What is THORChain?

THORChain is a decentralised, chain-agnostic liquidity network empowering users to trade assets quickly at manipulation-resistant market pricing. Users can swap using permissionless cross-chain liquidity pools that enable users to stake their assets in order to earn trading fees. Traders may monitor pool prices and gain by trading back to fair-market pricing. Projects may stake their treasuries to provide their tokens with liquidity.

RUNE is the native asset of the THORChain ecosystem. It is used for governance, staking, bonding, rewards, and trading.

A brief history of THORChain

THORChain was introduced in October 2018 as a proposed solution to the faulty use of using centralised exchanges to move crypto assets across blockchains. Long-term solutions include non-custodial exchanges, often known as decentralised exchanges (DEXes). As a result, the THORChain team created an independent blockchain capable of bridging to other networks and facilitating cross-chain transfers akin to a DEX, claiming to be the closest to an immutable exchange currently in existence (i.e. unable to be manipulated).

The THORChain team said it has no CEO, founder, or directors, while acknowledging the presence of unidentified project, tech, and research leads.

In July 2019, the THORChain network debuted the RUNE token on Binance Chain (now BNB Chain). In the same month, the project also launched its DeFi product BEPSwap on Binance Chain and its RUNE staking interface RUNEVault. In August 2019, the RUNE token burn program Project Surtr began with an initial burn amount of 2.6 million RUNE. Under this program, THORChain has committed to burning RUNE tokens that are not allocated for publicly declared uses every 20th day of the month for a five-year period.

THORChain released its first public testnet of BEPSwap in June 2020. Months later, in April 2021, the project launched its mainnet, taking its cross-chain decentralised crypto trading platform public after months of testnet updates. The mainnet launch of THORChain also effectively turned RUNE into a native token of the THORChain ecosystem, and THORChain introduced its non-custodial crypto wallet, named THORWallet. In the same month, THORChain suffered a hack that resulted in the loss of US$7.6 million in crypto assets.

How THORChain Token (RUNE) works

THORChain aims to be a cross-chain solution that can seamlessly swap any asset, regardless of its native blockchain. More significant, users retain complete control of their assets during the exchange. THORChain users can make trades with BTC, ETH, LTC, BCH, and BNB, and trading across the different blockchains for these tokens is made possible through the platform’s native token RUNE.

A common issue that DEXs struggle with is capturing sufficient liquidity. Ideally, traders want to use platforms where they won't be taking losses from slippage. However, these same traders try to supply adequate liquidity in the first place in an attempt to avoid high slippage. As a result, the team at THORChain aims to use an updated variant of Bancor’s ‘smart token’ to construct what it refers to as continuous liquidity pools (CLPs).

THORChain also addresses several issues related to decentralised finance (DeFi). CLPs supply liquidity to automated market makers (AMM). By using a CLP, THORChain avoids the requirement for external price feeds or oracles. The platform also employs slip-based fees to guarantee liquidity remains where it is intended, preventing impermanent loss. It uses various technologies like on-way state pegs, a state machine, the TSS protocol, and others to support cross-chain token swaps.

To prevent Sybil attacks, a type of attack that compromises a computer network through the use of a large number of pseudonymous identities to influence the network, THORChain employs a proof of stake (PoS) consensus mechanism.

The RUNE supply is capped at 500 million, with zero inflation. It runs on the Cosmos SDK/Tendermint, a PoS consensus.

What is THORChain (RUNE) used for?

Users of THORChain can easily swap one asset for another in a permissionless context, eliminating the need to depend on order books for liquidity. Instead, a ratio of assets in a pool maintains the market prices. THORChain’s native token RUNE facilitates these cross-chain transactions. To do this, the platform matches the tokens being swapped with an equal value of RUNE. For example, when a THORChain user swaps ETH for BTC, the platform facilitates the trade from ETH to RUNE, then from RUNE to BTC.

THORChain’s use of RUNE allows it to maintain an independent blockchain capable of bridging various other networks to conduct cross-chain transfers. As a result, traders can use the platform to swap multiple kinds of cryptocurrencies without the necessity of a centralised exchange. The elimination of the need for exchanges improves efficiency and lowers costs for traders.

RUNE holders support THORChain’s operations by staking or locking their RUNE tokens into THORChain liquidity pools.