Thread by @SlawTeh

1/ A new class of users will emerge in the THORChain ecosystem. The network will have network products, and network users. And those new users will be massive. To see this development, let’s unroll the story of developers, node operator and LP depositors first.

2/ Developers are building towards Mainnet. The current beta version is Multi-chain Chaosnet. Expect chaos as it gets battle hardened. Bugs which couldn’t have been found in a testnet environment are showing up. They are getting fixed.

3/ I have talked with a number of new developers just joining the ecosystem who consistently praise the strength of the development effort, the quality of the code and responsiveness to issues as they arise.

4/ In fact, the THORChain community sees these efforts because of the level of disclosure on twitter itself.

Node operators has burdensome financial and operational requirements. The current minimum bond is 333k RUNE, or $350,000. Running a node is 24/7/365.

5/ Problems happen at any time. They require significant debugging chops. Any node not operating correctly will see its income slashed and can lose significant percentages of its bonded RUNE.

6/ If the developers are the creators of the ecosystem, and the node operators give life to the ecosystem, the LP depositors are its first class citizens. Why?

The nodes bond RUNE and earn RUNE. But what give RUNE value?

An ecosystem has no value if it’s not used.

7/ RUNE is given value only when it’s deposited with a non-RUNE asset into an LP. In fact, its value is determined by such action. LP deposits are the first order use case. And have been well reward by the competitive behavior of the nodes.

8/ Once the caps came off of single-chain chaosnet, the node bonds were consistently 2.5X to 3X the LP RUNE count. This level of overbonding pushed the incentive pendulum to favor the LPs. It’s as if the nodes themselves were paying extra to LP depositors. Why?

9/ The more value in the LPs, the higher RUNE’s deterministic value. Nodes collectively will become largest holders of RUNE (if they aren’t already). And it’s not so much that the node operators want their stacks to be worth more at a given point in time.

10/ Nodes want to impede other nodes from entering the ecosystem by driving up the cost of a node bond.

On the dev boards, new potential node operators seem to show up every other day. They ask beginner questions and some clearly don’t have the operational skills. But some do.

11/ And if these new players have the operational chops?

The lowest node bond at the last network churn was $350,000. Lots of money. But when the bonds are 1M and RUNE is $30, it’s $30,000,000 to spin up an active node.

12/ The ability of future node operators to enter the system diminish with higher bond requirements.

So look for node operators to pile in with one new operator joining with the every-third-day vault churn.

13/ Look for competition to drive up the minimum node bond with each churn. Look for the cap raise to accelerate as cumulative bonds levels increase. Look for the first-class citizens to step lively into the LPs.

14/ The existence of an individual LP gives rise to counterparties - swappers and arb-ers. These players exist around individual LPs.

So after developers and nodes, there is a third grouping - the first class LPs and their counterparties.

15/ There will be an array of products which will exist because there is a network of LPs. These network products will attract a fourth group to the ecosystem -network users.

What are these products and who are these users?

16/ Developers are adding new features - synthetics, vaults and composites - to the network. These features work across all LPs. They abstract away complexity. Radically simplified products are possible.

17/ Click a button and:

- Trade RUNE native versions of RUNE, BTC, ETH, etc., for tiny fees
- Stake and earn interest
- Borrow a self-paying loan
- Own an crypto index

Network products, network users.

18/ There are going to be a lot more of these users than we can possibly imagine.

They won’t see the THORChain ecosystem like current participants do - as a collection of CLP AMMs.

19/ For them, from a simple interface, they will be able to stake BTC, earn BTC interest, and withdraw BTC at any time. In fact, the plan currently is to offer a known fixed rate of interest on the BTC stake.

20/ After staking BTC, click another button and get a self-paying USD loan. Perhaps use the proceeds to buy more BTC. Network BTC can be bought for a tiny fee because their is no associated on-chain transaction.

21/ If your capital is on the THORChain network, all the on-chain transaction fees of using BTC, ETH etc disappear. No more crazy ETH gas to make a decentralized trade.

Some network users might wonder how this is all done. Others won’t.

22/ And after several months / quarters / years of ‘it just works’ fewer will need to understand the mechanics of creating such a financial opportunity. Complexity disappears.

23/ LP depositors enable the system’s ‘it just works’ feature by taking on the financial risk of these promises (and earning boosted LP income). What financial risk?

24/ When a BTC staker is promised BTC outcomes, the BTC LP depositors who own BTC and RUNE in equal measure back that promise. If BTC has a god-candle and a BTC stake withdraws, that stake was leveraged against an underperforming LP.

25/ Consequently, the LP holders suffer dilution from the resizing of the BTC stake relative to the LP size.

What if someone borrows BTC? If RUNE rages higher, then the repayment of the loan will be diluted in RUNE terms and therefore in LP terms.

26/ LP holders again suffer this consequence.

The new products emerge from a network of LPs with the same base currency - RUNE. The network pushes the financial complexities into LPs. The products will generate boosted fees and interest income. LPs get rewarded for the risk.

27/ Like nodes enlivening the developer-created ecosystem, LP depositors enable a radical simplification of this node-based decentralized state-machine operated vault. First class citizens indeed.

28/ Developers, then nodes, then LPs and their counterparties, then network users. Welcome to the THORParty network users!

Now hurry up and #RAISETHECAPS

The honor is mine to announce the next time caps are raised.