Written by:Paras Katoch

What is Thorchain | Rune Crypto | A true DeFi Gem?

Bitcoin was launched to make financial transactions borderless, transparent and immutable. After almost a decade, developers are working to create wider applications of blockchain technology by deploying it in gaming and other financial instruments like lending and borrowing in AAVE crypto etc.

thorchain

Despite initial success, the purpose behind the creation of cryptocurrency seems to be fading away into oblivion. It was supposed to be immutable and independent of third party interference. Unfortunately, that’s not the case today. The majority of users have to use centralized exchanges to trade cryptos, making cryptocurrency a controlled asset. Safe to operate, these exchanges aren’t meant to govern cryptocurrencies.

Although DEXes like Uniswap exchange & Pancakeswap Crypto exchange have addressed the issue to some extent. These exchanges are still limited to single-chain assets. It’s THORChain (Rune Crypto) that has brought the solution to the table by providing decentralized trading of multi-chain assets. Despite the initial setbacks, the project has some serious potential in the crypto space. Keeping this in mind, let’s raise our hammers and explore THORChain.

Table of Contents

  1. What is THORChain?
  2. What is RUNE Crypto?
  3. 2.1 Liquidity
    2.2 Security
    2.3 Governance
    2.4 Incentive
  4. THORChain Network Participants
  5. 3.1 Liquidity Providers
    3.2 Swappers
    3.3 Traders
    3.4 Node Operators
  6. How does THORChain work?
  7. THORChain Core Technology
  8. 5.1 Tendermint
    5.2 Continous Liquidity Pools (CLP)
    5.3 Bifrost Protocol
    5.4 THORChain Vaults
  9. THORChain Hacks
  10. 6.1 Hack 1
    6.2 Hack 2
  11. THORChain Wallet
  12. THORChain Benefits
  13. 8.1 Multi Chain
    8.2 Audited
    8.3 Low Competition
    8.4 Fits the Crypto Philosophy
  14. THORChain Drawbacks
  15. 9.1 Hack
    9.2 Anonymous Team
    9.3 Not Listed on DeFi Pulse
  16. THORChain RUNE Crypto Price
  17. THORChain RUNE Crypto Price Prediction
  18. Where to buy RUNE Crypto?
  19. Is THORChain worth Investing?

What is THORChain?

THORChain is a decentralized, immutable cross-chain liquidity network that allows users to trade cryptocurrencies across multi-chain assets using RUNE. The protocol is based on Tendermint BFT and Cosmos SDK, making it both scalable and interoperable. More about Tendermint and Cosmos SDK can be learned from my post on Cosmos crypto.

Founder:

The project was founded in 2018 by anonymous developers. It has 20 developers and the majority of the resources are created by the community members. Despite the anonymity, the project is transparent when it comes to publishing reports and development updates.

The project looks similar to Uniswap. However, there is a visible difference. While Uniswap is a single chain DEX supporting all ERC20 tokens on the Ethereum blockchain, THORChain is a multi-chain platform facilitating the trade of cryptocurrencies irrespective of the asset type (ERC20, BEP20, SPL etc).

Thorchain dashbaord
Thorswap Dashboard

Its multi-chain mainnet i.e Chaosnet was deployed in April 2021 with a mission to eliminate the need for centralized exchanges and institutions that limits the scope of cryptocurrencies by controlling the access to funds.

Team has planned to completely handover the control of the network to the community by 2022

What is RUNE Crypto?

RUNE is the native currency of the Thorchain network. It was launched in 2019 and play the following roles –

  • Liquidity
  • Security
  • Governance
  • Incentive
thorchain rune crypto

Liquidity:

RUNE is bonded with other assets in the liquidity pool like ETH-RUNE, BTC-RUNE etc. An increase in the value of the asset will automatically increase the value of RUNE. Therefore, the excess liquidity can be used to incentivise the liquidity providers (LPs).

Security:

Every blockchain uses a consensus mechanism to secure its network. Similarly, THORChain uses Proof of Bond mechanism to secure its network using RUNE. The nodes commit a bond (around 1 million RUNE) to be churned in. The bond is used to underwrite the assets in the pools, thus securing the assets. If a node tries to steal the assets their bond is deducted 1.5X times the asset they stole. Also, the bond will be slashed if the node misbehaves. Thus securing the assets in the pool

Governance:

RUNE is used in the asset listing and delisting process. Though the chain is governance minimal, it deploys a protocol that uses committed capital to signal priority listing which helps list the important assets faster than the others in the queue. The same goes in the delisting process called Ragnarok.

Incentive:

RUNE is also used to pay incentives to the liquidity providers and bonders by paying out emissions. THORChain computes the block reward and distributes it to the recipients using the Incentive Pendulum algorithm.

