All you need to know about Thorchain

THORChain is a decentralised cross-chain liquidity protocol based on tendermint & cosmos- SDK and utilizing Threshold Signature Schemes (TSS). It does not peg or wrap assets, it simply determines how to move them in response to user-actions.

THORChain’s key objective is to be resistant to centralization and capture whilst facilitating cross-chain liquidity. THORChain only secures the assets in its vaults and has economic guarantees that those assets are safe.

RUNE is the asset that powers the THORChain ecosystem and provides the economic incentives required to secure the network. RUNE has four key roles

1. Liquidity

Transmitting Purchasing Power

Since RUNE is bonded to assets in its pools, then as the value of those assets increases, then the RUNE value will also increase. This means the system is always “aware” of the value of the assets it is trying to secure. If it is aware of the value of the assets it is securing, it can use incentives to ensure the security of those assets.

Providing Liquidity Incentives

Since RUNE is the pooled asset, incentives can be paid directly into each pool. This extra capital is owned by the liquidity providers, and over time, slowly “purchases” the paired asset via arbitrage. Thus RUNE liquidity incentives can drive real yield to LPs.

2. Security


Sybil-resistance refers to the ability to prevent someone masquerading as many identities in order to overcome a network. Bitcoin uses Proof-of-Work (one-cpu-one-vote) to prevent a network take-over. Ethereum 2.0 will use Proof-of-Stake (32-eth-one-vote) to prevent a network take-over.

Underwriting Assets

The Incentive Pendulum ensures that Nodes are incentivized to continually buy and bond enough Rune each time to maximize their gains – which is a maximum when there is 67% of RUNE bonded and 33% pooled in pools. If the pools are holding $100m in the capital, then the value of RUNE in the aggregate bond is $200m. Thus all assets can be underwritten.

3. Governance

Signalling Priority for Assets

While THORChain strives to be governance-minimal, there are some parts of the protocol that use committed capital to signal priority. This is the case for the asset listing process, where every few days a new asset can be listed as a pool. In a queue of standby assets, the one with the deepest commitment of RUNE is the one that is listed first.

Signalling Priority for Chains

Additionally, if a connected chain is no longer economically valuable, then all liquidity providers in that chain can leave. If a pool is empty, it will be delisted, and this will cause the network to immediately sever ties with that chain in a process call a “ragnarok”.

4. Incentives


RUNE is the native currency of THORChain and is consumed as transaction fees on the network. All swaps are charged both a fixed network fee, as well as a dynamic slip-based fee. This prevents various attack paths such as denial-of-service attacks, as well as sandwich attacks on a pool.

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