft Aqua Source License 1.1 and DAO governance. The DAO gives this consent with knowledge of the DAO-funded audit program and of the inherent risks of smart-contract systems.

Risk allocation: this authorization allocates defined operational responsibilities to the operator, as set out below; it does not make Degensoft or any contributor a guarantor of protocol performance. The underlying protocols are source-available under the Degensoft Aqua Source License 1.1 and run as DAO-authorized deployments, and the interface is non-custodial: users retain full control over their keys and on-chain interactions. Protocol-level risks of DAO-authorized deployments are borne by participants, who acknowledge and assume such risks as set out in the Guidelines' risk disclosures (Sections 5.3.2 and 5.6.2), and nothing here limits the DAO's governance authority over the deployments.

The 1inch.com domain and the 1inch dApp belong to the 1inch Network. Under the network structure set out in the 1inch DAO Guidelines, operation and management of these assets rested with the 1inch Foundation, acting on behalf of the 1inch DAO; pursuant to the DAO's authorization in 1IP-88 and the transfer documentation executed by the Foundation, that role now rests with Degensoft. Degensoft holds and manages the domain and the dApp in this capacity, and operates the official Aqua interface of the 1inch Network under the same authorization. The interface will be hosted on the Network's domain (e.g. 1inch.com/aqua), and 1inch.network, the DAO's governance hub, will reference and link to it. Aqua operates under the 1inch brand as part of the broader 1inch ecosystem, and its users participate in the 1inch Network.

Degensoft's underlying right to build and operate Aqua front-ends already exists under the operational license confirmation [1IP-102]. This proposal designates the interface Degensoft operates as the official Aqua interface of the 1inch Network; it confirms status rather than granting new rights.

• The interface remains fully non-custodial; users retain control of keys and assets at all times.
• As operator, Degensoft is responsible for interface-level operations and risks, including terms of use, restricted-jurisdiction access controls, sanctions screening, user disclosures, and interface security.
• This authorization does not restrict third parties from building alternative Aqua interfaces under the existing license and ecosystem protections.

2. Protocol Fee Activation — Fees Accrue to the DAO Treasury

Acting within its authority over DAO-authorized deployments of Aqua and SwapVM, made available under the Degensoft Aqua Source License 1.1, the DAO activates protocol-level fees. In plain terms: every Aqua trade pays an LP fee, which goes to the maker whose liquidity filled it. The protocol fee is a slice of that existing fee, redirected to the DAO Treasury (converted to USDC on the way) — a quarter of it on low-fee pools, a sixth on high-fee pools. Worked example: a $10,000 trade in a 0.30% pool generates a $30 LP fee — $5 goes to the DAO, $25 stays with the maker; the same trade in a 0.05% pool generates $5 — $1.25 to the DAO, $3.75 to the maker.

Initial fee schedule — the protocol fee as a fraction of the LP fee:

Three edge rules, stated plainly: a strategy with a zero LP fee pays no protocol fee; tiny derived values round up to the smallest unit the system can record; and right at the dividing line the absolute take steps down slightly (a 0.13% pool pays ~0.0217% versus 0.030% for a 0.12% pool) — a known property of any tiered rule, accepted by design. Exact encodings for all presets are pinned in the fee schedule published by the core team prior to activation.

Boundaries: the protocol fee is independent of (i) the Degensoft Aqua Source License 1.1 and any license fees thereunder, and (ii) the revenue-share obligations of Incubator teams to the DAO, both of which remain unchanged. Degensoft Ltd, as Licensor under the Degensoft Aqua Source License 1.1, acknowledges that protocol fee configuration on DAO-authorized deployments falls within the permitted operational use confirmed in [1IP-102].

Execution: to give the confirmed license arrangement contractual form, the DAO authorizes and directs the 1inch Foundation, as the DAO's off-chain representative, to execute the operational-use terms of the Degensoft Aqua Source License 1.1 with Degensoft Ltd, exercising the DAO's authority to direct the Foundation under the Guidelines (Section 4.3.2). This changes nothing in [1IP-102]: the license and the DAO's confirmed operational rights are unchanged — the Foundation's signature converts an on-chain confirmation into a bilaterally executed agreement, a clearer contractual bond for both sides.

Foundation position: the Foundation's directors have confirmed this in writing — by email to the proposer and in a published Foundation page linked from this proposal [link] — endorsing the framework as a whole (the interface authorization, the license execution, the fee activation, and the incentive program) as serving the interests of the 1inch Network. Consistent with its neutral role in day-to-day governance, the Foundation expresses its support through this written confirmation rather than by voting.

