ROUTE 2.0: Chain Abstraction by Building the Middleware for Web 3.0

12 min readJan 28, 2024

Background:

The rise of DeFi (decentralised finance) and the necessity for seamless value transfer across various L1 blockchain networks laid the foundation for Router Protocol in late 2020. Since then, Router has embarked on a remarkable journey marked by dynamic shifts and groundbreaking discoveries in the interoperability space. What started as a simple Proof-Of-Authority (less decentralized) bridge, Router Protocol, as envisioned today, has evolved into a highly secure, scalable, and customizable interoperability and dev tooling layer for truly growing Web 3.0.

The project’s focus now adds an exciting prospect of fostering a collaborative ecosystem of interoperable dApps that abstract away the chain complexities for the end user. The potential for a thriving network of developers and a community converging around Router Chain can become a hub for innovation.

Router So Far:

Router started as a 4-member project and has since expanded into a 50+ member team. Router Protocol’s valuation has surged from a seed round at $3.5 million to trading at $90 million now. We’ve successfully closed over 200 partnerships, processed over $1 billion in cross-chain volume, and garnered support from industry giants such as Coinbase Ventures, Wintermute, Polygon, Woodstock, Shima, MapleBlock, DeFi Capital, and QCP Capital, as well as multiple angels and crypto founders. With most investor vesting complete, we have witnessed strong ownership and long-term support from our stakeholders.

In the Immediate Future:

The next few months are going to be incredibly exciting. We’re just getting started with intents and the broader chain abstraction narrative, and the concomitant ecosystem growth. We can’t wait to see how our community and partners build on top of the interoperability framework (CCIF) we’ve created.

🚀Router Nitro — the world’s most gas-optimized, highly capital-efficient and fast asset bridge powered by our innovative reverse-verification flow. With Router Nitro, users can experience lightning-fast <15 sec bridging and avoid honeypot risk — no TVL lockup required!
🔒StakeEase coming SOON — ONE click RESTAKING from ANY chain and ANY asset. StakeEase emerges as a restaking aggregator, tapping into the current market meta of Restaking. Mainnet Launch expected before the next LST/LRT cap increase — early Feb. Partnered with protocols like Kelp, SuperMeta, and others. Most of our ecosystem projects will be rewarding the Router community in the future.
🎯Going BIG on Intents — We recently released our cross-chain intent framework CCIF. It enables users to submit ambiguous intents, like “Stake my USDC,” which are subsequently translated into executable cross-chain workflows optimised for speed, cost-effectiveness, and reliability. Launching 20+ adapters in 1Q24 tapping major protocols — Lending like Aave, DEXs like Uniswap, Liquid Staking like Lido, and others.
🌉Router Chain full public mainnet in 2Q.
🚀Ecosystem of IDapps BLASTING OFF — Several new Interoperable DApps (IDapps) being built including restaking, lending/borrowing, gamified ordinals, and an NFT marketplace. Route token stakers will be ELIGIBLE for ecosystem project rewards.

ROUTE 2.0 Tokenomics for Sustainable Growth:

At Router, our unwavering commitment has always been towards the growth and steadfast expansion of the interoperability ecosystem. To fortify the development and launch of our chain ecosystem, we strategically onboarded several industry experts with extensive backgrounds in prominent ecosystems like Polygon, Injective, and others. As we confront the financial intricacies associated with Router Chain, a recalibration of tokenomics is a strategic move to ensure the sustainable development of the ecosystem and, thus, imperative. We believe this phase is a launchpad propelling Router Protocol into a future where boundaries between chains dissolve and Router Protocol’s interoperability reigns supreme.

Our ROUTE 2.0 tokenomics have been meticulously thought out with an emphasis on higher accountability and a focus on long-term value creation. We’ve identified three major areas requiring additional tokens: 1) Staking Rewards, 2) Ecosystem and 3) Foundation

One important point to note across all vestings is that except Validator rewards, no new tokens from the proposed categories will enter circulation before June 2025.

Staking and Validator Rewards:

Objective: Incentivize validator onboarding and active participation. Staking rewards attract long-term holders and increase network security.
Proposal: Implement a 6–10% inflation, subject to community voting and adjusted based on market conditions. Please note we are evaluating all developments in the ecosystem and, at the appropriate time, would transition to L2 or utilize restaking security, etc., if required. At the time we transition to an alternative solution, these rewards and inflation will no longer be required.
Important note: As per the current standards in the Cosmos ecosystem, the staking rewards are given to the community via staking. Validators typically charge a small percentage of rewards, like 5% of the staking rewards. This means ~95% of these tokens will go back to the community who stake their tokens. Essentially, the winners from this are the community. Popular projects that implement staking in the Cosmos ecosystem are ATOM (Cosmos Hub), OSMO (Osmosis), and INJ ( Injective).
Historical context: Due to a lot of bridges getting hacked and bridges contributing to a large supply of the total hacks across the industry, we decided to build a decentralized cross-chain bridge, and for that architecture, we have built PoS staking is necessary as it provides economic security to the interoperability blockchain. Had we chosen to continue with a vanilla, PoA bridge, this would not have been required. But most of the institutional players, aggregators, large projects, and sophisticated players do not integrate PoA bridge, rightly so, because they are a bit centralized.

