As the cryptocurrency market grows, the need for cryptocurrency exchanges also grows. Though there are many cryptocurrency exchange centers on the internet, like Coinbase, none of them allow for a direct swap of tokens. Most of the time, the exchange of cryptocurrencies and/or assets happens within the limits of the native blockchain or the assets require staking or wrapping for the exchange to occur. THORChain addresses this lack of interoperability between decentralized finance exchanges.
What is THORChain?
THORChain is an independent blockchain that serves as a cross-chain decentralized exchange. It is built using the Cosmos SDK and uses an automated market maker (AMM) model to facilitate crypto-asset swaps. THORChain uses the RUNE, its native token, as the base swap pair to allow traders to move between different asset pools.
THORChain was built during a 2018 hackathon by a mostly anonymous team. The project launched its multichain chaosnet (MCCN) to the public in April 2021. The MCCN is a decentralized network that facilitates intermediary-free swaps between blockchains. The THORChain protocol has a cross-chain bridge system called the Bifrost Protocol. The Bifrost Protocol enables multichain connectivity by building a bridge between blockchains and solves the interoperability problem in decentralized exchanges.
The Bifrost Protocol is a system of THORNodes that operate on multiple blockchains. A THORNode is a THORChain node operator that simultaneously runs nodes on other blockchains. THORNodes check and verify deposits made to other native cryptocurrency wallets and approve the transfers by jointly signing a multi-signature transaction.
What is the RUNE
The RUNE token is the native cryptocurrency asset of THORChain. It has a maximum supply of 500,000,000 RUNE. The RUNE has five primary uses within the THORChain ecosystem. One of it’s uses is as a liquidity pool pair, network security, transaction fee, governance token, and reward currency within the THORChain ecosystem.
To liquidate assets, liquidity providers must pair the asset with an equal amount of RUNE tokens. The RUNE acts as the backup for the deposited asset and also ensures that the transaction falls through. The RUNE also powers and ensure the security of THORNodes. THORNodes require a bond twice the value of the external asset in RUNE to validate the network and earn fees. If a THORNode malfunctions, the exchange still remains secure because of the proof-of-bond mechanism. Transaction fees, THORNode validators, and liquidity providers use RUNE for payouts. Also, staking RUNES earns users the right to vote on other THORChain updates and projects.
THORChain continues to grow its presence in the crypto world. Its chaosnet runs around 30 THORNodes simultaneously. However, its mainnet, which launches in 2022, will boost its efficiency and value by running up to almost 100 THORNodes. This update increases THORChain’s potential and value, especially as more cryptocurrencies are begin to circulate and are available to the public.