What Is THORChain (RUNE): Easy Token Swaps With the World's First Trustless Multi-chain DEX
Cryptocurrency exchanges, just like stock exchanges, are platforms where investors buy and sell digital assets. Crypto exchanges are distinctly split into two types — the first generation centralized exchanges, or CEXs, and the newer decentralized exchanges (DEXs).
CEXs offer ease of use and higher liquidity than their decentralized counterparts. However, CEXs also have a single point of failure and are more prone to regulatory controls as exchanges freeze funds and accounts of investors. While decentralized exchanges have the advantage of offering trustless and permissionless trading, they lag behind CEXs when it comes to liquidity. Even more critical, the blockchains traded have interoperability issues, where trading can only be done with native blockchain assets. Simply put, you can't directly swap ETH for BTC on DEXs such as Uniswap.
Enter THORChain, a unique DEX that allows safe crypto trading between assets across different blockchains. Curious about how THORChain achieves this? Read on, as this article discusses THORChain, what it is, and how it solves the interoperability issues plaguing blockchains — among other benefits.
What Is THORChain?
THORChain is an interoperable cross-chain solution that can seamlessly swap native assets across different blockchains in a decentralized, permissionless and trustless manner. It’s named after the hammer-wielding Norse god of thunder.
THORChain allows anyone to trade digital assets across disparate blockchains without wrapping or pegging them first. Wrapping a token is the technique whereby blockchains represent a cryptocurrency from another blockchain with a token and equate (or “peg”) it with the original. This allows the wrapped tokenz to be used on specific blockchains where they’re not native, which isn't possible with the original cryptocurrency. The wrapped or pegged asset can then be redeemed for the original cryptocurrency.
The THORchain protocol's core is composed of a network of nodes built with the Tendermint and Cosmos software development kit (SDK), making it possible for the THORchain blockchain to use composable modules, without starting one from scratch.
Thorchain network uses the Tendermint BFT model that allows it to reach consensus even when one-third of the nodes fail. This consensus mechanism plays a critical role, because the nodes have to work together to record transactions coming from other blockchains.
History of THORChain
THORChain was created at the Binance hackathon in 2018. The THORChain team continued working on the project after the hackathon ended. They managed to raise a small seed round, and developed Instaswap, a decentralized exchange built on the THORchain protocol to demonstrate the viability of a functional cross-chain DEX.
In July 2019, the team launched their first product, BEPSwap, which enables users to swap BEP2 assets (assets governed by the technical standard for creating and using tokens on the Binance Chain). Still, BEPSwap was limited only to the Binance Chain Network.
The team raised a further $1.5M in an initial DEX offering (IDO) to continue work on the project. In April 2021, they released the limited mainnet known as the multi-chain chaos network (MCCN).
Why Invest In THORChain?
Decentralized exchanges such as Uniswap and PancakeSwap only allow swaps in their native assets. Since the blockchains are isolated, the only way to swap dissimilar tokens is through wrapped or pegged tokens. As mentioned, wrapped tokens like WBTC are assets locked in their native chains, but represented 1:1 on other chains.
For instance, a user that wants WBTC (or wrapped Bitcoin, the most popular wrapped token) sends the required amount to a custodian address on the Bitcoin network. The custodian locks the original BTC and mints an equivalent amount of the requested token. The user can then access the full benefits of DeFi through the WBTC, and when they want their BTC back, they simply request it, and the custodian releases the funds while burning the equivalent WBTC.
While solutions such as using wrapped assets mitigate interoperability issues on DEXs, they present new headaches in the form of additional transaction fees, liquidity problems, and security issues. Some of the largest hacks within the crypto space have taken place through these bridges.
Consequently, developers have been working to create better alternatives to address these flaws and offer users a more secure and generally better cross-chain trading experience.
THORChain goes about solving interoperability issues differently. It uses a continuous liquidity pool containing staked assets, including THORChain's native RUNE token. Native cryptos — such as Ethereum and Bitcoin — are staked in a separate pool with RUNE. When these assets are swapped, they aren’t directly paired with each other. Rather, what happens instead is that two trades take place at the same time.
Suppose, for instance, that you want to swap Bitcoin for Ethereum: You first exchange your Bitcoin for RUNE, and then exchange the RUNE for Ethereum. THORChain offers traders frictionless transactions between multiple blockchains, while avoiding the significant counterparty risk associated with CEXs.
How Is THORChain Different From Other DEXs?
The THORChain protocol was designed to allow cross-chain decentralized swaps. In that regard, it can be considered a DEX. But compared to other DEXs like PancakeSwap and ApeSwap, THORchain not only solves the interoperability problem with a unique approach, it also provides a platform that other DEX projects can run on.It supports a variety of cross-chain DEXs such as THORSwap and Skip Exchange. It also supports other DeFi projects, such as Thorstarter, which leverages the multi-swapping capabilities of the THORChain network to build IDO launchpads (platforms purposely built for launching new crypto projects and raising liquidity). In addition, THORchain offers holders of their stablecoins and users that provide liquidity with other cryptos an attractive APY, making the protocol a means of passive income.
