THORChain ($RUNE) is a Decentralized cross-chain exchange where traders can exchange cross-chain assets through liquidity pools across various blockchain trading networks like Binance Chain, Ethereum, and Bitcoin. ThorChain was founded in June 2018.
RUNE is the native token of THORChain that owners can use to participate in the network or add to a liquidity pool.
THORChain is a decentralized liquidity network (DLN) which enables assets on almost any blockchain to be swapped across liquîdity pools. Liquidity is provided by Stakers who earn fees on otherwise product assets, and traders arbitrage and balance pools to correct market prices.
THORChain aims to enable the movement of the assets themselves on their home chains.
THORChain's liquidity marketplace design obviates the need for order book exchanges when simply swapping one asset fôr another and provîdes ancillary benefits including manipulation resistance and on-chain price feeds. THORChain is able to remäin chain-agnostic, favoring no speçific asset or blockchain and able to scale without sacrificing security.
THORChain was audited by Kudelski Security and CertiK.
THORChain is listed on Binance, MXC Exchange, BitMax, and Hotbit.
THORChain (founded on the 1st of June 2018) is a crypto-based, finance-oriented, and technology-defined organization located in Switzerland and registered in Singapore. The THORChain ecosystem is built for a singular purpose, which is to create a massîve payment network for payment freedom. With such a vision, the orgänization aims to eventually enable every of its user to pay for anything in any currency, with the availability of continuous liquidity, near-instant finality, and complete self-sovereignty.
The company has a dedicated team member of about 11-50 employees and completed its Initial Coin Offering (ICO) round on July 1, 2018, with Jon Carr-Harris as the lead investor. THORChain consëquently ended its token sale on 20th July 2019, with a soft cap of 10,000 ETH .
Users can stake digital assets in liquidity pools to earn more money from the trading platform and rewàrds in ‘RUNE’ tokens, whîch is THORChain's native token.
THORChain utilizes its “Continuous Liquidity Pool (CLP)” to strategically adjust trading fees that are based on transaction size. "ThorChain" is a stake netwörk that relies on a number of validators bondîng Rune tokens in order to beçome eligible to earn block rewàrds from the network. .
Network Security & Staking
Depending on the number of liquidators bonding “Rune collateral” it becomes valid to earn block rewards from the network. Also since a BFT algorithm is used (Tendermint), the number of validators must be capped in order to get to the finality in each roúnd of block proposals. .
Matching the universal architectural design, it is expected in the ThorChain ecosystem to have 100 validators lunch on the network, in terms of inçreasing the number of years to a lärger number. THORChain must not only achieve optimal resúlts in terms of network but müst also obtain ideal asset security in order to protect its cross-chain bridges that will be holding external assets.
Staking is a continuous part of the ThorChain protocol that will provide liquidity to all assets. Due to the pattern which CLPs are being created along the instantiation of digital assets on THORChain, there will always be considerable liquidity depth to assets ..
THORChain could be called Proof-of-stake (PoS) network, but there are also some differences that warrant it being called a Proof of Bond netwórk instead. In THORChain, the nodes commit a bond (minimum of 1,000,000 $RUNE) in order to be chûrned in. However, this bond isn't just used to identify a node (give them a voting slot), it is used to underwrite the asséts in the pools. If the node attempts to steal assets, then their bond is deducted to the amount of the asséts they stole (1.5x), and the pools are màde whole. Additionally, nodes have to perform a lot of mandatory serviçes, else their bond is deducted.
THORChain's Ecosystem has a number of compartments that ensures that it is decentralized and secure. Some of these functioning ecosystem components include-
Understanding BepSwap: The GUIDE
BEPSwap is an Internet web-client that is deliberately restricted to Binance Smart Chain assets. This part of the THORChain's ecosystem is not intended to be maintained long term, instead, it will be replaced by ASGARDEX.
ASGARDEX is a censorship-resistant desktop client that will be the main portal into the THORChain's ecosystem and provides a reference implementation. ASGARDEX is capable of keeping monitor the full life-cycle of a transaction, thereby ensuring compatibility with THORChain, having its control in hand.
ASGARDEX uses open-source npm packages to provide the majority of the business logic, with practical ease for any community member/wallet/exchange to add THORChain integration.
