Variety is becoming the new rule when it comes to functionality for crypto-asset exchanging. New swapping-oriented platforms are turning heads around, as they had an overgrowing impact amid the scene, by allowing traders to negotiate assets across different blockchains simply from one single place. In this sense, Thorchain aims to provide a trustless, secure, and decentralized liquidity network for cross-chain swaps.
For those unaware, a crypto coin swap can be explained as a mechanism employed to move a cryptocurrency from one blockchain to another, at a pre-determined rate.
How Does Thorchain Work?
Thorchain is a decentralized network that allows the swapping of digital assets such as ETH, BTC, BNB via Continuous Liquidity.
The main goal of the platform is to create a unique ecosystem, supported by several individuals and team altogether, looking forward to achieving a real democratized and decentralized liquidity platform.
Eventually, the network will reach a stage when a trader will be allowed to swap for any cross-chain currency, and also deploy cross-currency payments through the network.
The platform works founded on three main processes: the swaps between assets across different chains and the possibility to stake assets to earn liquidity incentives, also enabling users to run the Node to service the network.
It has a native token, the RUNE, which a fixed-supply network asset used both On-chain liquidity and network security purposes.
Follow the market: Real-time RUNE price
First, the customers swap the chosen assets by sending them into the liquidity pools containing both RUNE and other crypto assets. The swaps are calculated using prices related to the respective asset’s ratio. A trader can swap both ways, or even swap and the swapped coins to someone else.
Every single trade on the pool accrues a type of commission, which users can claim later. So, logically it will be more interesting for traders to choose low liquidity pools, opting for high trading volume to drastically increase their final earnings.
Time is money, so Thorchain focuses a lot on fast user experience. Swaps are completed immediately, once the trade is confirmed On-chain. As the platform is completely non-custodial, there is no third-party control over the users’ funds, which also gives users the possibility to swap directly from their wallets (available for supported wallets only).
When it comes to liquidity providers, the platform also offers some interesting possibilities. Anyone can stake in an existing pool, or even add a brand-new one to the ecosystem. Liquidity providers are an essential part of the system, as liquidity is always On-chain, neither pegged nor wrapped.
Liquidity providers earn fees and block rewards, and staked capital is always underwritten by the system.
Mystical RUNEs and Nodes
The network is secured by anonymous nodes that create vaults and validate incoming/outgoing transactions.
Network’s token RUNE is bonded by nodes and staked into each pool. To optimize security within the ecosystem, the value of each RUNE bonded by nodes always must be the double of the value of RUNE staked into pools, which would be translated in a 67:33 ratio.
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The logic here is that the rewards to compromise the network need to be smaller than the investment required do compromise the network.
How to Unblock Cross-Chain Barriers?
Thorchain manages to not be restricted across multiple chains by connecting to the network with so-called “one-way state pegs”.
It means that the assets are not pegged on the network directly, only the state of those transactions on the corresponding network.
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The nodes then start “listening” so to speak to each connected chain’s transactions. The state is highly-validated, so incorrect transactions are ignored or refunded, with only Torchain-related transactions being synced by the nodes
Who Is Behind the Thorchain?
The company was founded back in 2018. Following the motto “Pseudo-anonymity is a strength”, the team consists mostly of pseudo-anonymous individuals and companies.
The concept behind this unique work ethic is that personalities and founders just undermine a project’s ability to fully decentralize. They also believe in a “governance-minimal approach”, highly focused on transparency (for instance, they issue weekly development updates as well as detailed monthly treasury reports, etc.).
Thorchain managed to raise 3 funding rounds, raising an estimated amount of less than $3 million in the process.
Their instance on how to deal with publicity generated some criticism amid the scene, such as people criticizing potential risks and fragmented official documentation.
Final Words
Thorchain is a decentralized liquidity network, designed to facilitate cross-chain liquidity pools with no pegged or wrapped tokens.
Traders can swap crypto coins between different blockchains or provide liquidity by staking assets to earn incentives.
The platform has plenty of potential for the future, as it has several features to empower future DEXs performances, facilitating conditions between different token protocols and exchanges for fast and liquid transactions.