Thorchain (RUNE) is a decentralized, cross-chain liquidity network. One of the main attractions to RUNE lately has been their upcoming Bitcoin blockchain release.
In this post, I want to give a quick introduction to the Thorchain project and talk about the various aspects of RUNE as a crypto currency that I pay attention to. The project has seen a lot of hype and the price has been on an absolute tear lately. Is it living up to this hype or are people just FOMOing into the crypto space as a whole?
This release will support native Bitcoin (BTC) pooling. Allowing liquidity providers to pool native BTC (not wBTC) alongside the RUNE token.
This cross-chain asset exchange would also allow traders to swap between BTC, RUNE & a host of other assets. By using pipes from one currency to the next, the front end will allow users to swap something like native ETH directly into native BTC.
If you've used any DeFi protocol over the past few months, then you'll know the value of being able to instantly exchange one crypto asset for another. We're living in an unprecedented time to swap digitial assets and also earn system income in the form of liquidity provider fees.
Thorchain already has a functioning product called Chaosnet. Chaosnet is a key part of the Thorchain ecosystem becuase it provides token holders with a way to become a part of the early stages of their decentralized exchange.
Chaosnet can be accessed here. It currently lives on the Binance chain and as of this writing, it is one of the most popular decentralized cryptocurrency exchange platforms in the world.
Binance chain offers numerous benefits. Namely, access to liquid markets and a great testing environment. Over time, the Thorchain project will transition to their own native chain which is already operational. The Thorchain ecosystem is still in its early stages of coming to life which is why many Thorchain price prediction models put the token at insane valuations like $6 or even $60.
As the development on this project continues, Thorchain validators come online and a new mass of users dip their toes into the liquidity pool game, the Thorchain network has rapidly expanded.
The age of productive assets is just beginning. DeFi has shown everyone in the world that the face of finance is changing and the users of these up and coming digital assets and decentralized protocols are the ones who will benefit the most.
While unsustainable yield farming has taken over many projects, the Thorchain team has taken a much more measured approach. Liquidity providers are considered "First-Class Citizens" and many like to refer to this idea that users who provide digital assets against the RUNE token are to be "rewarded ruthlessly".
A number of models and theories have come out from the Thorchain community which talk about this idea of "Liquidity Black Hole Theory" and similar topics. The general idea is that Thorchain validators are important to the ecosystem (as are block validators in any blockchain), but so too is the liquidity provider category of RUNE token holders.
Being a block validator is an extremely valuable activity - and a necessary one - but liquidity reins supreme when it comes to providing a sustainable and valuable network.
Transaction Fees and Decentralized Finance
Liquidity fees play a central role in Decentralized Finance. With all of these various decentralized exchange protocols, liquidity providers are incentivized to deposit their digital assets into the defi protocol in exchange for liquidity fees when trading occurs.
As the liquidity pool deepens, traders have more of a reason to participate and since more traders are participating, there is a greater incentive to join the the network of liquidity providers. All of these factors combine to make a healthier and more sustainable ecosystem.
Kicking off this positive liquidity feedback loop is extremely important. Without a kickstart, there is a low chance of gaining deep liquidity. The Thorchain team has designed a robust and dynamic system for block rewards and liquidity provider incentives.
This means that liquidity fees are only one piece in a greater equation. Liquidity providers in the Thorchain ecosystem are earning additional RUNE from block rewards.
Thorchain Validators
The network is secured by node operators. As of this writing, there are about 30 nodes who work to validate the network and earn block rewards.
These node operators need to bond RUNE in order to participate. "Churning" refers to the changing in RUNE validators as more assets enter the ecosystem and more RUNE must be bonded.
You could think of bonded RUNE as being similar to staked RUNE. A validator node needs to have a certain amount of staked RUNE (bonded) in order to participate in the network.
There are a lot of mechansims governing the Thorchain network and how things like liquidity pool incentives, RUNE validator node rewards and other important features are determined.
One thing that has stuck out to me ever since getting involved in the Thorchain network is that there has been a great deal of financial follow through in terms of ecosystem mechanics and design. The Thorchain team clearly has a desire to build the best cross-chain liquidity network that exists where productive assets rule the streets.
The hype behind this project - including the increidble price predictions that we see from across the community - has lived up to every word.
To learn more about Thorchain and the RUNE cryptocurrency, I recommend checking out their official Twitter account and also check out the posts on /trending/rune where the LeoFinance community continues to talk about their excitement in the Thorchain project and how we think it will progress in the future.
- Learn more about Community-Led Thorchain projects like Thorchain Skittles which helps LPs calculate potential yield.
- Learn how we can predict the future value of RUNE using something called "Deterministic Value"