Recently, the @leofinance team discussed Thorchain and RUNE on the panel, and have uploaded it as a separate post here.
A couple of topics were raised in the chat, and I thought it would be a good idea to jump in and clarify some things.
First - here is the video of the chat:
Smart Contracts.
The Thorchain network does not manage Liquidity Pool's via smart contracts. The network uses a vault system to secure funds provided by LP's. Each node operator holds and manages a vault containing a small portion of the funds, and a central vault with a Threshold Signature System to manage its contents. This set up can be explored in The Thorchain TSS whitepaper.
The economic security of LP's funds is driven by node operators. They have a large amount of RUNE bonded, to secure their place as a node. That bond is on the line, so to speak, if they behave badly or are responsible for a security breach.
Lets say a node has 1 million RUNE bonded, and RUNE's current price is $1. (its not yet, but just wait...) The vault that that particular node operates will contain up to $500,000 worth of assets. The node has access to that vault, and decides to steal the funds. They can successfully and without great difficulty, steal $500,000 of LP assets (lets say BTC for the example). However, the Thorchain protocol will recognize that these funds have gone missing, and the node loses twice the value from its bond as what has been stolen. That means the node has stolen $500,000 worth of BTC, but lost $1,000,000 worth of RUNE. Obviously, there is almost no conceivable scenario where this could be considered rational behavior.
Key point is that Thorchain isn't securing funds with smart contracts, it is securing them in vaults run by nodes with a very strong economic incentive to protect those funds.
BTC/ETH pool.
The other topic raised mentioned a BTC/ETH pool. This is not possible on Thorchain. All assets that get added to pools are paired with RUNE. That means a BTC/RUNE pool and a ETH/RUNE pool. Say, as a swap-er, I have ETH and want BTC. On the UI that will be built this will look like a straightforward swap from one to the other. Behind the scenes, the following will happen:
- ETH will go into the ETH vault. this will cause slippage depending on the size of the ETH/RUNE pool compared to the transaction size.
- RUNE will move from the "RUNE/ETH" pool to the "RUNE/BTC" pool.
- BTC will come out of the vault and be deposited into your specified wallet address.
I hope this feedback is seen as constructive, and not nitpicking. It's great to see the team discussing RUNE, and I'd absolutely love to see a Thorchain team member or key community member join the roundtable or be interviewed by @khaleelkazi.
If you are looking for a great starting guide to Thorchain and RUNE, check this post:
Thanks for reading,
JK.
