Router Protocol Attempts The Holygrail of CrossChain Interoperability

Router protocol (ROUTE) is a cross-chain infrastructure that enables frictionless trades and swaps between assets operating on different networks.

Up to early 2020 when Ethereum basically ruled the world of smart contracts on the blockchain, cross-chain was hardly a word mentioned in the crypto world.

Don’t get me wrong.

There were numerous “Ethereum Killers” on the horizon. But they were all still in their infancy and could hardly really challenge Ethereum in the mega ecosystem that ETH had built.

And as months slowly crept by, new mainnets started to go online to chip away at Ethereum’s market share. Nevertheless, up to this point, people still generally felt that it was near impossible to take on ETH due to the first-mover advantage which ETH milked to the heavens.

That was until BInance smart chain (BSC) came to the fold and exploded onto the mainstream in a manner that I believe even took CZ by surprise. Even though BSC is essentially a fork of Ethereum, the much reduced gas fees was what people have been begging for for a while.

Because of the success of BSC, the mentality of industry watchers started to change dramatically.

No longer was ETH untouchable. Disrupting the disrupter was not a pipe dream after all. Add to that the ever-increasing gas fees that Uniswap users are complaining about, it was like a boxing champion finally showing some signs of jelly-leg weakness that could be exploited.

Soon other networks started to get swamped by investors and speculators. The tokens of some notable networks like Solana, Algorand, and Cosmos stormed to billions of dollars in market capital. Polygon (formerly MATIC) also made a grand entrance with the promise of layer 2 scalability at a super tiny fraction of Ethereum gas fees.

There were now multiple chains that developers were building on with various tokens and coins that run on these different chains.

An obvious problem has now presented itself to anyone who doesn’t think with their backsides. How will these networks communicate with each other in the transfer of tokens and assets.

From a user perspective, it was relatively easy to move assets to another network. It just takes a few clicks of the mouse or touches on the smart phone. It is the multiple transactions that would incur gas fees that was the problem.

Yet in this innovative space, people knew that someone somewhere would be working on the solution ASAP.

The team at Router Protocol saw this problem first hand when working on developing their flagship project DFYN. DFYN is a decentralized exchange (DEX) that embraces the low transaction costs of Polygon. The experience inspired them to work on an innovative approach to bridge the movement of assets and liquidity from different chains with one simple transaction, utilizing the native token ROUTE.

The infrastructure that would enable this is called Cross-Chain Liquidity Protocol (XCLP). And it works by allowing contract level data to seamlessly be ported from blockchain to blockchain. This means that it’s going to work whether it’s layer 1 or layer 2.

The enterprise and innovation of the team towards this project has attracted various big-name venture capitalists and investors such as Coinbase Ventures, Alameda research, Wintermute, etc, to invest in Router Protocol. These players knew that the issue of cross-chain must be solved for the industry to evolve. The decentralized world does not deserve such rigidity.

Some other investors include Polygon, Algorand and Terra. No prizes for guessing whether they would integrate with Router.

While ROUTE is well on it’s way to present the solution of cross-chain portability to the market, it must be noted that they are not alone in this quest. You can bet that there are other projects going on that are focused on this issue.

There are already some well-known bridges on the market. But they are unable to extend their tentacles throughout the industry as they are mostly focused on bridging specific chains.

The issue of interoperability is so glaring and obvious that many would attempt to solve the problem if a solution is not available soon.

So speed of implementation and adoption is critical for the success and longevity of Router Protocol. Mainnet has to go online as soon as possible and they have to blitz the market in the mould of how Polygon did it. The tentative date for mainnet launch is currently set for 27th January 2022.

Among the many milestones, notable ones include an enhanced testnet that goes live in December 2021 after the launch of the initial testnet towards the end of March 2021, obtaining a grant from the Terra blockchain, and the $4.1m raised from reputable VCs as mentioned earlier. The team also seems to have a strong link with Polygon, emphasized in the numerous collaborations they have conducted with them through ROUTE and DFYN.

Because of the affiliation with DFYN as mentioned earlier, it’s no surprise that ROUTE has a special relationship with this particular DEX. DFYN currently offers attractive rewards for providing liquidity on the ROUTE/DFYN pair on the exchange. And the liquidity token can be used to mine for even more rewards.

