Here are a bunch of different blockchains that serve as their own ecosystems. Think Ethereum, Solana, and Avalanche. Now, these different ecosystems all serve different purposes. They are specialized to suit different needs and requirements. One chain will not be the be-all and end-all, many different chains offer different benefits, and that’s how crypto will get to that next level. Multi-chain is the future.
However, the issue we face right now is that these blockchains can’t easily interact with one another. The movement of funds, the replication of apps, and the interaction between protocols are roadblocked due to this lack of interoperability.
An easy analogy to help you understand is to imagine you wanted to call a friend, but he was on a different phone provider, and that meant you couldn’t give him a call. Cell phones would never catch on. That’s like crypto’s cross-chain communication problem that many projects are looking to tackle.
In today’s piece, we will focus on THORChain’s little sister, THORSwap, a project integrated with THORChain that has its own token, THOR.
Settle into this piece to get a brief overview of THORSwap, how it works, and what the token THOR is used for.
What is ThorSwap?
THORSwap: Swap all your tokens on a single DEX.
THORSwap is a decentralized exchange (DEX) that leverages the THORChain network to connect multiple blockchains. The exchange allows users to swap native assets across chains using a series of liquidity pools interconnected by the base asset, RUNE (the native utility token of THORChain). THORSwap’s native token THOR can be staked by users and used in liquidity pools.
What is THORSwap in a single sentence? Uniswap but with multiple chains.
Before we go further, let’s clarify and understand some key terms to ensure we have a good grasp of the different concepts.
Decentralized Exchange
A decentralized exchange is a marketplace where users can buy, trade, and swap their cryptocurrencies. It’s similar to an exchange like Coinbase or Binance, but instead of a central authority controlling the funds and pooling together the capital, the capital and governance are controlled by the community. Users provide the capital (liquidity), and infrastructure known as automatic market makers facilitate the swaps.
Liquidity Pools
In simple terms, a liquidity pool is a collection of tokens locked in a smart contract. They allow for lending, trading, and other functions by providing liquidity.
Automated market makers
Automated Market Makers enable on-chain trading without requiring a direct counterparty to complete trades. Instead, you are completing the trade against the liquidity pool’s liquidity. So, as long as there’s enough liquidity in the pool, the buyer can buy, even if there’s no seller present at that moment.
What is the THOR Token?
THOR is an ERC-20 utility and governance token for the THORSwap application. THOR offers a robust revenue capture/value accrual model. Users can stake their THOR to earn a high APY, and use their THOR to vote on proposals.
The governance is pretty simple, but in short, by staking THOR, stakers get vTHOR which earns them voting rights, revenue, and other perks on the THORSwapplatform.
What’s the difference between RUNE and THOR?
RUNE is used to incentivize people to provide liquidity to THORChain. THOR is used to incentivize trading activity on the THORSwap platform. They have a symbiotic relationship, and the success or failure of one can have a direct effect on the other.