The total supply of RUNE is capped at 500 million

THORChain Network Participants:

Before understanding how the network works, it’s essential to cover the network participants –

  • Liquidity Providers
  • Swappers
  • Traders
  • Node Operators
Thorchain chaosnet

Liquidity Providers:

Similar to other DEXes, THORChain liquidity providers adds liquidity to the asset pools and in turn receive incentives and rewards from the network. They earn tokens in RUNE and the connected asset. For example, a liquidity provider depositing ETH in the ETH pool will receive RUNE and ETH as rewards as per the distribution algorithm.

There are various factors affecting the Yield like ownership percentage of pool, swap volume, size of swaps, incentive pendulum and change in asset price.

Swappers:

Swappers are the users that make use of liquidity pools to swap available digital assets on the network. Everything takes place in a decentralized manner without KYC requirements. All you need to do is connect the wallet to Thorswap and choose the respective pool to swap your token.

Thorswap

Once the pool is selected, enter the required token amount that you wish to swap and check the estimated fee before placing the trade. Check the image for reference –

THORchain rune crypto swap

You can also calculate the swap output by using the following formula, explained with example –

Thorchain Swap output
Swap Output

Traders:

Thorchain does not use Oracle like Chainlink Crypto to determine the market price of the assets. Instead, there are traders that find the mispriced assets listed on exchanges and trade them (buy or sell) for profit, seeking higher margins.

Therefore, high volume trades take place on the network which helps settle the price of asset by a simple supply and demand mechanism that matches the price of the asset with an exchange.

Node Operators:

As explained earlier, node operators provide bonds and are used to secure the system from hacks. When stable, they earn 67% of the income generated by the system. At the time of writing, there are 35 node operators and the capacity can go to 100 in the next few years. It’s important to note, once your THOR node is active, it will receive the revenue share for a month before being kicked out of the set. No one has the license to be a permanent THOR node.

1 million RUNE is required to become a node operator

How does THORChain work?

THORChain works similar to decentralized exchange with a little twist. All assets that are deposited in the liquidity pool are shared with RUNE. It is RUNE that is swapped in all trades behind the scene.

For example, if a user places a trade to swap Bitcoin with Ethereum. He has to place the trade first. Once the trade is placed, Bitcoin will be first swapped to RUNE and then RUNE will be swapped to Ethereum. The multi swap takes place behind the scene and the user will receive Ethereum after the applicable charges.

The nodes operated by node operators use proof of stake consensus mechanism to validate swaps and create pools for assets. At least two-third of nodes has to confirm the receipt of the swapped tokens in the pool address. Once confirmed the network will release the requested tokens back to the user.

THORChain Core Technology:

THORChain uses the following technology to ensure smoother network operations –

  • Tendermint
  • Continuous Liquidity Pools
  • Bifrost Protocol
  • THORChain Vaults

Tendermint:

THORChain is built on COSMOS SDK, therefore uses Tendermint BFT (Byzantine Fault Tolerance) consensus mechanism to validate transactions on the network. It is an advanced proof of stake consensus mechanism that can confirm transactions in the presence of faulty nodes.

Continuous Liquidity Pools (CLP):

CLP was first introduced by Bancor DEX. The system rewards the participants who supply liquidity in exchange for RUNE rewards. Traders can keep on placing trades which provides continuous liquidity to the pools. The protocol tracks the ratio of RUNE to assets held in CLP to maintain a fair price feed for the assets.

Bifrost Protocol:

Bifrost is a cross-chain bridging system. It uses proof of stake mechanism and CLP to create and secure these bridges.

Thochain work
Bifrost layer

THORChain Vaults:

Vaults allow THORChain to secure the assets. There are two types of vaults, Inbound (Asgard) and outbound (Yggdrasil). These are basically sharding mechanisms designed to help scale THORChain.

ASGARDEX is THORChain product that enable users to stake and swap BTC, ETH and Binance tokens from within their wallets

THORChain Hacks:

There were 2 infamous hacks on THORChain which forced the team to temporarily shut down the network for fixing issues in the THORChain smart contract. Here’s the summary –

Hack 1:

The first hack took away 2500 ETH worth $5 million along with some ERC20 tokens. Hackers created an Ethereum smart contract, falsely passing the asset deposit information against ETH swap. THORChain Ethereum smart contract approved the deposit of assets and transferred ETH from the pool to the hacker’s wallet. This happened multiple times that resulted in losing sizeable amount of ETH.

Hacker

Hack 2:

Adding insult to injury, within 2 weeks there was a second hack which resulted in the loss of $8 million worth of ETH and ERC20 tokens i.e USDT, USDC & SUSHI. The hacker created a copy of the THORChain Ethereum vault (Asgard). Hacker then sent real ETH to the fake vault using THORChain protocol.

The fake vault returned a deposit error and the protocol initiated refund from the real Ethereum vault, sending ETH back to the hacker’s wallet which resulted in doubling the hacker’s gains.

