Thread by @MikeOxmaul__

After going through this video for almost 10x, I finally get how $RUNE can capture value through THORFI!

This is a must watch, and why every $RUNE holder should understand this... TLDR thread below🧵👇

1/ Thorfi allows borrowing of thorusd by depositing your LPs as collateral WITHOUT liquidations. You can sleep well and easy at night even if your native coin or $rune drops below your borrowed amount (undercollateralized).

2/ Thorusd is a stable coin and is pegged to USD. How is thorusd minted? As you deposit an LP, you're earning an APY on your $btc and $rune. You can mint thorusd by placing your LP as collateral, thereby forgoing your LP rewards.

3/ The network collects your collateral and mints $rune, instantly swapping it to thorusd and gives it to the borrower. This increases $rune supply (which isn't good for $rune but we'll get to this later).

4/ The first borrower's max collateral ratio (CR) to borrow thorusd is 100%. As more borrowers enter the network, max CR increases, meaning you can borrow less thorusd with your existing LP collateral.

5/ Now as more people borrow, max CR increases, which decreases the RATE OF INCREASE in $rune supply.

6/ In steps Thorsavings: where depositors can deposit synths (single-sided assets) to earn a real yield. Yield is derived from the LP collateral deposited in the network and minting/redemption fees of thorusd.

7/ If you are the first participant in the Thorsavings vault, you essentially earn ALL the yield available. This incentives other users to deposit more assets into the vault, thereby equalizing and lowering the APY to a more reasonable level.

8/ When someone deposits in Thorsavings, thorusd or the synth asset is swapped to $rune and the $rune supply is burned.

9/ Remember when someone mints thorusd $rune supply increases, but the presence of Thorsavings naturally incentivizes people to deposit, decreasing $rune supply. However, the net change in supply is NOT ZERO!

10/ If the collateral value deposited in the network is equal to the amount of deposits in Thorsavings, APY will both be equal. Market forces will dictate how the APYs should be. Higher deposits in Thorsavings vs higher collateral put up leads to higher net burn in $rune.

11/ No one can predict market forces, but economic rationality points that a single asset APY should be lower than the LP APY as LPers face IL risk (more deposits in thorsavings vs collateral). This theory alone should encourage a higher net burn in $rune.

12/ Now here's what's magical: remember RATE OF INCREASE of $rune supply DECREASES as more users borrow, but there is NO CHANGE in the RATE OF DECREASE in $rune supply when more users deposit in Thorsavings.

13/ As more borrowers enter the network, max CR increases, rate of increase in $rune supply decreases, but the rate of burn for $rune stays the same, resulting in a NET BURN of $rune!

14/ Simply put: if more people want to rest easy and sleep at night, cash out holdings, borrow without liquidations, they borrow thorusd, which increases max CR, which increases THE RATE OF DECREASE in overall $rune supply, pushing $rune to be a hyper deflationary asset!

15/ Now you might ask why would the network lend money and risk being undercollateralized if the market falls. It doesn't matter because the net effect of Thorfi DECREASES supply of $rune and is bullish for the network.

16/ LENDERS ARE MADE WHOLE instantly due to the economic reasoning behind Thorfi! The mechanism is so uniquely designed to CREATE A NET BURN, which would create a massive supply shock that could send a very bullish price signal for $RUNE!

Top 10 asset soon perhaps?? 🤔

Full details of this thread can be found here
gitlab.com/thorchain/thor…

I highly encourage every $rune holder to read this thread and watch the video! It took me multiple watches to finally get it.

This needs time to understand although its not as straightforward as $LUNA and $UST burn mechanism, it still yields similar deflationary elements.

And for the love of God follow these chads so that you dont invest in hype but have fully ground conviction in the asset!
@CBarraford
@THORmaximalist
@CBarraford
@TheRuneRanger

⚡BUILDERS BUIDL⚡

#RUNATIC #LUNATIC

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https://twitter.com/MikeOxmaul__/status/1510460373329084418