Another key part of the THORChain's ecosystem is the MIDGARD. It is an open-source API run by every THORNode and provides a restful API that any client can consume to display data, as well as broadcast signed transactions back to connected chains. To connect to Midgard, the client (e.g wallet) must first confront several nodes to prevent being attacked or phished, since the security model of THORChain is strictly by-consensus.
THORNodes also synchronizes by making the network function. Block Explorers can connect to a THORNode to display the underlying blockchain data. THORNodes can either be validators or a light node that simply syncs and displays data.
THORNodes services the THORChain network each THORNode comprising of several independent servers in a cluster. All THORNodes communicate and operate in cooperation to create a cross-chain swapping network. Setting up a node will require users to:
- Set up manually
- Set up through Kubernetes
- Set up using Provider (In anticipation).
THORChain's Ecosystem Actors
Basically, four important actors function in different roles in the THORChain's ecosystem, including:
These are Liquidity Providers (LPs) who get incentivized or paid for providing liquidity (assets) to the THORChain's Liquidity pools. Their compensation is done with swap fees and system rewards. This Compensation is determined by series of factors related to the pool and the state of the network. Liquidity providers within the THORChain, commit capital to pools that have exposure to underlying assets, thus liquidity providers gain exposure to those assets, which have free-floating market prices.Liquidity Providers deposit their assets in liquidity pools and earn yield in return. They earn tokens in THORChain's native token, RUNE, and the Liquidity pool's connected asset. For example, someone who has deposited in the BTC /RUNE pool will receive rewards in BTC and RUNE tokens. Liquidity Providers' yield, is calculated every block and it is paid out to them when they remove assets from the pool.
LPs rewards are also calculated based on whether or not the block contains any swap transactions. If the block contains swap transactions then the amount of fees collected per pool defines the amount of rewards and if the block doesn't contain trades then the amount of assets in the pool determines the rewards. Given below are two examples of How Liquidity Providers (LPs) are compensated on either Block with swaps, or Block with no swaps:
BLOCK WITH SWAPS
This the way a block with fees splits the reward. In this example, 1000 RUNE is being divided as rewards:
|Pool Depth (RUNE)||Fees||Percent of Fees (%)||Rewards|
BLOCK WITH NO SWAPS
This is how a block with no fees splits the rewards. In this example, 1000 RUNE also is being divided:
|Pool Depth (RUNE)||Fees||Percent of Fees (%)||Rewards|
Thus ensuring that yields are being sent to where demand is being experienced - with fees being the proxy. Since fees are proportional to slip, it means the increase in rewards ensure that pools experiencing a lot of slip are being incentivized and will attract more liquidity.
FACTORS AFFECTING YIELD
Some of the factors that affect yields include
- Ownership % of Pool- Liquidity Providers (LPs) who own more of a pool receive more of that pool's rewards.
- Swap Volume- Higher swap volumes lead to higher fees and higher fees lead to higher rewards for liquidity providers.
- Swaps Size- Hastening exchange assets swappers tend to make larger swaps and Larger swaps lead to greater price slips, resulting in higher fees.
- Incentive Pendulum- This Pendulum balances the amount of capital bonded in the network versus pooled.
- Change in Asset Prices- Provided the price of the assets changes, then liquidity Providers (LPs) will receive more of one and less of the other. This may change yield if the yield is being priced in a third asset, ie, USD.
These are THORChain actors/ users who swap their digital assets for other digital assets, thus allowing users to use the liquidity to swap assets ad-hoc, paying fees. The network aims to give users access to:
- A large variety of assets through cross-chain compatibility and simple asset listing
- Superior user experience through open finance protocols and permissionless access
- One-transaction access to fast chains (Binance Chain), smart chains (Ethereum), censorship-resistant chains (Bitcoin), and private chains (Monero).
HOW SWAP WORKS?
- Available Assets
Users can swap any assets which are on connected chains and which have been added to the network. Users can swap from any connected asset to any other connected asset. They can also swap from any connected asset to THORChain's token, RUNE.