THORChain Wallet:

THORChain support multiple wallets. XDEFI and THORwallet are two famous community created wallets. The other wallers include Trust wallet, Keystore, Ledger etc.

Thorchain wallets

THORChain Benefits:

Multi Chain:

Unlike other DEXes like SushiSwap crypto or PancakeSwap. THORChain is a multichain liquidity provider which fits the use case of cryptocurrency, making them completely immutable, borderless and transparent compared to being open to manipulation by centralized financial exchanges.

Audited:

THORChain is audited by the top auditors in this space i.e Certik and Gauntlet. Scoring well over 90. It is one of the safest platforms to swap and deposit cryptos.

Thorchain certik audit
Certik Score

Low Competition:

There’s little to no competition for THORChain. Most of the decentralized exchanges are built on Ethereum or Binance Smart Chain, supporting ERC20 and BEP20 tokens but THORChain supports assets of every chain known in the crypto space (expansion in the process).

Fits the Crypto Philosophy:

THORChain team is all set to handover the control of its network to the community in 2022, making it completely decentralized and transparent. This is inline with the philosophy of creating Bitcoin i.e taking back control of the money from institutions and giving it to individuals.

THORChain Drawbacks:

Hack:

The worst thing that can happen to exchange is hacking. Even worse, THORChain was hacked twice which drained a total of $13 million worth of crypto assets from its liquidity pool. It did thwart the growth of its ecosystem and has brought down the adoption rate.

Anonymous Team:

Although THORChain’s development and report updates are fairly transparent, the project founders are still anonymous. It may not affect the existing crypto community but it may be a cause of concern for new crypto investors.

Not Listed on DeFi Pulse:

DeFi pulse is the face of finance based crypto projects. All the top projects are listed on it along with the details that an investor needs before investing in the top DEXes. Unfortunately like 1INCH DEX aggregator, THORChain is not yet listed on DeFi pulse which prevents it from coming into the limelight that can spur the adoption rate.

DeFi Pulse
DeFi Pulse

THORChain RUNE Crypto Price:

Please check the latest RUNE Crypto price, shared below –

THORChain RUNE Crypto Price Prediction:

RUNE crypto was launched in 2019, with a total supply of 500 million tokens of which half of it were in circulation. The project raised money in public and private sale that took place in July 2019. 20 million tokens were sold to public at a price of $0.032 per token and 150 million were sold in private sale at just $0.024.

ThorChain-1

Despite the setback, the investors have enjoyed huge gains during the bull run of 2021 when the token hit an all time high of $21 (approx.) in May 2021. Shortly after, the token fell back to $4 in the market crash and now dangling in the rage between $7-$10.

If we talk about the future price prediction. It is clear that the coin is pretty much volatile and has a lot of potential for growth. High volatility mixed with high adoption rate can give enough thrust to the coin to break previous high and aim for $50 per token, which is pretty much achievable in the next bull run.

I won’t be surprised if it surpass UNI and CAKE to become the number one DEX in the crypto industry.

Where to buy RUNE Crypto?

The best place to purchase RUNE crypto is its own DEX i.e THORSwap followed by centralized exchanges like FTX and Binance. SushiSwap is another decentralized exchange that supports the swap of RUNE tokens.

Is THORChain worth Investing?

THORChain is a revolutionary project. Its ability to create an immutable cross-chain liquidity network is unique in itself and justifies the creation of cryptocurrencies in the first place. As I said earlier, cryptocurrencies aren’t meant to be governed or controlled by any financial institution including centralized exchanges.

Unfortunately, there weren’t many projects or protocols which can enable multi-chain swapping of cross-chain assets until THORChain came up with its protocol that can help transform the way how crypto can be exchanged without worrying about KYC verification or the fear of getting banned from the centralized exchanges.

Thorchain crypto

The project had initial setbacks when it was hacked twice in a row despite being audited by top firms like Certik and Gauntlet which resulted in the erosion of RUNE market cap. Fortunately, the team is back up and stronger than before.

All eyes are set on THORChain as it passes on the control to the community, making it completely decentralized and transparent. If you’re a supporter of crypto revolution, THORChain is the project you should look up to. It has everything a crypto investor ever need. I believe the project has some serious potential and can beat top DEXes in the upcoming years.

This completes my review of THORChain RUNE crypto. In the next post, I will talk about GALA Games and Mirror Protocol. If you’re a fan of blockchain technology then please do share this post on your social handles and educate everyone around you. Do remember to subscribe to my YouTube channel for more informative content, released every week.

DISCLAIMER:

Cryptocurrency is a highly volatile market. All the information shared in the post is for knowledge purposes only. By no means, it’s financial or investment advice. Readers are responsible for their own investment decisions and should only invest in cryptocurrency after proper research.

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