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Thorchain: Bridging the Gap Between Blockchains

The major objective of third-generation blockchains is to achieve higher interoperability and offer a more frictionless and decentralized experience. With the growing blockchain ecosystem and constant expansion of DeFi, the need for cross-chain liquidity and asset exchange has been increasing. While traders want to swap their assets or exchange cryptos between two unique blockchains, they feel disappointed about relying on a centralized exchange. That’s so because the central authority first takes custody of the assets, wraps them, and then exchanges the assets for the desired native token. This method is time-consuming, and custodial which is not much impactful nowadays. Instead, the users demand a complete decentralized, transparent, and secure network for cross-chain crypto trading. To accommodate the need of traders and address the challenges of blockchain interoperability, THORChain facilitates multi-chain cryptocurrency swapping and offers immutability.

THORChain is a DeFi project, launched originally on the Cosmos network and transitioned to its separate mainnet in April 2021. This transition is a significant step taken by THORChain’s regulators towards improving the interoperability for multi-currency swapping. As anticipated, this protocol is now increasingly popular. So let’s find out more about THORChain, like what it is? How does it work? And how does THORChain allows users to swap native crypto-assets across different blockchain networks?

What is THORchain?

THORChain is a cross-chain liquidity network designed to power multi-currency exchanges across different unique blockchains. It’s a Tendermint and Cosmos-SDK-based decentralized protocol that provides a liquidity solution without wrapping or pegging the assets. It allows users to swap assets directly from their official wallets.

Crypto traders and investors frequently exchange their assets across a variety of blockchain platforms. However, blockchains remain isolated from each other and cannot directly interact to share information, tokens, or resources. THORchain provides traders with a decentralized environment that supports token exchanges on different blockchain networks without any intermediary to address the challenges of this low interoperability.

The THORChain protocol imparts complete visibility to the users, for it allows them to verify the solvency for themselves. They can even view the active nodes that uphold the network, the vaults that the network host, and the total locked currency value in the network. Together with these assistances, the THORChain project aims to bring more liquidity to cryptocurrency trading, contrary to fragmented and illiquid markets trading markets. Thus, it offers a decentralized cryptos exchange where no central authority or intermediary is required to regulate asset exchange.

What makes THORChain Unique?

THORChain is unique in terms of its effective approach to liquidity. The protocol uses a fee to eliminate slippage, reduce the chances of losing the users’ liquidity, and neutralize the impermanent loss. Another unique attribute of THORChain is its user-friendly interface designed by community-driven developers who keep on making the network more accessible and frictionless. With that, THORChain enables users to quickly exchange tokens across top blockchains such as Bitcoin, Ethereum, Binance Smart Chain, and others.

What’s the Architecture of THORChain?

The whole architecture of THORChain is similar to a trustless crypto bridge or a bridging solution. Simply put, it’s a decentralized, autonomous, and oracle-free bridge connecting blockchains and helping them establish secure communication between them. It uses a revolutionary technology that enables instant cross-chain swap and allows users to earn yield with their deposit of native assets into the network’s liquidity pool. Let’s look at the various elements that together set up the THORChainand network and power it.

Appreciating Asset

RUNE (the native token of THORChain) needs to be paired as a settlement asset at a 1:1 ratio in the liquidity pool. Still, the economic design of the network has the potential to increase the value of RUNE along with liquidity depth.

High Yield

THORChain network is designed to maximize the revenue both for node operators and liquidity providers.

Network Effects

Anonymous node operators manage the network. They bond RUNE to secure liquidity in the pools, and they receive rewards for their services. With such robust management, THORChain avoids the attempts like forking or cloning.

Impermanent loss prevention

THORChain provides insurance to the liquidity providers against any impermanent loss.

How does THORChain work?

THORChain adapts a protocol called Continuous Lending Pool that enables the cross-chain exchange of crypto tokens. It deposits all the non-native, THORChain-supported cryptocurrencies to the liquidity pool with THORChain’s native currency, RUNE. The network model releases tokens from there for cross-chain exchange. Let’s further elaborate on the mechanism of THORChain.

Whenever a user initiates the cross-chain exchange or the exchange between two non-native crypto assets, the protocol system at THORChain automatically exchanges that particular token into RUNE. It again exchanges the RUNE for the token that the user is entitled to receive in return. Essentially, the THORChain protocol offers instant double swapping through a non-custodial approach.

THORChain utilizes the Proof of Stake consensus mechanism where staking of RUNE token is required to achieve overall system reliability. It allows users to earn yields based on their deposits into the network’s liquidity pools. This deposited amount is available for other users who may need to borrow it. The THORChain network also incentivizes the nodes for validating the swaps. There are nearly 100 to 300 validator spots on the THORChain. For earning a validator spot, the interested validator needs to bond at least 1 million RUNE. These nodes are hosted with an added layer of security to prevent potential troubles on the network.

What THORChain Development Services Can LeewayHertz Provide?

At LeewayHertz, we build and deploy enterprise-grade blockchain solutions for startups and enterprises. Based on the project demand and clients’ requirement, we build solutions on new-age blockchain protocols like THORChains, untapping new capacities, technologies and possibilities for blockchain projects. Our developers’ technical orientation of emerging blockchain technologies , combined with their development passion and expertise, ensure that your project vision and requirements are satisfactorily met at LeewayHertz.

Using the interoperability technology of THORChain, we can develop robust solutions such as interoperable smart contracts, multi-chain dApps, decentralized bridges, and other for blockchain projects, requiring cross-chain asset swapping and sharing of data & resources.

THORChain’s Roadmap Ahead

The core functioning of THORChain empowers cross-chain liquidity networks. However, the architecture of THORChain’s protocol enables many benefits besides multi-chain asset swapping. Like it offers self-paying loans, composites, synths, and much more. The network is set to announce a multi-chain mainnet on the THORChain along with a suite of ‘ThorFi’ products for improved user experience.

THORChain also offers a wide range of robust tools invented, tried, and tested by a core team of developers who aim to provide various reliable resources for development enthusiasts. The tools range from THORSTARTER, THORChain Explorer, THORCHADS, and many more. With these benefits, THORChain positions among the top-performing blockchain networks.

If you are looking for a development partner to support you cross-chain projects, then we would be happy to assist you. Connect with our blockchain experts to discuss your project.

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Author’s Bio

Akash Takyar
Akash Takyar
CEO LeewayHertz
Akash Takyar is the founder and CEO of LeewayHertz. With a proven track record of conceptualizing and architecting 100+ user-centric and scalable solutions for startups and enterprises, he brings a deep understanding of both technical and user experience aspects.
Akash's ability to build enterprise-grade technology solutions has garnered the trust of over 30 Fortune 500 companies, including Siemens, 3M, P&G, and Hershey's. Akash is an early adopter of new technology, a passionate technology enthusiast, and an investor in AI and IoT startups.

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