What is Shared Liquidity?

What is Shared Liquidity?

Alp Gasimov

Mon, August 31, 2026 at 8:39 PM GMT+3 3 min read

• 1INCH-USD -3.30%

Shared liquidity is an approach to a longstanding problem in decentralized finance: how to make better use of assets provided for trading.

1inch is applying the concept through Aqua, its shared liquidity layer. Aqua allows the same token balance to support multiple liquidity positions at once, rather than requiring users to divide and deposit their assets into separate pools.

"The same token balance can support multiple liquidity positions at once because the assets stay in the user's own wallet," Holly Atkinson, chief product and technology officer at 1inch, told TheStreet Roundtable's Alp Gasimov.

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Why does DeFi need shared liquidity?

Traditional automated market maker, or AMM, pools generally require liquidity providers to deposit tokens into specific pools.

A provider who wants to participate across several protocols, trading pairs or price ranges therefore has to divide a finite amount of capital among them. According to Atkinson, much of that capital can end up sitting unused.

"Most capital sitting in traditional AMM pools in DeFi is idle on any given day," Atkinson said. "That capital provided by makers will sit there earning nothing while still carrying impermanent loss risk."

Atkinson said research conducted by 1inch with Dune found that about 85% of concentrated liquidity was underutilized.

How does 1inch Aqua work?

Aqua allows multiple liquidity positions to reference tokens that remain in a provider's wallet. Atkinson described Aqua as a registry: users connect a wallet and approve a token balance that can back multiple positions without depositing those tokens into the protocol.

When a swap occurs, the tokens transfer directly from the provider's wallet to the swapper in a single atomic transaction. If the wallet cannot cover the fill, the transaction reverts.

Atkinson said the Aqua contract itself holds no tokens and providers can revoke their allowance at any time.

"Of course, market risk and smart contract risk still apply, as with other DeFi protocols," Atkinson said. "Aqua simply reduces the protocol custody risk."

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What does shared liquidity look like in practice?

Atkinson gave the example of a liquidity provider with 1,000 USDC who wants to provide liquidity across three trading pairs.

Under a traditional model, the provider might divide the capital into roughly 333 USDC for each pool. With Aqua, the 1,000 USDC remains in the provider's wallet and can be referenced across all three positions.

"You're effectively making 3,000 USDC worth of liquidity available from your 1000 USDC real balance," Atkinson said. "So that gives what we call a shared liquidity ratio of three."

The provider does not actually own 3,000 USDC. The real balance remains 1,000 USDC. The model works because different positions rarely need to fill at exactly the same moment, allowing one balance to serve multiple positions.

Why is 1inch building shared liquidity?

Since 2019, 1inch has focused on helping users find competitive swap routes across fragmented liquidity through its app, wallet and swap API. Atkinson said working on that side of the market made the problem of idle liquidity difficult to ignore.

"Aqua is about making more of that liquidity usable in the first place," Atkinson said, referring to Aqua.

Aqua is now live across 13 EVM chains, according to Atkinson. 1inch is also running an incentive program that rewards liquidity based on the swap volume a position actually handles rather than simply the amount of capital parked.

Looking ahead, Atkinson said shared liquidity could also have applications across tokenized real-world assets, governance and institutional participation.

The basic idea remains simple: instead of locking separate portions of capital into individual pools, shared liquidity lets the same assets support multiple positions while remaining in the provider's wallet until they are needed.

This story was originally published by TheStreet on Aug 31, 2026, where it first appeared in the Explained section. Add TheStreet as a Preferred Source by clicking here.