Quote a juicy APR for a liquidity mining pool I must add.

Key factors for success

A huge adoption drive needs to be executed to put ROUTE tokens into as many wallets as possible, as fast as possible.

There’s also the unspoken effect of VC involvement. While partnerships and integrations are often predicted between entities within the portfolio circle of a VC, it can also mean that a business can be totally left out of partnership opportunities with companies that are linked to other VCs with no involvement in ROUTE. This can be even more probable when we consider that there will be other projects that would be tackling the same space Router is immersed in. When they are backed by other VCs, they would be inclined to link up with other companies in the circle of those VCs, thus possibly looking past integration with ROUTE.

It cannot be stressed enough that the speed and magnitude of adoption is a critical factor that will determine how huge Router Protocol can grow into. At least they would probably be able to call on the inputs of Polygon which has exploded onto the scene in 2021. They knew that there were numerous layer-2 projects getting online in the near future. So a grand entrance would go a long way towards it’s success and sustainability in the long term.

While this project started off as crosschain, the future of crypto is more likely to be multichain. The team seems to have slowly recognized this and adjusting their strategy accordingly. I’d think that the big investors coming on board might have played a part in this adjustment in direction.

Getting more and more DEXes on board is also critical in growing the ecosystem.

The good thing is that DFYN would definitely be on board. It’s even used as a real-world testing ground for ROUTE. And DFYN is no slouch in this space, consistently ranking among the top 50 DEXes in terms of volume.

Interestingly, this can also presents a concern for others. Will the team dedicate their resources on DFYN or ROUTE? There’s already a hint of this as the price of DFYN has tanked ever since ROUTE gained more exposure. Is this because DFYN has been neglected like an older brother in favor of the infant? Will the company which is headquartered in Singapore suffer a recurring bout of shiny-object syndrome and jump on the next hype project when they see it?

What price can ROUTE reach?

The maximum total supply of ROUTE tokens is 20,000,000. It currently trades on Kucoin, and DFYN.

There is currently no established player in this specific niche other than maybe RUNE. So it’s difficult to estimate how the market would price ROUTE. It’s no cluster of players to benchmark ROUTE against.

This can be observed with a wild swing of ROUTE prices from about $1 to $15 and back down within weeks of trading. There’s even a day when it hit $59 on Kucoin in October 2021.

The prices that ROUTE would be able to attain would be heavily dependent on what category of functions and services they bring to the table. If the crypto world classifies it as a bridge, getting out of a $100m market cap can be a challenge by itself. If they see it as a self-sustaining network that operates like a layer 2, then the potential price bracket expands exponentially.

The team appears to be on this track as they are building their own chain which would be deployed in Q4 2021 as described on the roadmap.

But I’d say that even though ROUTE compliments Polygon in a technical way, the use case of it is very comparable to what users are using MATIC tokens for. So I don’t think that in a best-case scenario, seeing ROUTE hit one-tenth or two-tenths of Polygon’s market cap is too optimistic. Some might actually find it a very reserved forecast.

This means that if Polygon hits $2, it’s not out-of-this-world to see ROUTE at $100-$200 if they are able to build a bustling ecosystem around it. By comparison, THORChain which is also a cross-chain juggernaut currently has a full market cap of about $3.5b, a number which would also put ROUTE in the $100-$200 range. Interestingly in a Medium post,  Router finds THORChain as the closest competitor in terms of the similarity of features on the network.

I’m actually a little stunned to see this price tabulated even though I’ve already had this pricing methodology in mind when starting this writeup.

For some reason, I find it highly unlikely for ROUTE to reach such prices… at least in the short to medium term.

If the objective of this project was to solve the problem of gas prices from the onset, then logic would say that gas prices on ROUTE chain would be as low as Polygon or at least comparable to it.

If that is the case, just 0.001 ROUTE token might be enough for the average crypto investor to last a lifetime of trading. So would there be a demand forceful enough to push the token prices upwards?

Or would the team choose not to compete on gas fees and actually charge more for the convenience factor? Then see themselves self-destruct like Ethereum with high fees.

We should have a general idea of the price potential come mainnet in January 2022.