THORChain is a decentralized liquidity network that facilitates cross-chain token swaps using the automated market maker (AMM) model and liquidity pools. Powered by the THORChain RUNE token, the THORChain crypto ecosystem incorporates several interoperable platforms. These include SKIP Exchange, BEPSwap, ASGARDEX, and THORSwap, all of which rely on THORChain technology. Following the recent THORChain hack, the platform lost a reported $7.6 million. However, the project appears to have an engaged following that is keen to see the reparations take place to reimburse the THORChain crypto community. Let us, therefore, examine both THORChain and the THORChain hack!
In this article, we’re going to dive deep into the THORChain crypto ecosystem. Also, we’ll discuss the THORChain RUNE token and the recent THORChain hack. Plus, we’ll look at some of the cross-chain liquidity pools and automated market maker (AMM) protocols powered by THORChain technology.
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What is THORChain?
THORChain is a decentralized, interoperable blockchain and liquidity network that facilitates non-custodial, autonomous cross-chain token swaps. Unlike other liquidity protocols, THORChain does not use chain-specific pegged assets or custodial wrapping services. Traders using THORChain benefit from high levels of interoperability between multiple blockchains without friction.
Furthermore, this can be achieved without the need for “know your customer” (KYC) information, as is the case with centralized exchanges (CEXs). Resultantly, the THORChain crypto ecosystem eliminates a great deal of counterparty risk.
THORChain technology uses the native RUNE token to secure the network via the Cosmos Tendermint Proof-of-Stake (PoS) consensus mechanism. Moreover, the project provides a suite of decentralized exchanges (DEXs) that facilitate cross-chain token swaps. These include SKIP Exchange, BEPSwap, ASGARDEX, and THORSwap.
THORChain RUNE Token
As THORChain uses the Cosmos Tendermint Proof-of-Stake (PoS) consensus mechanism, network validators are required to stake the native RUNE token to secure the network. The RUNE token serves two primary functions. Firstly, the RUNE token serves as a base pair and settlement asset in liquidity pools. Secondly, the RUNE token is bonded by nodes as collateral with a 2:1 bond:stake ratio.
The THORChain RUNE token does not serve directly as a governance token for the THORChain ecosystem. Although, nodes that stake the RUNE token can determine the future direction of the protocol. However, the RUNE token is required to signal on-chain priority for transaction confirmations and is used to incentivize participants by subsidizing gas and paying out rewards.
The RUNE token is available on several crypto exchanges. This includes Uniswap, Binance, and the BEPSwap exchange. At the time of writing, the THORChain RUNE token is trading at $4.36, with a market cap of around $1.2 billion and a circulating supply of 271 million tokens out of a maximum supply of 500 million according to CoinGecko.
THORChain Liquidity Providers
THORChain promotes cross-chain interoperability between the various liquidity pools and automated market maker (AMM) protocols throughout the THORChian crypto ecosystem. As such, liquidity providers are required to pay network fees and variable slippage fees using the native RUNE token.
THORChain liquidity providers can deposit funds into several pools. Each pool is tied to the THORChain RUNE token in a separate vault. The THORChain Continuous Liquidity Pool (CLP) is at the heart of the THORChain crypto ecosystem. It is used to incentivize liquidity providers and helps to ameliorate liquidity shortages.
Furthermore, THORChain’s CLP utilizes its own “on-chain and trustless ‘basket’ of liquidity” to further incentivize liquidity providers. This allows token swaps to take place without the need for buyers and sellers to be matched. Moreover, using the Bifrost protocol, the ratio of RUNE tokens to other assets in liquidity pools can be tracked using the THORChain Continuous Liquidity Pool (CLP).
MultiChain Chaosnet (#MCCN)
THORChain’s multichain chaosnet is a cross-chain network that enables assets to be exchanged without the need for intermediaries, custodians, or token wrapping. The launch of THORChain’s multichain chaosnet network is a step towards achieving full decentralization. Currently, this allows for non-custodial cross-chain token swaps between the Bitcoin, Ethereum, Bitcoin Cash, Litecoin & Binance Chain blockchains.
THORChain’s multichain chaosnet has been under development for the past three years. The goal is to facilitate trustless, permissionless, and non-custodial cross-chain asset swaps without the use of pegged assets. Also, THORChain’s multichain chaosnet is secured and operated by nodes that underwrite pooled liquidity for THORChain’s liquidity sensitive automated market maker (AMM). The network is designed in a way that puts safeguards in place until the network has proven to be safe and secure.
This guarded approach puts a cap on liquidity pools to ensure that the impact of any bug or hack is minimized. Although these safeguards are intended to be lifted in the near-to-mid term, the network recently suffered an exploit that halted activity on the network. We discuss this in more detail later in the article.
The THORChain Crypto Ecosystem
The THORChain crypto ecosystem provides a diverse suite of decentralized applications (dApps), automated market makers (AMMs), and decentralized exchanges (DEXs). Further, the THORChain landing page prompts users to explore the THORChain ecosystem including protocols such as SKIP Exchange, ASGARDEX Desktop, ASGARDEX, and THORSwap.