3. Interface & Protocol Development — Service Fee Framework (Separate Proposal)

Developing, maintaining, and servicing Aqua, SwapVM, and the official interface is ongoing work that Degensoft currently carries at its own cost. Compensation for that work is deliberately kept out of this proposal. Degensoft intends to bring a dedicated Development & Service Fee framework to the DAO as a separate proposal, so the launch decision and the operator's compensation are each judged on their own merits.

The follow-up proposal should define, at minimum: the scope of services and deliverables (protocol development, interface operations, security and incident response); term and renewal; budget and payment mechanics, including whether part of the compensation is denominated in 1INCH with vesting, to align long-term incentives and support token utility; reporting obligations; independent review of terms before the vote; and the DAO's rights to adjust or terminate the arrangement.

Sequencing matters. Before recurring service payments begin, the DAO should have its treasury and organizational structures in place, including operational finance groups and defined budget and reporting standards, so a standing service relationship can be administered, accounted for, and reviewed properly.

4. LP Incentive Program

To bootstrap shared liquidity on Aqua at launch, the DAO allocates up to 500,000 USDC to a three-month maker incentive program. The USDC stream stacks on top of the 1INCH-denominated base campaigns funded by the 1inch Foundation on the same markets, following the DAO's precedent for co-rewarded campaigns (1IP-92, 1IP-93):

• Scope: rewards for makers on DAO-authorized Aqua deployments across a curated set of 1INCH-paired markets organized in token groups, weighted toward strategies routed by 1inch aggregation and excluding Incubator-graduate strategies, which carry their own revenue-share terms. Market-level parameters and group weights are set out in the published campaign configuration.
• Distribution basis: rewards are paid pro-rata to the trading volume a maker's positions handle in each epoch (processed volume), not to parked TVL, so the budget pays only where flow actually routes through Aqua. This is the same volume on which the Section 2 protocol fees accrue to the Treasury.
• Safeguards: address blacklists (router, resolvers, treasury and team addresses, sanctioned addresses), taker–maker exclusion, per-wallet caps, and wash-trading filters. Transfer-restricted or allowlist-gated assets are excluded — the program runs on open-venue markets only.
• Administration & Disbursement: administered by Degensoft as program operator, consistent with its administration of the Foundation-funded base campaigns. DAO funds are disbursed from the DAO Treasury multisig — from its aEthUSDC holdings, unwrapped 1:1 to USDC — to a dedicated campaign address 0x7c24E3049F46d59114908dB0C3eccd4695f7A8e4 used exclusively for reward distribution. Degensoft receives no compensation from this budget.
• Sequencing: the Foundation's base campaigns launch with Aqua's production release independently of this vote. The DAO's USDC stream begins only upon Snapshot approval and execution — no DAO funds are disbursed and no USDC rewards accrue for any period before approval — applying prospectively from activation, so the program launch is not delayed by the governance timeline.
• Unspent funds: any undistributed budget returns automatically to the DAO Treasury at campaign end.
• Reporting: Degensoft will publish a program report on the governance forum within 60 days of program end, covering distribution totals, volumes handled, safeguard actions taken and confirmation of unspent-fund returns.

Incentive structure

The program stacks two reward streams on the same markets: a 10M 1INCH base stream funded by the 1inch Foundation, and the DAO's 500,000 USDC boost requested here, both following identical scoring and distribution rules.

The program spans up to 80 markets, each pairing 1INCH against a major asset, activating per network as Aqua deployments complete. Markets are organized into five token groups with initial shares of both streams: ETH & liquid staking tokens (35%), stablecoins (30%), BTC wrappers (15%), DeFi majors (15%), and RWA (5%). Budgets pool at group level: rewards flow to the markets makers actually quote, so inactive markets consume no budget. Initial weights and the full market list live in the published campaign configuration and may be re-weighted between groups as the checkpoints and safeguards provide. Each group runs daily epochs, paying each maker pro-rata to the trading volume their positions handle, after safeguards — no reward accrues to parked TVL. Distribution runs through Merkl as six campaigns (five in 1INCH, one USDC umbrella); Merkl's 1.5% fee applies, netting ~492,600 USDC distributable.

The budget releases 50/30/20 across three months, gated by adoption checkpoints at days 30 and 60 (thresholds published in the campaign configuration); underperforming groups have their weight cut to zero. Markets where reward rates would make self-trading profitable, or where wash filters flag material volume, are suspended, their budget re-flowing within the group.

