Thread by @Rafi_0x

1/ @THORChain $RUNE
-Thorchain aims to be the cross chain back-end for the entire crypto space
-Multi-Chain Chaosnet went live on Apr 13th and uncapped Mainnet coming soon
-Major wallets and exchanges already integrating Thorchain for cross-chain swaps
-ThorFi is coming...

2/ Here is a multi billion mcap protocol that many people (including myself until recently) have been sleeping on. But once you understand what Thorchain is doing and where it’s heading, it’s hard not to feel bullish. This is a top 10 project in the making.

So what is Thorchain?

3/ The simple explanation is that Thorchain is a cross chain asset exchange protocol. Call it a multi chain Uniswap, where you can swap between assets such as $BTC, $ETH, $BNB or $LTC natively in a fully decentralised manner and without the need for wrapped assets.

4/ ThorChain does this through a Uniswap-like AMM model where instead of multiple pairs and liquidity pools for each asset (eg ETH-BTC, ETH-BNB, ETH-USDT, etc) each asset has a single liquidity pool between itself and $RUNE, Thorchain’s native token.

5/ So in the background, a trade between native $ETH and native $BTC will consist of swapping $ETH for $RUNE on one side, and $RUNE for $BTC on the other, while the Thorchain blockchain itself acts as the decentralised intermediary and ledger for these transactions.

6/ In this ETH/BTC trade example, the ThorChain nodes will verify on the Ethereum blockchain that $ETH has indeed been received from the user, and then collectively sign the tx authorising the corresponding $BTC amount to be sent to the user on the Bitcoin blockchain.

7/ So how do you ensure that the nodes who control these asset vaults remain honest? This is where it gets interesting. Thorchain nodes are required to post a very large amount of $RUNE as collateral (or bond), so that it becomes economically ineffective to attack the network.

8/ So if there are $50M in assets (ETH, BTC, LTC, BNB…) in Thorchain’s liquidity pools, with $50M in $RUNE paired with these assets, the network will seek to have at least $100M worth of $RUNE bonded by nodes as collateral, ensuring Nodes have no incentive to be malicious.

9/ This ideal equilibrium (2/3 of RUNE bonded by nodes vs 1/3 in liquidity pools) is reached through what Thorchain calls the incentive pendulum.
If there is too little $RUNE posted as bonded collateral by nodes, a larger share of block rewards and trading fees will go to nodes.

10/ But if there’s too much $RUNE bonded by nodes and too little in liquidity pools (thus hurting the efficiency of the network) a larger share of block rewards + fees goes to LPs.
In the long term, the 2/3 - 1/3 split between nodes and LPs should then be maintained.

11/And now for the mind-blowing part: if each liq pool’s value is split 50/50 between $RUNE and its paired asset ($BTC, $ETH, $BNB…) and if nodes need to post 2x that amount of $RUNE as bond, then the mcap of $RUNE will be at least 3x the value of the assets in ThorChain’s pools

12/ This means the value of $RUNE will be directly linked to the amount of liquidity in Thorchain’s pools.

For now, Thorchain’s Multichain Chaosnet has only been live for a few weeks, and the liquidity pool amounts are capped and slowly rising over time (#RAISETHECAPS)

13/ Just earlier today, the liquidity cap for the multichain pools went from 750k to 1.5M $RUNE (about 28M USD) and a few hours later the new cap is almost fully reached. This shows how fast liquidity can grow once pools become uncapped and once more assets are added to Thorchain

14/ Currently Thorchain supports BTC, ETH (and Ethereum tokens incl. SUSHI, YFI and USDT), BNB (and Binance chain tokens incl. BUSD and BTCB), LTC and BCH. But this list is expected to grow fast to include other blockchains including XHV, XMR, DOGE, ZCASH, DOT, AVAX, ZIL, etc.

15/ The current circ supply of $RUNE is 235M with Max supply at 500M, although it will take over 10 yrs for it to be reached. Note that when the uncapped Mainnet launches (in 1-2 months) the team and seed allocations will start to unlock (15% of supply in 5 quarterly instalments)

16/ The current price of RUNE is about 10x higher than the implied price based on the liquidity in Thorchain’s pools (chart below from t.me/thorchain_alert). But again, these liquidity amounts should sky rocket once the liquidity caps are removed and more assets are added.

17/ So why am I so bullish that Thorchain will attract higher liquidity and volumes?

For starters, on top of working through dedicated exchanges like @asgardex or @thorswap, Thorchain will be used as a back-end for wallets and existing exchanges to perform crosschain swaps:

18/
-@ShapeShift_io is already live with cross chain swaps powered by Thorchain
-@xdefi_wallet, probably the most promising blockchain wallet project out there, will natively integrate Thorchain
-The team is working with multiple other wallets interested in integrating Thorchain

19/ Another project that deserves attention is @thorstarter.
Despite the name, Thorstarter will be more than just an IDO launchpad for new projects, as it will use a new token $XRUNE as a bridge for smaller “long-tail” projects to access Thorchain’s cross-chain liquidity.

20/ And last but not least, Thorchain will start to roll out ThorFi soon, where it will leverage the network’s liquidity to offer broader DeFi applications such as lending, synthetic assets, composite/index tokens, etc… See below a great chart by @flyacro on ThorFi.

21/ ThorFi will open the DeFi floodgates to all assets and chains in the network, including $BTC, and without the need to go through wrapped assets such as $WBTC or $renBTC.

That’s an additional 1 trillion USD in potential addressable market for DeFi applications!

22/ Even today, by providing $BTC liquidity in the BTC/RUNE pool, $BTC holders are earning yields (which can be as high as 30%-40%) on their $BTC without the need to rely on wrapped assets on other chains, or on centralised services such as CEXs or BlockFi.

23/ And as the scope of Thorchain expands from just asset swaps to lending, synthetic assets, leverage, etc, this should generate more and more fees / interest for LPs, which will help attract more liquidity, which will help increase the value of $RUNE… you know how this goes :)

24/ In short, even after its impressive run to over $4bn mcap, I believe $RUNE can still go a lot further as it becomes the cross-chain back-end for the entire crypto space, and as it brings Defi multi-chain, including to $BTC and other assets.

25/ A few links:
-Documentation: docs.thorchain.org
-Latest development update: medium.com/thorchain/week…
-Network stats (chaosnet): thorchain.delphidigital.io/thorchain/chao…
-Token release schedule: docs.google.com/spreadsheets/d…