What Is THORChain
The growth of the DeFi space has required the need for a reliable way to exchange different assets and for cross-chain liquidity. While existing DeFi protocols that use the automated market maker (AMM) model such as Uniswap have allowed crypto users to swap their crypto assets in a peer-to-peer and decentralised manner, the majority of these protocols only allow the same blockchain network swaps to take place. This lack of interoperability impedes the full potential of the DeFi space.
The key aim of THORChain is to enhance the overall liquidity and accessibility of the cryptocurrency market by allowing users to trade one cryptocurrency for another across different blockchain networks without relying on a centralised intermediary or a custodian.
Who Is The Founder Of THORChain
Funded with an initial DEX offering (IDO) on Binance DEX back in July 2019, THORChain “is a decentralised project with no company, no CEO and no founders” according to its official site. Instead, the network operates in a non-hierarchical structure where the community, comprising of individuals who were part of the project’s launch and contributors, influence the direction and make key decisions.
How Does THORChain Work
THORChain is designed to provide decentralised and permissionless liquidity for cross-chain asset swaps. When performing a cross-chain swap on THORChain, the user sends their assets to the smart contracts. THORChain’s network of nodes then collectively determines the exchange rate and executes the swap through an algorithm known as the Continuous Liquidity Pool (CLP) formula. The formula calculates prices based on the ratio of assets in the liquidity pool in which RUNE is used as the settlement currency for every swap.
For example, if a user wants to exchange BTC for ETH, they would first trade their BTC for RUNE in one liquidity pool before trading their RUNE for ETH in the next liquidity pool.
The liquidity pools on THORChain are created and maintained by users who deposit their assets into them. In return, they receive a portion of the trading fees generated from swaps within their respective liquidity pools.
What Is THORChain Used For
These are some of the key use cases for THORChain:
- Cross-Chain Swaps
Users on THORChain can swap one cryptocurrency for another without relying on a centralised exchange or intermediary. For example, you can exchange Ethereum for Bitcoin or other supported cryptocurrencies directly through THORChain.
- Liquidity Provision
Users can tap into THORChain’s liquidity to facilitate the exchange of assets. Users can also become liquidity providers by depositing their assets into THORChain’s liquidity pools. In return, they earn a share of the trading fees from those pools.
- DeFi Integration
THORChain’s liquidity can be integrated into various DeFi applications and platforms, allowing these DeFi protocols to tap into a broader pool of assets and liquidity.
- Decentralised Exchanges (DEX)
THORChain offers a decentralised exchange called BEPSwap which allows users to make trades, provide liquidity, and manage their assets without relying on a centralised exchange.
- Accessibility to various blockchains
The cross-chain capability of THORChain makes it possible for users to access and trade assets on different blockchain networks.
RUNE is the native token of THORChain and these are some of its key roles:
- Cross-Chain Functionality
THORChain’s cross-chain functionality relies on the use of its native token, RUNE. Since every asset is paired with RUNE in its liquidity pool, RUNE is necessary for every swap on the network.
THORChain uses a Proof of Stake consensus mechanism which requires validators to stake their RUNE to validate and create new blocks on the network. An individual and/or organization must stake a minimum of 1 million RUNE to be an active validator/node. The staked RUNE acts as a security deposit to deter malicious actors.
Each active validator/node has one vote which can be used to participate in the governance of the network. To change the network’s parameters, 67% of the nodes must come to a consensus.
RUNE tokens are used as an incentive in the network and are distributed as block rewards and swap fees to liquidity providers and nodes.
RUNE has a total supply of 500,000,000 tokens of which 338,930,403 tokens are in circulation as of September 2023.
The planned allocation of RUNE tokens is as follows:
– Liquidity Emission – 50%
– Operational Reserve – 13%
– Community Reserve – 12%
– Team & Advisors – 10%
– Seed – 6%
– Private Sale – 5%
How To Trade RUNE On The Flipster App
To trade RUNE on Flipster:
- Download the Flipster app and set-up your account
- Go to [Trade]
- Click on [Search] at the top of the page and type in RUNE
- Click on RUNE
- In the [Amount] field, type in the amount of RUNE you wish to buy or sell. Alternatively, you can select the percentages below to choose how to use from your available funds.
- Click [Preview order] to check your order
- Once you have confirmed the details, click on [Buy RUNE – Long] button or [Sell RUNE – Short] respectively.
Disclaimer: This material is for information purposes only and does not constitute financial advice. Flipster makes no recommendations or guarantees in respect of any digital asset, product, or service.