About a week ago, the nodes powering cross-chain swap provider Thorchain voted to temporarily halt their lending service, after concerns were raised that the protocol may be insolvent.
The price of the RUNE token, which powers the Thorchain ecosystem, crashed from $3 dollars to $2 dollars, as traders and investors panicked over the issue.
This isn't Thorchain's first rodeo. Back in 2021, we wrote about another technical issue that Thorchain was forced to deal with, which resulted in the loss of $7 million USD.
What impact will this latest incident have on the Thorchain protocol, and the future of cross-chain swaps in general?
Blockchain Evolution
Before losing our minds, let's consider that most of today's successful blockchain protocols have experienced technical glitches in the past.
Even Bitcoin suffered from a glitch back in 2010, in which 184 billion coins were minted erroneously. This incident required rolling back the blockchain to reverse the malicious transaction.
In 2016, the DAO smart contracts on Ethereum were exploited to steal millions of dollars worth of ETH from investors. This required a controversial hard fork to resolve.
Then in 2022, Solana was halted more than eight times due to excessive network demand. It suffered two more outages in 2023, and one more at the beginning of 2024, before finally stabilizing (knock on wood).
You may also remember back in 2011 when Twitter was experiencing an outage nearly every every month due to overcapacity. At the time, the "fail whale" was displayed frequently on their web page.
Haters vs. Builders
The point is, technology - especially new technology - is never perfect on the first try. It needs to be battle-tested, and iterated upon over and over again before it becomes bulletproof.
When these problems occur, it's much easier to sit back and criticize, than it is to build.
There were lots of critics claiming Bitcoin was a doomed protocol when it unexpectedly minted 184 billion Bitcoin back in 2010.
Even more detractors lost hope in Ethereum after the DAO hack.
Throughout 2022, Solana received tons of flak on Twitter during every outage.
The builders just ignored the noise, and kept iterating on their protocols.
Ultimately, these negative incidents generate more publicity for the project, planting the seed for more usage in the future.
Cross-Chain Swaps Continue
Despite this problem affected the lending side of Thorchain, the core cross-chain swap functionality remains operational, and trading volume continues to trend upwards.
Due to the increasing friction and censorship we have been seeing on centralized exchanges, permissionless cross-chain swaps have a bright future, and will continue to grow.
Thorchain has already inspired other similar cross-chain swap projects like Maya Protocol and Serai DEX, which will no doubt learn from this mistake, and strengthen their protocols accordingly.
Until next time...
If the Thorchain developers and community remain dedicated to the project, this problem will eventually be resolved, and the protocol will continue to improve the services it offers to end users.
If you learned something new from this article, be sure to check out my other posts on crypto and finance here on the Hive blockchain. You can also follow me on InLeo for more frequent updates.
Further Reading
- The Power Of Sensational Publicity