DeFi decrypted: THORChain and Rune
THORChain launched its mainnet operation earlier this year, and it’s fast becoming one of the key players in the DeFi space.
The platform offers a decentralized liquidity network across blockchains, in a bid to take over from the more established Uniswap which offers a similar service. Its utility token RUNE has recently been tearing through the charts making its way up the list of most successful DeFi tokens. DeFi tokens also include the now popular SushiSwap and SUSHI. THORChain is a project that can’t be missed by anyone interested in DeFi, and traders looking for promising opportunities.
What is THORChain
THORChain is a decentralized exchange that uses a cross-chain which means it can be used on any blockchain protocol for any asset. The liquidity protocol is designed to connect all crypto assets in a marketplace through cross chain bridges with continuous liquidity pools secured by a decentralized network of validators.
The network of validators are part of the Proof-of-Stake model on which the project is based. Validators need to lock up RUNE, the native THORChain token, to participate in validating blocks and bad behavior is punished by having those stakes of RUNE slashed.
Users can participate on the platform not only by swapping assets, but also by providing liquidity to the various pools available or creating new pools. To add liquidity, users need to stake assets in any of the pools, after which they earn a commission on each trade made within that pool.
It offers users a way to turn unproductive assets into productive assets in a non-custodial manner.
Staked capital is underwritten by the decentralized system and liquidity is always on-chain, never wrapped or pegged.
Nodes are what make THORChain’s services work, and they perform three essential functions: staking RUNE, creating vaults (wallets), and witnessing transactions. New nodes are created every 3 days and need to compete to enter with staked RUNE. This way the network is constantly updating itself kicking out the oldest nodes.
RUNE is the native token and an integral part of THORChain. It is a BEP2 token and used for a variety of purposes. All RUNE tokens are at a 1:1 ratio to asset value which is what makes it possible to link all liquidity pools. RUNE is the token that nodes need to stake in order to participate in the network, and liquidity providers are rewarded with RUNE.
RUNE is also used to maintain the integrity of THORChain, protecting it against bad actors by offering a larger benefit for liquidating than they would receive for corrupting the system. Nodes earn 2/3 of system income, with the remaining third reserved for liquidity providers.
The token started trading publicly in July 2019, with minimal price movements for the first 6 months hovering around the $0.017 mark. Up until June 2020, RUNE floated in the $0.07 and $0.11 range. Since then, the token has swiftly picked up riding the DeFi wave along with other tokens such as COMP, ADA, LEND, BNT. It reached an all-time high on Aug 17 printing $0.96, followed by a slump back down to $0.80. Altogether, RUNE has gained 4605% since market-wide trading began.
THORChain still has something to prove before it truly secures its place in DeFi, but it certainly does hold the promise of ushering in a new generation of decentralized exchanges that work well, provide ample liquidity, and provide cross chain pools.
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