What is ROUTER PROTOCOL? (Overview, Consensus, Adoption, Tokenomics)

Router Protocol, also known by the market ticker ROUTE, is a cross-chain liquidity aggregator platform that aims to provide the best price across multiple blockchains, that can connect to any DEX or AMM.

The idea behind Router Protocol is to enable the ability to swap assets across different networks in a quick, cheap, and efficient manner.

The reason why a platform like Router Protocol exists is partially due to the risk of liquidity being spread too thinly across blockchains.

Currently, liquidity can be spread across multiple platforms like Ethereum, Avalanche, Polygon, Solona, and more.

The problem is, as the markets continue to grow, there needs to be a way to ensure liquidity is always available no matter which blockchain you are utilizing.

And that’s where Router Protocol comes in, by providing a service that will allow you to swap assets across blockchains.

So how does Router Protocol work? Today we find out!

Router Protocol was founded by four guys in 2020.

Router Protocol is designed to keep up with the ever-increasing supply demands of Decentralised Finance, by allowing for easy access to assets across multiple blockchains.

Router Protocol looks to facilitate the movement of assets between platforms to allow trading to continue uninterrupted and for a lower price than using an AMM or the individual blockchains, using smart contracts and stablecoins as their medium of exchange.

In short, Automated Market Makers allow digital assets to be traded in a way that is both automatic and doesn’t require trust or human oversight to function between strangers.

Additionally, smart contracts are pre-agreed contracts that execute automatically once the conditions have been met, without the need for trust or human oversight.

Finally, stablecoins are cryptocurrencies pegged to an underlying asset, such as the US dollar.

But how does Router Protocol work exactly?

Router Protocol is a multi-directional bridge that connects many layer 1 and layer 2 blockchains, which then allows for data and assets to be transferred between them.

For example, if you wanted to swap OP tokens on Ethereum, for CAKE on the Binance Smart Chain, say to take advantage of an arbitrage opportunity on the other network, Router Protocol would facilitate this using an algorithm to find the optimal path and price between the exchanges.

The way Router Protocol works is through the Super Mesh.

Instead of a direct 1-to-1 bridge, Router Protocol creates a mesh network where all chains are connected via the same set of router nodes. The result is a network that can listen for inbound transactions across all chains in the Mesh.

Because it is not a 1-to-1 bridge, new networks can be added to the Super Mash by having their networks configured to the Router Protocol nodes.

Router Protocol behaves similarly to projects I have spoken about previously. This is because Router Protocol was built using the Cosmos SDK.

The Cosmos Software Development Kit, or SDK, is a framework for building decentralized applications and custom blockchain networks.

It aims to simplify the development process by providing developers with modular tools, libraries, and pre-built components to streamline the blockchain creation process and ultimately ensure compatibility with other Cosmos SDK-built blockchains.

How these blockchains talk to each other is through the Inter-Blockchain Communication Protocol, also known as the IBC protocol.

Enabling this allows for the two different networks to communicate with each other, and move assets or data between them.

Lastly, we have Tendermint.

Tendermint is the Cosmos Proof-of-Stake variant that verifies transactions and maintains consensus on the blockchain.

Naturally, providing liquidity across multiple blockchains is the unique selling feature.

Though, one additional feature of Router Protocol is their Middleware Contracts Support.

To keep it simple, Middleware Contracts Support was what was missing and prevented smart contracts from efficiently working cross-chain.

Router Protocol’s Middleware Contracts Support allows developers to create custom modules for cross-chain data processing, which reduces the errors when transferring assets or data between platforms.

By adding this layer of flexibility and customization, applications like Decentralized Exchanges and lending platforms can improve their interconnectivity and the overall user experience.

As a Proof-of-Stake blockchain, the ROUTE token is used for all the Proof-of-Stake classics like staking, making payments, and governance.

In total, there will only ever be 20 million ROUTE tokens.

The distribution of ROUTE is as follows: In total 11% was sold during either seeding or private funding rounds. 15% was allocated to the Route Protocol team, 10% to partners and advisors, with 20% also going to the Router Foundation, which looks after the maintenance of the blockchain.

Then, 25% was given to the Ecosystem Fund, 17% went to the reward pool, and 2% was set aside for liquidity provisions – as in, to fund a liquidity pool in the case of an emergency.

These allocations are all released slowly over time to prevent inflation and crashing the price.

On paper, Router Protocol is an excellent idea.
It has a valid use case that could come in very handy should the landscape continue to grow.

This is because cross-chain compatibility is likely a required step in the evolution of cryptocurrencies to ensure it remains relevant and lives up to its full potential far into the future.

The question is, can it live up to the hype?
Can it successfully navigate the turbulent crypto ocean and survive any potential mishaps in management that may occur between now and the next bull run?

Of course, no one can say for certain, but assuming it can, Router Protocol has set itself up nicely for the future by providing a cheaper, more convenient way to exchange data and assets across multiple blockchains.

Ultimately, this reduces the fragmentation of liquidity, communities, and developers which have been spread across many different networks.