THORChain is a decentralized liquidity protocol that allows swapping native assets between different networks.
The history of THORChain started in 2018 when a team of developers took part in Binance’s hackathon, aiming to create an independent blockchain that could facilitate cross-chain transfers. In July 2019, the first THORChain product hit the market, it was BEPSwap, a decentralized exchange built on Binance Chain L2, that allows to swap and earn a yield on BNB and BEP2 assets.
Currently, THORChain operates in its limited mainnet edition called Multi-Chain Chaos Network (MCCN), which was released in April 2021. MCCN enables cross-chain swaps across the Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Binance Chain networks. Under this version, staking is capped until the functionality of the protocol will be verified. After the mainnet will be deployed the limit will be eliminated.
THORChain is built on an independent blockchain using Tendermint and Cosmos SDK. It uses a liquidity pool model similar to Uniswap, where its own native token is used in each transaction as an intermediary. The Bifrost Protocol helps to swap assets from different blockchains, working as a cross-chain bridge.
There are four key roles to participate in the THORChain network: liquidity providers, swappers, traders, and node operators. LPs add liquidity to pools and earn fees and rewards; swappers, who pay fees, use the liquidity to swap assets; traders pay fees to monitor pools and rebalance continually in order to make profit; and finally, node operators provide a bond and are paid to secure the system.
Swaps on THORChain work in a non-custodial and permissionless way, so the traders don’t lose ownership of their tokens in the process until the swap is finalized. The network uses the Tendermint BFT consensus model, according to which two-thirds of the nodes need to agree on each transaction. And another technology, Threshold Signature Scheme (TSS) helps to sign transactions without delegating private keys to a node.
THORChain also has a Proof-Of-Stake (PoS) mechanism implemented. The process of staking RUNE is called bonding on THORChain. The lowest bond needed to run a full node is 302,506 RUNE worth $1,424,056 at the time of writing. And the maximum number of nodes is limited by the total supply of RUNE available.
To prevent the situation when the node that bonded the most RUNE is always signing transactions, THORChain uses a process called churning to organize the active nodes. Every 50,000 blocks the oldest and the most unreliable nodes are replaced from the active set by the nodes from the standby set. This helps to ensure that each node on the network will get its chance to sign transactions and to earn interest, that is, of course, if they have enough RUNE to stake.
THORChain also implemented a model of Continuous liquidity pools (CLPs) to provide permissionless and incentivized liquidity for nodes and LPs. Thanks to CLPs traders have access to liquidity without the need to find or contact another buyer or seller. The assets are stored in separate vaults on each blockchain involved in the transaction.
The THORChain use cases include trading of digital assets from one chain to another in a decentralized manner, with no custodians and no wrapping of tokens. Users can also earn yield on their assets in a decentralized manner by providing liquidity. The difference between normal liquidity pools and THORChain liquidity pools is that the latter includes one more user group namely THORChain nodes. Users running nodes both to secure the THORChain and run a node for each supported blockchain.
Users who want to interact with the THORChain app need to utilize a UI such as Thorswap. To connect to it, they need to acquire a wallet THORChain supports, currently such are the community-created wallets - THORWallet and XDEFI, however, the network also supports other apps like Trust Wallet and Keustore Ledger. Once the wallet is connected to the UI, users are free to explore the THORChain ecosystem and execute swaps, provide liquidity, withdrawal assets etc.
The THORChain fees are designed to reflex the costs of the network to complete users’ requests and in cases where nodes are required to pay for outgoing transactions to other blockchains, they subsidize back the final gas costs into the outgoing blockchain’s liquidity pool on the network, by paying RUNE tokens from the reserve. A detailed explanation of how THORChain fees are calculated can be found in the project’s documentation webpage.
THORChain network heavily relies on its native token, RUNE. This asset is bonded to secure the network and is used as a settlement asset in each transaction to enable liquidity among pairs of swapped tokens. The rewards for nodes and LPs are paid in RUNE as well. The token also functions as a governance token, and is used for charging fees on the network as well as to subsidize gas fees for transactions to other blockchains.