The RUNE token is the native reward token of the THORChain network. Because of THORChain's Cosmos Tendermint PoS consensus mechanism, network validators bond (i.e., deposit) RUNE to secure and validate transactions in return for rewards. Each THORChain network validator or node must stake a minimum of 1 million RUNE (about $100,000).
The RUNE token is used as a base pair for other tokens in liquidity pools, and as a settlement asset. All other assets are paired against the RUNE at a 1:1 ratio. Also, RUNE serves as collateral for THORChain nodes in the THORchain ecosystem.
Simply put, THORChain node operators must deposit at least twice the amount of RUNE staked in the liquidity pool. This is a security measure to protect the network from attacks: If a node operator attempts to steal assets, the mechanism also punishes them by slashing their bond value.
According to CoinMarketCap, the RUNE token price is $10.36 as of 04/4/2022 and has a live market cap of $3,426,253,500. The circulating supply is 330,688,061 RUNE tokens from a total supply of 500,000,000. 100% of this supply was minted at the genesis and is distributed as follows:
Is RUNE a Good Investment?
THORChain's team is anonymous, and the official creators are only known publicly by their aliases. However, the project has been audited by reputable audit firms, including CertiK, Halborn, and Trail of Bits, which lends credibility to the project.
The code is open source, and it has a strong community of developers and users who run the website, as well as a medium account where weekly reports are published and the latest updates and bug fixes are announced.
THORChain's development has been on an upward trajectory of continuous improvement since the team wrote the first code in 2018.
Notable milestones include:
The THORChain's chaosnet, their single-chain proof of concept, went live in 2020. It enables users to swap between BEP-2 assets and the THORChain RUNE token.
The network mainnet multi-chain chaosnet (MCCN) went live in April 2021. It allows swapping between native tokens of different blockchains.
The THORChain team is presently working on future development plans, which include:
An insurance fund for liquidity providers to reduce risk on their capital and encourage more LPs, while also safeguarding the project's reserves from unexpected adverse events.
Deployment of the project's mainnet, which will feature uncapped staking and liquidity by the first quarter of 2022.
Improved interoperability with a Cosmos IBC (Inter Blockchain Communication integration).
A fixed APY/cross-chain savings account for all existing assets.
A cross-chain lending protocol with self-repaying loan features.
Transfer control of the THORChain project to a DAO.
Addition of 15 more blockchains to the protocol. These include Haven (XHV), Cardano (ADA), Terra (LUNA), Dogecoin (DOGE), Monero (XMR), Avalanche (AVAX), Polkadot (DOT), Zilliqa (ZIL), Cardano (ADA) and Zcash (ZAC).
With their ambitious road map, there's no doubt the THORChain project is one investors would do well to keep an eye on. Unsurprisingly, many experts and algorithm-based forecasts predict consistent price growth for the RUNE.
RUNE Price Prediction
While the team’s anonymity might be an issue for some investors, the overall outlook for THORChain's RUNE is optimistic. The THORChain project heralds a new era in the DEX space, with its unique method of facilitating safe and efficient cross-chain swaps.
Considering THORChain's road map, which promises far greater use cases beyond the primary multi-chain DEX solution, expert sources such as WalletInvestor.com and DigitalCoin predict that THORChain's RUNE holds significant potential for price appreciation within the year and in the next five years.
Analysis by WalletInvestor.com indicates RUNE's price is expected to approach $13.187 before the end of 2022. They also project the cost to hit $45.341 by January 2027.
Meanwhile, DigitalCoin expects RUNE to reach $9.40 in 2023, $12.92 in 2025, and $25.37 in 2029.
Data from PricePrediction suggests that RUNE may cost up to $27.32 in 2025 and $182.11 in 2030.
These price ranges are comparable with that of Uniswap (UNI), which WalletInvestor.com predicts to cost $28.35 by the end of 2022 and $63.50 by 2025.
How to Invest in RUNE
Choose your preferred currency from the drop-down menu and enter the amount you’ll spend in fiat, or the USDT amount you want to buy.
Select a service provider and choose your payment method. Available options include electronic fund transfers, Visa/Mastercard credit and debit cards, and cash deposits.
With the USDT now in your account, go back to the Bybit homepage and click Spot on the navigation bar to go to the spot trading page.
You will see all the trading pairs on the left side of the page. Use the search box and enter RUNE/USDT.
When the RUNE/USDT trading pair page opens, you can select any of the three types of orders — Limit Order, Market Order or Conditional Order.
Then, select Limit and enter the order price if you prefer to buy using the limit order
In the field directly below, enter the amount of RUNE you want to buy, or use the percentage bar.
Click Buy to complete the transaction. Congratulations, you’re now a proud investor of THORChain and own RUNE tokens.
The Bottom Line
THORChain provides an innovative solution for swapping assets across different blockchains trustlessly. However, the project’s team is not yet done. With more updates and features still in the works, the price outlook for RUNE, THORChain’s native token, is optimistic. Although the team is anonymous, they keep the THORChain community updated on the latest developments through their dedicated medium account and social media channels. For more in-depth information on THORChain, check out how they solve the cross-chain dilemma.