Abstract

THORChain is a decentralized liquidity protocol that allows users to exchange assets without permission. It can act as a yield pool manager to exchange native Layer 1 assets such as BTC. To ensure the security of its network, THORChain uses Tendermint and Cosmos-SDK. It also utilizes the Threshold Signature Scheme (TSS) for its leaderless main revenue pool.

Introduction

The concept of THORChain was born in 2018 and was proposed by a team participating in the Binance Dexathon (decentralized exchange coding competition). THORChain facilitates cross-chain liquidity and reduces the need for centralized trading platforms and third parties in the DeFi space. It supports cross-chain exchange and yield generation on crypto-assets such as Bitcoin and Ethereum.

How does THORChain work?

THORChain is a Layer 1 network based on Cosmos SDK and Tendermint. THORChain operates as a cross-chain permissionless decentralized exchange (DEX). It also uses the Threshold Signature Scheme (TSS) to secure its leaderless asset yield pool. Tendermint and TSS provide a layered Byzantine Fault Tolerance (BFT) consensus mechanism, and a two-thirds majority consensus is required for funds to enter and exit the main TSS fund pool.

There are four main user types in the THORChain ecosystem:

1. Exchangers use liquidity pools to exchange assets.

2. Liquidity ProvidersAdd liquidity to the pool and receive rewards.

3. Node operators provide bonds and charge fees to ensure system security.

4. Traders monitor and rebalance capital pools with the aim of making profits.

Different from other cross-chain protocols, THORChain will not conduct asset verification before exchange. packaging, but uses native assets on THORChain for autonomous and transparent asset exchange.

Asset exchange is realized through a liquidity pool. These pools are made up of assets provided by liquidity providers and secured by a network of node operators. Liquidity providers deposit their assets into THORChain’s liquidity pool to earn revenue consisting of exchange fees and system rewards. Anyone can add liquidity to existing pools, so THORChain is permissionless. Additionally, THORChain is non-custodial, as only the original depositor can withdraw the assets they deposited into the pool. Liquidity providers can also propose new asset pools, but these assets must be tokens of supported chains in the ecosystem.

Node operators are called THORNode. They are independent of each other and communicate with each other, forming a cross-chain exchange network. They receive fees from each exchange as a reward for keeping the network secure. Before becoming a node operator, users must provide RUNE bonds. These bonds serve as collateral, ensuring that node operators act in the best interests of THORChain. The total bond volume needs to be twice the size of the RUNE capital pool.

During the asset exchange process, exchangers will send their assets to THORChain and receive another asset. For example, when exchanging BTC for ETH, the exchanger will send their BTC to THORChain. When BTC enters the network, it is first exchanged from BTC to RUNE, and then from RUNE to ETH. The exchanger will then receive ETH from THORChain’s revenue pool. This process allows THORChain to be exchanged natively without wrapping assets.

THORChain’s market price is regulated by arbitrage traders, which in turn defines the value of the asset exchange. These traders look for assets that are mispriced in the market in order to profit from the price difference. This mechanism allows the market price of THORChain to be adjusted naturally without the need for an oracle.

With this liquidity pool model, THORChain is able to determine the exchange of any other assets for other assets using only the pool balance value afterwards. In effect, THORChain can act as a yield pool manager, monitor deposits and withdrawals, and use pool ratios to price assets. This helps create decentralized liquidity and removes centralized middlemen.

What is unique about THORChain?

THORChain is a DEX that does not require packaging for asset exchange. Other advantages of THORChain include:

Exchangers and traders

• Ability to exchange Layer 1 native assets across multiple blockchains.

• No registration required — anyone can send transactions and THORChain performs the exchange.

• No wrapping of assets is required — THORChain uses the yield pool of its native assets to perform swaps.

• Transparent and fair prices can be obtained without relying on a centralized third party or oracle.

• Enjoy liquidity on demand at any time.

Liquidity provider

• Earn income from idle assets such as BTC, ETH, BNB and LUNA native tokens.

• Enjoy up to 100% impermanent loss (IL) protection after 100 days in the fund pool.

• Not subject to the lock-up period.

• No registration required.

• No need to deal with third parties.

Node operator

• Ensure network security to earn rewards.

• Encourage anonymity to increase decentralization.

• No registration required.

What Is it RUNE?

RUNE is the native token of THORChain. Within the network, it serves as a base trading pair for users to exchange RUNE for any other supported asset. It has a supply of 500 million and has four main use cases: settlement, security, governance and incentives.

RUNE's settlement function

RUNE is the settlement asset for all liquidity pools and can facilitate swaps between the two pools. The ratio of RUNE to assets for each fund pool is 1:1. For example, a pool with $100,000 in BTC would need to hold $100,000 worth of RUNE.

RUNE’s security features

To ensure security, node operators must bond twice the number of RUNE they want to add to the pool. These RUNE bindings serve as collateral, ensuring that node operators act in the best interest of the network.

RUNE's governance function

RUNE generation Coin holders can choose which assets or chains they want to prioritize. They do this by using liquidity to vote. For example, the fund pool with the most RUNE invested will have higher priority.

RUNE’s incentive function

Block rewards and exchange fees are paid to liquidity providers and node operators in RUNE on a fixed distribution schedule. RUNE can also be used to pay for fuel.

RUNE's smallest denomination is called Tor, accurate to the 8th decimal place. RUNE aims to move toward predictable, deterministic values. RUNE's design determines that its market value should be at least three times the total value of non-RUNE assets in the ecosystem's liquidity pool.

How to buy RUNE on Binance?

You can buy RUNE on cryptocurrency exchanges such as Binance.

1. Log in to your personal Binance account and click [Transaction]. You can buy RUNE using Classic or Advanced trading modes.

2. Enter "RUNE" in the search bar on the right side of the screen to view available trading pairs. Let's take RUNE/BUSD as an example.

3. Visit the [Spot] area and enter the quantity of RUNE you wish to buy. In this example, we select Market Order. Click [Buy RUNE] to confirm your order, and the purchased RUNE will be deposited into the spot wallet.

Summary

As a cross-chain DEX in DeFi, THORChain is working for autonomy Asset exchange paves the way. RUNE is designed as a settlement, security asset, governance and incentive tool that enables THORChain's native exchange model to be used in a decentralized environment and on multiple blockchains.