What is Router Protocol?
The crypto industry has gone a long way from the first Bitcoin markets to the advanced functional exchanges we see today. However, that doesn’t mean that the current state of the crypto markets doesn’t come with its own set of problems.
The first crypto exchange that has ever existed in the industry emerged in the first half of 2010, offering users a rusty website where they could purchase Bitcoins with PayPal. While people weren't aware at the time, the now-defunct Bitcoinmarket.com started a shockwave that resulted in thousands of trading platforms setting up shop on the market.
And so, the rapid rise of behemoth exchanges we see today revealed a huge problem the industry was facing — centralization.
Fast forward to 2018, the first decentralized exchanges started gaining attention. In the span of two years, people have built an entire DeFi industry where users could transact P2P without going though KYC, or any limits. Ethereum was the initiator for the DeFi craze, and other chains hopped in the trend.
Networks like Solana, NEAR, and Avalanche spun out their own DEXs and AMMs. There was one problem though. Users of one chain were more or less forced to stay with that chain. Migration options relied on 1-to-1 bridges that disincentivized users to explore opportunities outside their network.
To illustrate, if users had their assets on NEAR and they wanted to migrate to SushiSwap, they would have to bridge via Rainbow Bridge. Migrating from NEAR to Ethereum, and then Cosmos would require using 2 different bridges, each with their own fees and security risks.
Enter Router Protocol! Instead of using native bridges for each network, users can migrate their funds to the most popular blockchains using only one bridge. Router Protocol derives its value from making cross-chain transfers easy and cheap. As a result, liquidity that was previously out of reach is now available with just a couple clicks.
But Router Protocol is more than a traditional bridge – it is an actual layer-1 blockchain. As a Proof of Stake network, Router is run by a network of validators with economic incentives to act honestly.
In some sense, Router Protocol is similar to Polkadot. The network facilitates interoperability between multiple blockchains, hence its main utility as a cross-chain bridge. Built on the Cosmos SDK, Router encapsulates all the features of Cosmos, including fast block times, robust security mechanisms, and, most importantly, CosmWasm - a security-first smart contract platform.
Bridges are notoriously labeled as honeypot for hackers, and for good reason! In order to bridge from one chain from another, funds are locked on the source chain, and an equivalent of that asset is issued on the target chain.
Because Router Protocol is made up of open-source smart contracts, this makes it vulnerable to potential attacks. Router takes a couple measures to keep its protocol safe from potential threats.
Here is where validators come in. Because they are paid in ROUTE tokens from transaction fees, they have an economic incentive to validate the transactions correctly – the network can only be compromised only if the voting power of more than 67% decide to collude.
In order to discourage malicious behavior, Router has implemented a slashing mechanism. Therefore, validators as well as delegators will monitor each other to avoid losing money.
The protocol is governed by a community of token holders. ROUTE holders will be able to use their tokens to decide the future of the protocol by voting on Router's governance proposals. Active stakeholders of the network will be responsible for proposing, vetting, and passing proposals concerning protocol amendments and upgrades.
Every chain supported by Router Protocol will have a bridge contract deployed on it. On the source chain, the bridge contract locks users’ assets and broadcasts an event that can be picked up by listeners associated with Router nodes. On the destination chain, the bridge contract aggregates votes from Router nodes on proposals relayed from the source chain. When the voting quorum is achieved, the bridge contract unlocks/mints tokens on the destination chain. Whenever a transaction is submitted on the source chain, a deposit function is initiated on the bridge contract
As of May 2023, Router's Mandara testnet has launched, which means the protocol will soon launch on the mainnet.
How does Router Protocol work?
Router Protocol is an extensible multi-directional bridge that connects current and emerging layer 1 and layer 2 blockchains. Unlike traditional deployments of cross-chain protocols, which use 1-to-1 bridges, Router creates a network where all chains are connected to each other via the same set of router nodes.
Router nodes can listen to and enable transactions on all blockchains that are part of Router's supported blockchains. Any new chain can therefore be simply plugged into Router's collection of blockchains by pushing its relevant configurations to all the router nodes.
During a cross-chain transfer, Router Protocol locks users' funds on the source chain and releases them on the target chain.
Router Protocol uses a fee manager module that estimates the transaction fees every 30-60 minutes depending on the congestion on different networks.
Router gives much needed flexibility in choosing the preferred method for paying fees. For example, users can choose to pay in the chain's native token, in USDC, in ROUTE (50% fee discount), or in DFYN (20% fee discount).
How to make money on Router Protocol?
Those interacting with Router Protocol will be able to enjoy a rather hands-off user experience — when swapping assets, the system will automatically find the best market price and execute the swap.
That being said, there is no other utility for ROUTER than being used as a discount token.
ROUTE
Besides paying your fees in ROUTE to get a 50% discount, you can also farm ROUTE on DeFi protocols like Uniswap, DFYN, 1Inch, or SushiSwap, and get rewarded in LP tokens. The LP tokens received after providing liquidity on the exchanges will have to be staked on the RouterProtocol.com farming page.
With your newly famed ROUTE tokens you can spend them on bridging fees, or simply sell them on the open market.
Price Prediction for Router Protocol — Can it hit $1000?
Buying and hodling ROUTE — the native token of Router Protocol— is one way of potentially making money on Router Protocol.
By looking at its current price, it’s natural to think about the chance of ROUTE hitting $1000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.
Let’s examine the potential growth of the ROUTE token by analyzing its tokenomics. ROUTE’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} ROUTE tokens being in circulation today, that means a price of {PRICE} per ROUTE.
How did we come to that calculation? It’s quite easy, the price of a ROUTE token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each ROUTE coin.
By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of ROUTE at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for ROUTE to hit that price.
At a price of $1000 per token, that means the current market cap of ROUTE would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.
Now let’s shift our attention to the fully diluted market cap.
Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.
The fully diluted market cap represents the total value of a coin if all tokens were in circulation. ROUTE’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} ROUTE which means that no more coins above that number will ever be created.
These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.
How does this impact the price of ROUTE? Taking into account the current price of a ROUTE token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. ROUTE coins that have been burned are not taken into consideration because they have been permanently removed from circulation.
Whether it seems gigantic or not, the number we came to above only takes into account the current price of a ROUTE token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the ROUTE protocol fully diluted market cap.
These are all crucial details to know when calculating if ROUTE can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.
The future of ROUTE depends solely on its growth as a network used by tens and hundreds of millions of users.
If you’re looking to add some ROUTE to your portfolio, the most trusted places to get some are Binance and Coinbase.