Rationale

This framework gives the launch a clear structure and confirms existing contributor roles. The Network keeps its domain and dApp; production deployment proceeds under the DAO's express consent; a single accountable operator carries the interface and its operating obligations; protocol fees accrue to the DAO Treasury, where governance directs them to audits, development, security, and ecosystem programs; and a time-bound, volume-based incentive program seeds the liquidity the flywheel needs. The incentive design pays for handled volume rather than parked TVL, so spend tracks actual usage, and it builds on the DAO's own co-rewarded campaign precedent (1IP-92, 1IP-93). Because the same proposal activates protocol fees, the incentive budget is partly self-funding: rewards pay only for processed volume, Aqua charges protocol fees on that volume, and the fees accrue to the DAO Treasury — the boost pre-funds the DAO's own fee stream. At an illustrative blended take of 2 bps, roughly $2.5B of cumulative processed volume repays the full 500,000 USDC. The market set targets the venue gap: assets with deep global demand but thin on-chain venues, so incentivized depth competes for flow that today executes off-chain.

Considerations

Security

The interface introduces no new smart contracts and interacts exclusively with Aqua/SwapVM deployments covered by the DAO-funded audit program, including the fee logic activated under Section 2. Later changes to fee parameters or collection routing require DAO governance approval; the fee exchanger and its target composition follow the same rule, with composition changes by governance signal as set out in Section 2. The interface is non-custodial throughout. Interface-layer security, including penetration testing, monitoring, and incident response, is Degensoft's responsibility as operator.

Team Qualifications

Degensoft Ltd (BVI) is the developer of Aqua and SwapVM and operates the 1inch dApp for the 1inch Network — one of the most widely used non-custodial interfaces in DeFi.

Legal & Risk Management

This proposal falls within the risk-review triggers in Guidelines Section 5.6.2 (a new product or feature with changes to the DAO's financial arrangements), and the independent review contemplated there is being completed before the temperature check. The interface is non-custodial, and Degensoft, as operator, is responsible for interface-level risk management, including terms of use, restricted-jurisdiction access controls, sanctions screening, and user disclosures.

Protocol fees accrue to the DAO Treasury as community resources allocated through governance. They are not distributions to tokenholders, and none are proposed. Fee parameters, collection routing, conversion composition, and activation status remain under DAO governance control at all times, including suspension for legal or operational reasons, and deployment of fee proceeds follows the DAO's treasury processes. The interface authorization confirms the official status of an interface Degensoft is already licensed to operate; it does not create new rights or transfer intellectual property. The express deployment consent records that production deployment occurs at the DAO's direction, with informed acceptance of the inherent risks of smart-contract systems disclosed in the Guidelines (Section 5.3.2, 5.6.1, 5.6.2); it allocates operational responsibility without making any party a guarantor of protocol performance. The Foundation's execution of the license terms on the Network's behalf follows the DAO's authority to direct the Foundation (Guidelines Section 4.3.2).

Conflict of Interest

This proposal is submitted by a Delegate, who received no compensation for authoring it. It was developed with technical input from the Degensoft team, disclosed here for transparency.

Degensoft Ltd's interests: it is the developer of Aqua and SwapVM, the Licensor under the Degensoft Aqua Source License 1.1, the deployer of the protocol and the operator of the official interface under Section 1, the administrator of the incentive program under Section 4, and the intended proposer of a future Development & Service Fee framework under Section 3.

Mitigants: all protocol fees accrue to the DAO Treasury, and fee parameters, collection routing, and the exchanger's target composition sit under exclusive DAO governance control; no Treasury funding for interface operations is requested here, and any future service fee will be a separate governance decision with independent review of terms; incentive funds flow to makers primarily through Merkl's claim mechanism, under a published methodology, Degensoft takes no compensation from that budget, and unspent funds return to the Treasury automatically; fee accrual to the Treasury is on-chain and independently verifiable; and Degensoft reports on the incentive program within 60 days of its end.

Summary

This proposal sets the launch framework for Aqua in a single governance action: the DAO authorizes the production deployment of Aqua and SwapVM and recognizes the official Aqua interface, operated by Degensoft for the 1inch Network on the Network's own domain; protocol fees on Aqua and SwapVM are activated and accrue to the DAO Treasury under governance-controlled parameters; the operator's development and service compensation is deferred to a separate, properly structured proposal; and the DAO allocates up to 500,000 USDC to a three-month, volume-based maker incentive program. Governance holds the protocol economics; the operator carries the interface and its obligations; makers get paid for the flow that turns the flywheel.

Note: This proposal follows the fast-track governance process to align its approval with the upcoming public launch of Aqua, ensuring protocol fee activation and the maker incentive program are in place from day one of production availability.