Why do we need Thorchain?

Introduction

In light of the recent financial failure of the lending project on Thorchain called ThorLend, which represents an approximate 900 million dollar loss to depositors, the survival of the Thorchain decentralized exchange Thorswap was threatened.
Some dismissed Thorswap and thorchain as a failed experiment.
But some see it as to important to die.
So I think this begs the questions of : who is thorchain? and why should we care it dies?

Who or what is Thorchain.

Thorchain is a decentralized exchange, of which there are very few in cryptocurrency, Uniswap on the ethereum blockchain, PanCakeswap on the binance smart chain, and a few others on the polygon, and other ecosystems. These decentralized exchanges serve a smaller portion of the cryptocurrency market then larger centralized exchanges like Binance and Coibase. The majorioty of people in cryptocurrency have used these centralized exchanges and are happy with their services, so why do we need decentralized exchanges like Uniswap, PanCakeswap and ThorSwap?
why does that matter?

Decentralized versus Centralied cryptocurrency exchanges

I think to understand the importance of Thorswap, Uniswap and Pancakeswap, you need to understand how cryptocurrency trading or swapping began, and why centralized exchanges developed.
In the beginning most people got their bitcoin by mining it on their personal computer at home. The software was easy to download and set up on your computer, and it included a wallet to store your bitcoin.
Satoshi Nakamoto created bitcoin to be something you could easily send from your wallet to anothers wallet, and called this peer to peer exchange.

Trust

Peer to peer exchanges was simple to do, but it involved trust. The first party; you, had to trust the second party; a stranger on the internet, to fullfil their end of the agreement. If you, the first party, sent Bob, the second party bitcoin, you trusted Bob to send you money. The first party sent cash, and the first party relied on the second party to send bitcoin. This meant there was a risk that you would send Bob bitcoin, but he wouldn't send you cash. This risk was called second party risk.

Third Party RIsk

When bitcoin was easy to mine, and had no real value, most people could be trausted to fulfill their end of the bargain, send money. But as bitcoin increased in value and the bitcoin market grew to where you could buy things of value with bitcoin, second party risk became more important. So peer to peer trading or exchange was replaced with three party exchange.
In three party exchange, the first party want's to sell bitcoin to a second party for cash or money. But there is a risk that the seond party will take the bitcoin, and not send the cash. In a three party exchange, the third party gets the bitcoin from the first party, the third party gets the cash from the second party, and the third party takes possession of both, then exchanges them by giving the cash to the seller of bitcoin and the bitcoin to the buyer of bitcoin.
This system was a solution to second party risk, the buyer running of with the bitcoin without paying for it. Initially, buyers and sellers thought three party trades were a perfect solution. But then the third parties started running off with both the cash and the bitcoin. And to make matters worse, the third parties were not just running off with one persons cash and one persons bitcoin. The third party was sometimes trusted by several thousands of people. So the third party was running away with the cash and bitcoin of thousands of customers.

Centralization

The three party trade or exchange was the perfect solution to the peer to peer or two party trade. but it replaced the risk of one persone stealing the money or cryptocurrency of one person, with the risk of one person stealing the money and cryptocurrency of thousands of persons. This process where the trade was moved from the person to person level, to the person to exchange to person level was called centralization. The concentration of both wealth and control in one location.
Centralization creates a solution to second party risk, but also the opportunity for one person to steal from many persons. Additionally it creates a situation where one person exerts power or control over thousands of persons.
The three party exchange creates the situation where the third party, a single person, takes possession of the cash money and cryptocurrency of thousands of persons. They now control the money and the cryptocurrency, and can tell these persons who they can trade with, when they can trade, how they can trade, and how much.
This removal of control from the many persons to the few persons is also called centralization. And it is the opposite of decentralization, where eash person controls their cash and cryptocurrency. One person controls when, where, who and how much they trade.
In decentralization there is no concentration of wealth in one persons exchange and there is no concentration of control.
In a decentralized system like peer to peer trading, the parties maintain control over their cash and their cryptocurrency, and they are also in control of the rules of who, what, when and how much they trade.
So in centralized exchanges we surrender control of our money and our cryptocurrency, along with we agree to follow someone elses rules.

Decentralized exchanges

Decentralized exchanges are not centralized exchanges where you surrender your cash and cryptocurrency to the exchange.
In decentralized exchanges you maintain control of your cryptocurrency, and your cash, in your wallet, upto the last moment of the trade, and the softward takes control of the cash and the cryptocurrency for a few seonds to make sure they equal each other, then swap them.
You never give up control of your cash or cryptocurrency until the actual trade of swapp.
They are a good solution to the second party risk of peer to peer, and they are a good solution to the third party risk of centralized exchanges and the third party control of centralized exchanges.
However they introduce a third problem wrapped tokens, and bridges.

wrapped tokens and bridges

In order to use Uniswap decentralized exchange on ethereum, your bitcoin must cross a bridge from the bitcoin blockchain to the ethereum blockchain.
While on that bridge, your bitcoin is held in a vault, and a ethereu token is created which has the value of your bitcon token, but it is an ethereum token. So now you can use that token, which we call wrapped bitcoin on the ethereum blockchain, inside the decentralized exchange called Uniswap.
The problem with wrapping and is it creates a valt where your bitcoin is being held to swap back for the wrapped bitcoin, so it is a target for thieves.
The same problem exists on Pancakeswap, your bitcoin has to cross a bridge from the bicoin blockchain to the binance smart blackchain, and while on the bridge, your biotcoin is swapped for wrapped bitcoin, then the wrapped bitcoin trades on the pancakeswap decentralized exchange.
This wrapping creates another target for theives.
These targets rae frequently broken into and the cryptocurrency is stolen.

Thorchain

Thorchain fixes trhis problem of needed wrapped tokens to perform decentralized exchanges.
Thorchain has a system of instead of needing wrapped tokens, you trade bitcoin for any other asset, simply by converting them both to rune, swaping the rune, then buying the desired asset.
Thorchain elminates the need for wrapped tokens, elminates the need for bridges and eliminates the target for theft, a collection or valut with stored bitcoin.
That is the importance of thorchain, true cross chain swaps , without a bridge or wrapped tokens, thus eleminating a major point of failure and financial loss.
This is why Thorchain is important, and why we need thorchain.
We need decentralized exchanges, but we need decentralized exchanges which don't need bridges and wrapped tokens.

The future

The only constant in life is change.
Innovation, a form of change, is a change in the way we do things, in response to a problem.
Centralized exchanges evolved to solve a problem which peer to peer trades created.
Decentralized exchanges evolved to solve a problems centralized exchanges created.
Thorchain evolved to create a problem that decentralized exchanges created.
Innovation is wonderful, but it is not without it's own problems.
We evaluate and rate innovation based on the problems it solves and the problems it creates. The first one is easy to see, the second one, not so much.

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