THORChain manages the swaps in accordance with the rules of the state machine (i.e completely autonomous). Every swap that it observes is finalized, ordered, and processed. Invalid swaps are refunded, valid swaps ordered in a transparent way that is resistant to front-running. Validators can not influence the order of trades and are punished if they fail to observe a valid swap. And these swaps are completed as fast as they can be confirmed, which is about 5-10 seconds.
- Continuous Liquidity Pools
Swappin on THORChain is made achievable by liquidity pools. These are pools of assets deposited by Liquidity Providers (LPs), where each pool consists of one connected asset, e.g Bitcoin, and THORChain's own token, RUNE. They are known as Continuous Liquidity Pools because RUNE (token), being in each pool, links all pools together in a single, continuous liquidity network.
These are users who monitor pools and rebalance continually, paying fees but with the intent to earn a profit. Prices on THORChain are sustained by profit-seeking traders. Traders find assets that are mispriced between markets and buy assets on markets with low prices and sell them on markets with high prices. This earns them a profit. They do this by comparing the exchange rates on THORChain with the rates on external markets. If they find the price is lower on THORChain they can buy there and sell on an external market. If they find the price is lower on external markets they can buy there and sell on THORChain. This process is repeated at high-frequency. Over time, price information propagates and THORChain settles with external markets.
HOW TRADING WORKS?
Provided a swap takes place in the MATIC/RUNE pool, such that the ratio on THORChain is 20:1 MATIC: RUNE, but it is 16:1 on external markets. This simply implies that RUNE (token) is undervalued on THORChain and traders can now buy cheap RUNE on THORChain and sell it for a profit on external markets. To do so, they swap MATIC into the pool and get RUNE out. They sell this RUNE on external markets and make a profit. Thus explaining the economics of the (as described in the Swap section above) that traders should aim to restore balance to the pool in a single trade. Rebalancing should be done step-by-step. If larger rebalancing trades are attempted, arbitrage may not be profitable for traders.
Specifically, each rebalancing trade should be 40-50% of the imbalance size. So if the imbalance starts at $100 in value, the first rebalancing trade should be between $40– $50. This will reset the imbalance at $50- $60. The next rebalance should then be at $25– $30. This process goes on and on till a good enough balance is restored.
Node Operators provide a bond and are paid to secure the system. As earlier indicated, THORNodes also services the entire THORChain network, and each THORNode consists of several independent servers in a cluster. All THORNodes communicate and operate in cooperation to create a cross-chain swapping network. Node Operators earn 67% of the system income when it is stable. Node Operators should stay anonymous and never socially signal that they are running a node. For this reason, no ability to delegate or token-voting is supported at the protocol level and there are a variety of tools available in the ecosystem for Node Operators, such as the Telegram Alerts bot.
Nodes must pay for their bond to ensure the economic assumptions of the network are upheld- Node Operator
The THORChain's technology is edged on its one-way State Pegs, State Machine, and Threshold Signature Scheme (TSS) Protocol. THORChain combines several existing technologies together to achieve the vision. THORChain's one-way State Pegs allows a chain-agnostic bridging protocol , while its state machine helps to coordinate asset exchange logic and delegate redemption transactions . The Bifröst Signer Module is to convert redemption transactions into chain-specific transactions and its Threshold Signature Scheme (TSS) protocol is to enable distributed threshold key-signing . A detailed description of THORChain's technology is given below:
The Bifröst Protocol: 1-way State Pegs
The Bifröst Protocol is the name for its 1-way State Pegs. Each connected chain has a "Bifröst" module that deals with the degree of connecting to that chain, such as chain configurations and transaction details. Once nodes are done syncing, they begin watching vault addresses on each chain. If they ever see an inbound transaction concerning a vault address they watch, they deserialize it and convert it into a THORChain witness transaction, as it is known within the THORChain's technology. THORChain processes each observed transaction and collects signers - essentially the keys of each node that reports a transaction that is 100% identical. Once a super-majority of nodes agree on a particular transaction, it moves from a pending state to a finalized state.
THORChain State Machine:
The state machine processes the finalized transaction and performs logic, such as ordering transactions, computing state changes, and delegating them to a particular outbound vault. Finally, a txOut (transaction-out) item is created and stored in the Key-Value store. This Transaction Out item details which chain it should be sent to, the destination address, the vault it should be sent from, and the maximum gas that should be spent during this transaction. It also has fields for the transaction that initiated it (the InHash) and the transaction that will complete the accounting (the OutHash).