SKIP is a cross-chain decentralized exchange (DEX) powered by THORChain technology. With SKIP, users can make cross-chain token swaps and deposit assets into SKIP pools to earn yield.
The SKIP platform works much like the popular DEX, Uniswap. However, SKIP has the added bonus of cross-chain interoperability, plus, comparatively low transaction fees. Furthermore, as with most Ethereum-based applications, all transactions made on the SKIP exchange are completely transparent and can be viewed using the THORChain explorer.
BEPSwap is another platform that works similarly to Uniswap on Binance Chain. Powered by THORChain technology, BEPSwap allows users to add liquidity to pools, earn yield, and swap BEP-2 tokens. BEPSwap enables users to make near-instant token swaps on a range of supported assets. Plus, by providing Binance Coin (BNB) and BEP-2 tokens as a liquidity provider to the automated market maker (AMM), participants can make a passive income from transaction fees.
Also, users can monitor BEPSwap pool prices via the BEPSwap application programming interface (API), or directly in the application. This makes it simple to connect BEPSwap to other applications. BEPSwap uses THORChain validators to maintain the security of assets in pools using threshold signatures. Plus, BEPSwap uses a Cosmos-SDK (software development kit) statechain to achieve consensus for events that take place on Binance Chain.
BEPSwap uses the RUNE token as a base settlement currency to match token swaps and token pairs in liquidity pools. To swap assets using BEPSwap, users send RUNE tokens and BEP-2 tokens into the BEPSwap liquidity pools. Or, users can deposit funds as a liquidity provider to earn commission from trading fees. Plus, liquidity providers can withdraw assets and any interest earned at any time.
BEPSwap liquidity pools work much like any other automated market maker (AMM). Assets within a BEPSwap pool are price-pegged to the RUNE token. The price of tokens within liquidity pools can also fluctuate, which often provides arbitrage opportunities.
Additionally, BEPSwap can be integrated into existing decentralized applications (dApps). Plus, BEPSwap can be used to create liquidity pools, create starting liquidity, and encourage token holders to become liquidity providers.
Still in beta, ASGARDEX is a decentralized exchange (DEX) powered by THORChain. ASGARDEX works much like Uniswap and PancakeSwap. However, thanks to THORChain technology, ASGARDEX also facilitates cross-chain token swaps.
That being said, the user experience has a familiar feel to these DEXs, with a similar user interface. To connect to ASGARDEX, users need a Web3 wallet such as MetaMask or xDEFI wallet.
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THORSwap is “the world’s first multichain DEX that utilizes the THORChain network to provide a front-end user interface to perform cross-chain swaps”. As with THORChain’s other DEXs, the THORSwap DEX is very similar to UniSwap. The platform offers a sleek graphical user interface (GUI), along with analytics, and a highly scalable codebase.
Also, THORSwap features all the tools needed to execute permissionless cross-chain token swaps in a single application. Plus, THORSwap provides 24/7 support via the platform’s Discord channel!
What is Different About THORChain?
As a chain-agnostic protocol, THORChain facilitates cross-chain token swaps without the need for wrapping, as is the case with Ren and Wrapped Bitcoin. This means that, unlike most Ethereum-based decentralized applications (dApps), participants can use real assets from multiple chains across several dApps.
Also, THORChain has a growing network of smart contract-enabled platforms that provide interoperability and add further utility to the project. Partnerships include Solana, Polkadot, Monero, and Cosmos.
Moreover, by pooling assets from multiple chains, THORChain is creating a decentralized finance (DeFi) ecosystem that facilitates frictionless cross-chain swaps across a suite of secure, decentralized applications (dApps).
In July 2021, it was reported that THORChain had lost up to $7.6M in an exploit after a bug was found in the chaosnet code. The THORChain hack enabled one malicious actor to drain assets from the network.
The guarded approach taken during the chaosnet rollout meant that caps on liquidity pool sizes helped to minimize the impact of the THORChain hack. Resultantly, the community has received constant updates as the THORChain team assembles a plan to reimburse funds lost during the THORChain hack.
THORChain has announced that the THORChain Treasury can cover the lost funds. However, the team has urged the perpetrator to come forward and return the funds in exchange for a bug bounty.
THORChain Ecosystem & RUNE Token Summary
In light of the recent THORChain hack, the THORChain ecosystem appears to be striving forwards. With several cross-chain liquidity pools and automated market maker (AMM) protocols, the THORChain crypto ecosystem provides several compelling solutions for non-custodial cross-chain token swaps. The recent THORChain hack is unfortunate, however, the project has a strong community-backing and solid fundamentals with innovative and interoperable THORChain technology.
As the project matures, we can expect to see further integrations of the THORChain technology. Moreover, THORChain offers a range of options for liquidity providers to earn a yield and make a passive income with idle assets.
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