The THORChain RUNE token is pooled equally with other assets in liquidity pools meaning their value affects the RUNE value as well, which is why the system constantly keeps track of tokens’ price fluctuations and reflects it by changing the amount of RUNE tokens in liquidity pools.
The maximum RUNE supply is limited to 500,000,000, with over half of it now circulating. 25% of circulating RUNE is locked in THORChain.
THORChain RUNE token can be purchased on centralized exchanges like Crypto.com and ProBit.
THORChain RUNE token can be purchased on decentralized exchanges like Binance DEX.
It is up to you where to buy the RUNE token. It is worth taking into account that decentralized exchanges allow you to do this anonymously, you do not need to pass KYC procedures to use them, on the other hand, the cost of transactions may be higher than on centralized exchanges, while there is a risk of your funds being held by the exchange.
To understand if THORChain is a good investment and try to make a RUNE price prediction, you need to do your own research on the project.
All the data for research is available on the project page on our website: check out the technical features of the project in this review, try to use the app, see if the information about the team is available and the team is open for communication, and using the project dashboard and the RUNE price chart, assess the project usage rates as well as the token price movement and the number of its holders.
The THORChain team is mostly anonymous. The project has no CEO and no founders, there are no payments to the core developers team, and the ongoing development is powered by economic incentives for nodes and liquidity providers.
THORChain is also deliberately limiting its governance system. The network is crafted with the thought that nodes do not need to communicate with each other. This security measure helps to ensure that node operators will not act together or take control over the network.
In July 2021, two serious incidents occurred on THORChain in a two weeks span.
On July 15, a hacker was able to steal approximately $4,9 million of crypto assets in Ether and ERC20 tokens due to an exploit. As was explained by the dev team, Bifrost was tricked using a custom wrapper to read a deposit amount of 200 ETH when it was actually zero. When a community developer noticed this issue, anonymous nodes voluntarily made commands to stop their nodes to protect the network. The whole network was halted, once more than one-third of the nodes had stopped.
On July 23, soon after the network recovered from the previous hack, THORChain lost $8 million due to a similar exploit. A hacker tricked Bitfrost protocol using a custom smart contract to deposit fake assets later to receive real assets in return. ETH bridge on THORChain has been halted since.
THORChain was audited by CertiK in April 2020, Kudelski Security in June 2020, Gauntlet in June 2020, IOActive in November 2020, and Gauntlet in November 2020
While THORChain is supported by a team of core developers, all the members of the community may take part in its development. Among such independent projects augmenting the network, there are THORChain Explorer, ThorWallet app, ThorSwap multi-chain DEX, liquidity relayer and IDO platform ThorStarter, and Brokkr, providing native THORChain Synthetic assets. Projects such as RUNE Data and RUNEStake.info help to simulate profit and loss for various pools and to visualize liquidity positions and rewards for holders. One of the latest services added on THORChain is the ThorName Service, allowing users to use human-readable names on the network.
In February 2021 Multicoin Capital revealed it accumulated a large position in RUNE. According to Messari.io, Delphi Digital and Zee Prime Capital are as well among the investors of THORChain.
The list of THORChain-compatible wallets includes Trust Wallet (iOS and Android), Binance Chain Wallet, Metamask (only ETH or ERC-20 assets), xDeFi Wallet (Chrome/Brave), Ledger, Keystore File, Asgardex Electron (desktop wallet), and KeepKey ShapeShift (hardware wallet).
The latest THORChain roadmap includes releasing the mainnet and adding unlimited staking to the blockchain, although no further details are shared and the team states no dates are final, the updates are scheduled for Q1 2022.
Aave will integrate Chainlink's Proof-of-Reserve, further increasing the platform’s security
Dec 23, 2022
Uniswap's governance proposal accepted
Dec 22, 2022