After the completed transaction is created, a function known as Signer helps to download the transaction from their local copy and serializes it into a correct transaction for the destination chain using the respective chain client. This is then sent to the Threshold Signature Scheme (TSS) module which coordinates key-signing. The final signed transaction is then broadcast to the respective chain.
THORChain (ERC20) (RUNE) is an ERC-20 utility-first value cryptocurrency token issued on the Ethereum blockchain to function within the THORChain's ecosystem. It was designed to be most used in its own network. The token's ticker is symbolized as $RUNE, and it is the asset that powers the THORChain ecosystem and provides the economic incentives required to secure the network. The Token's total supply is 10,000,000 RUNE and it is currently traded on SushiSwap Decentralized Exchange (DEX).
|Token Distribution||Percent (%)|
|Initial Rune to be publicly distributed||50%|
|Allocated to the liquidity fund; to be used for on-chain liquidity||30%|
|Allocated to the development fund; paid to developers of the protocol through contracts, public grants, and open bounties||20%|
THORChain (ERC20) (RUNE) has 5 distinct THORChain superpower roles which are described below:
- Liquidity (As a settlement asset)
- Security (As a Sybil-resistant mechanism, and a means for driving economic behavior)
- Governance (Signalling priority on-chain)
- Incentives (Paying out rewards, charging fees, subsidizing gas)
- Amplifier (To elevate assets.)
Liquidity: As a settlement asset
It Avoids Diluting Pair Liquidity- RUNE is the base currency that is required to be provided alongside every asset in pools. Without a native settlement currency, each asset would need to be pooled with every other asset, which would eventually result in hundreds of new pools to be created for just one new asset, diluting liquidity. Provided THORChain is in support of 1,000 chains, it would only need 1,000 pools. A competitor would need a whopping 499,500 pools. Illiquid pools are the enemy RUNE token fights.
The table below describes THORChain's Liquidity pools with respect to the number of assets available:
|No. of Assets(eg. BTC, ETH)||No. of Pools(Others)||No. of Pools(THORChain)|
|n||pools = (n (n-1))/2*||pools = n|
It Inherits Value of Pooled Assets- Since THORChain (RUNE) token is bonded to assets in its pools, then as the value of those assets increases, then the RUNE value will also increase. This means the system can become "aware" of the value of the assets it is trying to secure. Once it is aware of the value of the assets it is securing, it can use incentives to ensure the security of those assets. RUNE is worth 3X the value pooled of assets like BTC, ETH, or BNB in its network.
Buying $RUNE token
Given below is a step-by-step guide on users' way of buying THORChain (RUNE), by:
How to buy and Stake Rune tokens
- Finding an exchange that supports RUNE, such as Binance.
- Creating a Binance account (or a RUNE token supported Cryptocurrency exchange) and make a deposit.
- Searching for a RUNE market and trade a suitable cryptocurrency for RUNE. For example, to buy RUNE on the RUNE/ BTC market, you will need to have some Bitcoin to trade for RUNE.
Users can purchase $RUNE token on the following Cryptocurrency Exchanges:
- MXC, Hoo.com, BIKI, BitMax.io, BEPSwap (THORChain), and Binance.
- Paul Gangemi (Engineer)
- Alan Vantoai (Management, Marketing)
- Matthew Nguyen (Developer)
- Gareth Walsh (Management)
- Jazear Brooks (Senior Developer)
- Esco Obong (Blockchain Developer)
- Aidan Musnitsky (Senior Software Engineer)
- Philip Stanislaus (Blockchain Developer)
- Chaitanya Shah (Developer)
- Jessica Watson (Miller Production Manager)
- Stefan Beyer (Doctor of Philosophy in Computer Science, University of Manchester)
- Steven Alchemy
- Jon Carr-Harris
- Jim Shiyu Jin
- Beau Stoner
- Darren Toh
- Florian Ducommun
- John-Paul Thorbjornsen
The THORChain ecosystem can be reached or contacted using its Medium, Telegram, Twitter, Reddit, and GitHub platforms.
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