Router Foundation:

Objective: Allocate resources for strategic fundraising to support early-phase project grants, audit expenses, salaries, audits, influencer onboarding, and marketing expenditures in USDC and other day-to-day operations.
Proposal: Allocate tokens, with no tokens vested in the first year and the rest vested quarterly over the four years. This allocation aims to support development and growth expenses, recognizing the inherent costs associated with building a blockchain.
Historical Context: The foundation has currently spent almost $1,000,000 on the multiple audits of leading auditors like Informal Systems, Oak Security, 0xCommit, Zellic, Hacken, Halborn, and Certik. We also paid over $200,000 to secure the network with the help of bug bounty hunters at ImmuneFi and direct reports. Our commitment to security has worked well, and there have been exactly 0 instances of funds getting compromised. We have spent over $750,000 in engineering & infra costs. (looking at you, AWS bills) We also want to build a world-class research team to further propel our growth. Our team is also nearly 50 members big, and there is a monthly cost associated with it. Our last fundraise was nearly two and half years ago, while many projects that raised funds at that time have shut shop and pivoted, we have relentlessly pursued our mission to build the connecting glue, the middleware for enabling seamless interoperability in web3.

Ecosystem Grants & Community Incentives:

Objective: Incentivize ecosystem growth and community adoption for early-stage projects utilizing Router’s interoperability stack to build natively interoperable primitives and thereby enhance the usage and adoption of web3 dapps. Includes allocation towards funding public goods, builder & developer incentives, community grants, user acquisition, marketing & listing initiatives.
Proposal: Allocate tokens, with no tokens vested for Year 1 and the rest vested quarterly over the four years. These tokens will form the ecosystem reserve, supporting the development of early-late stage projects and other growth platforms within the Router ecosystem.
Historical context: The valuation of the blockchain is directly proportional to the size of the ecosystem it supports. Ethereum, being home to a large developer and user community, is the highest-valued blockchain simply for the fact that it has a burgeoning ecosystem of Dapps. There are a lot of chains that have claimed that they are technically more advanced or superior — but that is not enough. That being said, Router Protocol must strive to build a large ecosystem of projects. In that direction, we are incubating a project called StakeEase which is a cross-chain re-staking aggregator, Lendara which is a cross-chain lending/borrowing protocol, a cross-chain NFT marketplace, and a few more which are building in stealth mode. The projects will be part of Router Protocol’s ecosystem and would welcome and reward the Router community appropriately. We recently onboarded our Head of Ecosystem, who has previous experience in building ecosystems at projects like Near.

ROUTE v1.0: The Router team proactively addressed the maturity of $ROUTE tokenomics v1.0 in 2021. Recognizing the need for alignment with industry standards, the vesting duration was extended to 4 years (from the initial vesting of 9–18 months) for most categories (including team) in 2022, steering the project towards a more robust and sustainable path.

In the current v1.0 tokenomics situation, we have roughly 5.6 million remaining tokens of $ROUTE. Of these, 3.6 million tokens are already committed and under vesting for advisors, teams, project grants, and investors. Setting these aside, we are left with roughly 2 million tokens to allocate across various activities. From the 2 million surplus of ROUTE 1.0 token emissions, we’ve allocated 1 million to Ecosystem Grants (including community incentives for 2024) and 1 million to the Router Foundation. This strategic distribution underscores our commitment to sustainable growth and innovation in the decentralized space.

Route 1.0 Tokenomics Distribution:

Proposal 1: The proposal implies a 7.5M new supply addition, with vesting starting one year after Chain TGE/transition, and then vesting over the following 4 years

The token split, as well as all and any approved tokenomics changes, will only happen after chain TGE, and there will be no supply changes in the current ERC-20/Polygon token. Router Chain TGE is currently scheduled for sometime in Q2 2024

Note: If this proposal passes for every 1 ROUTE token, there will be a conversion to 36.36 new ROUTE tokens. There will be no new tokens circulating for the first year from the migration except the validator rewards — which are meant to reward the stakers in the PoS chain. Validator rewards will only start after the chain TGE/transition.

For the ecosystem, our vision is to support at least ~100 projects over the next 5 years, split across different ecosystem verticals. In addition, we intend to keep at least a similar size of token supply for community incentives, which would combine the ecosystem grants & community incentives. The ecosystem grants will be milestone-based, and a dashboard will show the status of milestones and disbursements. 1M ROUTE incentives will primarily be directed towards developer incentives for derived applications using Router CCIF.

From the Foundation, we intend to support chain & ecosystem project audits, developer efforts to build public goods projects, market makers, audits, salaries, and others.

