Here's How THORChain (RUNE) Is Enabling A Multi-Chain Smart Contract Future

As an increasing number of blockchain protocols continue to emerge with their specific use-cases to cater to varied user needs, there is an urgent need for a protocol that allows users to trade or swap native assets on-chain without having to let go of the custody of the underlying cryptocurrency.

Sure, there are centralized crypto exchanges such as Coinbase, Kraken, Binance, and FTX that allow users to seamlessly trade one cryptocurrency for another with thick liquidity from order books. However, trading on these centralized exchanges means that users are not in complete control of their assets. Should any of these exchanges fall victim to a sophisticated hack attack, then the users could stand to lose their funds and there’s not much they can do about it.

THORChain (RUNE) aims to solve the above-mentioned problems plaguing the digital asset industry.

In this article, we will study what problems THORChain is aiming to solve, how it aims to solve them, the challenges it faces, and the price action of its native RUNE token.

What is THORChain?

To begin, do not get swayed by the protocol’s Marvel-esque name. THORChain is trying to solve perhaps the most complex and difficult problem in the crypto landscape today — enabling swaps of native digital assets across different blockchains.

In a nutshell, THORChain is a decentralized cross-chain liquidity protocol that offers users a non-custodial way to swap their digital assets across blockchains.

For example, at present, it is nearly impossible to trade bitcoin (BTC) for ether (ETH) without using a centralized exchange or some synthetic assets such as WBTC or RBTC which are essentially ERC-20 tokens that are pegged to the price of BTC.

With THORChain, users can swap their native BTC for ETH without having to convert their assets into any synthetic asset or letting go of the custody of their asset. To achieve this, THORChain leverages a suite of advanced cryptographic tools such as Tendermint, Cosmos-SDK, Threshold Signature Schemes (TSS), and Byzantine Fault Tolerance.

It’s alright if you do not understand any of the aforementioned technological jargon. The aim behind mentioning them was to highlight how complex and sophisticated a protocol THORChain is.

Who Is Behind THORChain?

THORChain began as a modest project during the Binance hackathon in 2018. However, it didn’t take long for the crypto industry to take notice of the innovative project as soon after its inception, leading crypto investment firm Multicoin Capital took a major stake in THORChain instantly propelled RUNE’s price by 30% — from $3.90 to $5.61.

The team of 18 developers at THORChain continues to remain pseudonymous and, as such, has no central figures or CEO. This is to ensure that THORChain’s decentralized ethos is not compromised while it is being built.

How Does THORChain Work?

Built on the Cosmos (ATOM) blockchain, THORChain utilizes the Tendermint BFT model that ensures the network reaches protocol consensus even if 33% of its nodes start failing.

To understand this, consider the following example.

Let’s say Joe wants to use THORChain to swap his ether (ETH) on the Ethereum network to Solana (SOL) on the Solana blockchain.

To achieve this, Joe sends a standard ETH transaction to the Ethereum vault — an Ethereum address controlled by the THORChain network.

Next, THORChain uses its built-in Bifrost Protocol which functions as a connective layer between two different blockchains. A major function of Bifrost is to continually monitor all incoming transactions to vault addresses and then convert them to THORChain witness transactions.

Once the majority of the THORChain nodes agree to the authenticity of the transaction, the inbound transaction (in our case, consisting of ETH) is converted into its “finalized” state.

At this stage, Joe’s ETH is recorded on the THORChain blockchain.

The next step of the transaction — sending SOL back to Joe follows a similar pattern in that the Bifrost Protocol initiates a withdrawal of SOL from THORChain’s Solana outbound vault.

Once finalized, the SOL is swapped for ETH and Joe finally completes his swap across two different blockchains without ever losing custody over his assets.

Price Action of RUNE Token

THORChain’s native token, RUNE, has undergone a major correction which was triggered by the recent unfortunate series of hacks of the protocol that resulted in a cumulative loss of about $13 million to hackers.

At the time of writing, RUNE trades at $6.82 with a market cap of $1.79 billion and a circulating supply of slightly more than 262 million RUNE out of the total supply of 500 million RUNE.

RUNE recorded an ATH of $20.87 on May 19 at the peak of the 2021 crypto bull run.

From the below chart, we can infer that RUNE faces a few stiff resistance levels at $10, $14, and its ATH value.

(Source: CoinGecko)

Investing in RUNE at its current market price could hold immense upside potential as THORChain is still steadily recovering from the series of hacks it underwent earlier this year.

While the wider crypto markets’ sentiment in THORChain might have dipped, the developers and RUNE community continue to burn the midnight oil to propel THORChain to its full potential once again.

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