1./ Although many people are bullish on $RUNE not everyone seems to get why it’s programmed to $100 and probably far beyond.
In this thread I’ll explain why @THORChain is a liquidity black hole and you probably want to accumulate more now it’s still cheap 🧵👇
In this thread I’ll explain why @THORChain is a liquidity black hole and you probably want to accumulate more now it’s still cheap 🧵👇
2./ First of all it’s important to know what @THORChain is. @THORChain is a decentralized liquidity network that enables swapping native assets against each other without using bridges. Next to this it’s possible to mint synths of native assets which will always keep their price
3./ But why is this important?
Currently going from one to the other chain requires centralized parties or trust. You can either use a CEX, which is centralized. Or you can use a bridge which requires trust. There are reasons why this is not the preferred way.
Currently going from one to the other chain requires centralized parties or trust. You can either use a CEX, which is centralized. Or you can use a bridge which requires trust. There are reasons why this is not the preferred way.
4./ I personally don’t like to use a CEX because I don’t own my tokens once they’re on a CEX. How many times have we seen withdrawing assets from @binance was halted? That’s what I mean. I want to have access to my tokens whenever, wherever I want. So no CEX for me.
5./ Bridges require trust. Quite recently we’ve seen exploits on the @wormholecrypto and @Ronin_Network bridges. So I’m not a fan of bridges. Now let’s have a look at @THORChain.
6./ Because it might be too hard for now to explain in detail how @THORChain exactly works, it’s important to know that this mechanism runs on liquidity pools. As we all know, liquidity pools are pools of two assets and the total dollar value of the two is always in balance.
7./ Every asset that is connected to @THORChain is pooled against $RUNE. Why only $RUNE? To make sure there are not too many pools. The more pools there are, the higher the slippage will be because liquidity is fragmented over more pools.
8./ So let’s say I want to swap native $ETH for native $BTC. This means I would have to deposit $ETH in the $ETH / $RUNE liquidity pool and withdraw $BTC out of the $BTC / $RUNE liquidity pool.
Of course, @THORChain does this for you. You have to do just one transaction.
Of course, @THORChain does this for you. You have to do just one transaction.
9./ In this trade there is a fee for both the $ETH / $RUNE liquidity provider as for the $BTC / $RUNE liquidity provider. Because of this, people are incentivized to provide liquidity.
10./ Alright, back to the value of $RUNE. Why is it programmed to reach $100?
As explained, @THORChain relies on liquidity pools. This means that for every dollar of an asset other than $RUNE that is deposited into the protocol, one dollar of $RUNE needs to be deposited too.
As explained, @THORChain relies on liquidity pools. This means that for every dollar of an asset other than $RUNE that is deposited into the protocol, one dollar of $RUNE needs to be deposited too.
11./ But that’s not all. Because of security measures, Thorchain nodes need to lock up two times as much $RUNE as there are assets other than $RUNE in the protocol.
12./ So for every dollar of $BTC deposited in a liquidity pool, one dollar of $RUNE needs to be in the liquidity pool and two dollars of $RUNE need to be locked by the nodes.
13./ This means there will always be three times as much $RUNE locked as that there are non $RUNE assets in the protocol.
14./ So for $RUNE to go up, more liquidity is needed. But why do I expect more liquidity to be added?
Currently only swapping assets and minting synths is available. It’s already amazing, but there is a lot more to come.
Currently only swapping assets and minting synths is available. It’s already amazing, but there is a lot more to come.
15./ Once #THORFI launches we'll see lending, borrowing and much more #DeFi utilities coming to @THORChain.
16./ Next to this I expect a lot more chains to integrate with @THORChain in the future. Once the biggest chains are all integrated native swaps between all chains will be possible. No CEX needed for this anymore.
17./ Also important to mention: Currently the APR on providing liquidity is all coming from trading fees which says something about the sustainability of @THORChain. No inflation is needed to make LPs earn so much yield.
18./ My expectation is that @THORChain is just getting started and $RUNE will melt faces in the coming years. The more liquidity that is added, the more $RUNE will be worth. Decentralized trading is the future.
$RUNE to $100 is not a joke.
$RUNE to $100 is not a joke.
19./ I hope you liked this thread. @THORChain is not just a project, it’s a change in the way we experience crypto and #DeFi. I couldn’t cover everything because it’s just too much. If you want to know anything specific, let me know! I’ll try to cover it next time.
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