From the Core Contributors, we want to onboard new world-class developers, marketers, and researchers.

Route 2.0 New Token Emissions Schedule (staking rewards subject to community vote annually):

Staking Rewards: This is an estimation based on 6–10% inflation, subject to community voting and adjusted based on market conditions. Please note we are evaluating all developments in the ecosystem and, at the appropriate time, would transition to L2 or utilize restaking security, etc., if required. At the time we transition to an alternative solution, these rewards and inflation will no longer be required.

Proposal 2: The proposal implies a 10M new supply addition, with vesting starting one year after Chain TGE/transition and then vesting over the following 5 years

Note: If this proposal passes for every 1 ROUTE token there will be a conversion to 33.33 new ROUTE tokens. There will be no new tokens circulating for the first year from the migration except the validator rewards — which are meant to reward the stakers in the PoS chain. Validator rewards will only start after the chain TGE/transition.

For the ecosystem, in addition to Proposal 1 supply emissions proposed above (5M), the extra 2M ROUTE incentives will primarily be directed towards onboarding large existing DeFi and Gaming projects to build on top of Router’s interoperability solutions. The extra 2M tokens buffer would allow us to onboard exciting new projects like StakeEase and Nitro. We want to set up an incubation center for cross-chain development where the projects will build interoperable DApps on top of Router and then further reward the Router community. The extra tokens also allow us to more aggressively go after new L1/L2 ecosystems.

From the Foundation, we intend to support chain & ecosystem project audits, developer efforts to build public goods projects, market makers, audits, salaries, and others.

From the Core Contributors, we want to onboard new world-class developers, marketers, and researchers.

Route 2.0 New Token Emissions Schedule (staking rewards subject to community vote annually):

Conclusion: The proposed ROUTE 2.0 tokenomics reflects a strategic and comprehensive approach to token supply adjustments. By breaking down the allocations into specific categories, we aim to enhance transparency, accountability, and community involvement. This proposal seeks to create a positive-sum game, fostering sustained growth and long-term value for the Router community.

Monetary Policy Changes — Historical References:

The concept of a finite token supply has been a longstanding narrative in the crypto space, championed by OGs & influencers since Bitcoin’s inception over a decade ago. However, as the crypto industry has continued to evolve beyond just speculative use cases in the last few years, certain projects have strategically embraced token emissions to catalyze growth. Incentives such as staking rewards, retroactive airdrops, and other mechanisms directly reward active users and long-term holders, fostering a positive-sum game.

Several notable projects have successfully modified their token supply to achieve growth objectives:

In summary, these projects have demonstrated that a well-considered adjustment of token supply can be a powerful tool for achieving growth objectives, fostering community engagement, and contributing to the development of the crypto ecosystem.

Thoughts on the Tokenomics 2.0 Proposals

It is abundantly clear that as we make the transition from Router Bridge to Router Chain, both the challenges and the opportunities ahead are magnified. This vision around cross-chain abstraction and intents and the execution of this vision in terms of products such as Nitro and StakeEase has really energized the community, especially in the past few months. Looking past the current temporal turbulence and the FUD, it is our duty to inform the community and recommend what we believe to be the best course of action, keeping the long-term in mind. The easy decision at this point is to just say yes, there is absolutely no dilution. We can build out a chain with the exact same tokenomics as we built out a bridge. That will keep everyone (including the team and investors) very happy in the short term, but in the medium to long term, this will deny Router Chain the essential ballast it needs to propel itself to the next level in terms of achieving and fulfilling its vision. And remember, we are in good company here, as the table above shows, PoS transition and inflation have been judiciously deployed earlier as well to really take the project to the next level.

There is indeed going to be a ‘fast money’ trading-focused constituency that is only going to look purely at the headline inflation number and immediately rush for the exits. However, our hope and belief is that the vast majority of the community will look at this from a ‘total addressable/capturable value’ perspective and continue to support us as we build out the next phase of this transition from bridge to chain. We have been building in crypto for a while, and are building Router for the long term. Additionally, it is important to reemphasize that none of this proposed inflation is hitting the market until one year after the chain launch, so there is no real additional inflation starting at least for the next 15–18 months.

The suggested inflation, especially in the way in which they are going to drip into the various categories over the next several years, will give Router Chain a good chance of capturing the Metachain narrative even against some of the more biz dev driven, technically inferior competitors out there who have pulled in a fair bit of capital. Router Nitro is now the bridge, and we have all seen its best-in-class capabilities. Other ecosystem projects building on top of Router Chain, as well as the multiple partnerships we have lined up, will similarly contribute immensely to Router. It will also allow us to continue to engage with the amazing Router community, including further rewarding long-term holders and supporters.

Head to our Proposal Portal here: https://vote.routerprotocol.com/#/proposal/0x612f33920fbc9867e72f36c621e8213d7b935d477f19287599321459d9e6c460