Thread by @SlawTeh

1/ Staking coins into a RUNE LP captures two types of value - cashflow, and RUNE appreciation. Cashflow has two parts - transaction fees and block rewards. Transaction fees are self-explanatory. Block rewards will create an explosive flywheel effect of value accrual.

2/ Currently, there are 200M RUNE in circulation, and a max total of 500M.

3/ Messari gives a great breakdown of RUNE’s token supply curve: messari.io/asset/thorchain. Over the next 5 years, 90M RUNE, worth $550M will be provided as liquidity rewards, issued with the production of each Thorchain block.

4/ Thorchain will pay $28M per quarter of block rewards - based on the completely absurd assumption that RUNE doesn’t increase in value. But the size of the network determines the value or RUNE, and with that much incentive to stake, staking will be enormous.

5/ RUNE has a baseline value and a speculative premium. Its baseline value will be greater than *the total non-RUNE value* in the network *times 3* and *divided by the number of RUNE in the network*. See this thread for details:

https://twitter.com/SlawTeh/status/1375516578796630022

6/ If $500M of non-RUNE tokens are staked into the network within the first month, RUNE’s baseline value is 3 times $500M divided the number of RUNE locked in the network. How many is that? Let’s estimate 70% of 220M outstanding or 150M.

7/ What is RUNE baseline value under this scenario? 3 * $500M / 150M RUNE = $10 RUNE. And if the network doubles in 3 months and maybe 5Xs by year end? If you estimate a YE baseline value of $50 per RUNE, what are you willing to pay today for it?

8/ Let’s speculate that RUNE trades at $25 once the market realizes at least $2.5B will be staked in Thorchain LPs by YE. So the speculative premium is $15. No reason to assume there won’t be a speculative premium at YE either.

9/ But what about the block rewards that get paid to the LP holders? They just 4Xed in value! Maybe the network’s growth will be even faster than estimated! Maybe the speculative premium will be higher!

10/ There is a flywheel effect of network growth value accrual that is greatly overlooked because the market really has not experience with such a phenomenon.

phe-no-me-nah, do-do-do-do-da, phe-no-me-nah, do-do-do-do ..