What is Thorchain?
Thorchain can be said to be one of the oldest DeFi projects on the chain. The team was established as early as 2018, and the product was launched in 2019. Despite experiencing multiple hacking incidents, with the strong support of its team and the unwavering community, Thorchain continues to deliver and has become one of the top fifty blue-chip projects in terms of market value.
Thorchain's main business is a decentralized cross-chain AMM, allowing users to exchange and trade between different blockchain assets without the need to trust third-party institutions. Unlike centralized exchanges, Thorchain operates based on a specially designed trustless protocol, allowing users to deposit trading funds into liquidity pools and conduct frictionless cross-chain asset exchanges. Unlike cross-chain bridges, Thorchain provides native asset cross-chain swaps rather than wrapped token forms. Thorchain uses the Cosmos SDK to build a blockchain and creates multiple native token (BTC, ETH) and Thorchain token $RUNE AMM pools within its protocol. When users conduct cross-chain transactions, they actually swap through $RUNE and native tokens on different blockchains to obtain native assets on the target chain.
Technically, Thorchain uses advanced cross-chain messaging systems and custom Byzantine fault-tolerant algorithms. After being attacked by hackers multiple times, it has continuously improved to enhance the security of cross-chain messaging. Thorchain is considered one of the most promising cross-chain infrastructures, addressing the pain points of cross-chain asset liquidity and trading efficiency, and has become the best route for BTC-ETH cross-chain channel liquidity in the current chain.
What updates does Thorchain have?
Thorchain has welcomed two major updates this year. The first is the introduction of the Streaming Swaps mechanism, which allows users to conduct immediate large-scale cross-chain asset exchanges, overcoming the previous issue of poor liquidity leading to low user participation. The main idea behind user use of Streaming Swaps is as follows:
Users initiate a large-scale cross-chain exchange, such as exchanging 10 BTC for 3000 ETH.
The protocol splits this exchange into multiple small Streaming Swaps, each in units of 0.1 BTC.
After each 0.1 BTC is exchanged for approximately 30 ETH through a streaming swap, the ETH is immediately sent to the user.
The streaming swaps are repeated until the entire 10 BTC is exchanged for 3000 ETH.
This streaming swap mechanism achieves immediate settlement of large-scale exchanges, reduces slippage losses, improves capital utilization efficiency, and enhances the protocol's resistance to front-running attacks.
From a data perspective, since the launch of Streaming Swaps in the third quarter of this year, trading data has shown significant growth, with the main trading volume still being on BTC trading pairs. This demonstrates Thorchain's success in providing a more efficient and convenient cross-chain trading solution, attracting more users to participate.
Another major update is the official launch of Thorchain Lending, which has been discussed on the forum for nearly two years. Thorchain Lending features interest-free, non-forced liquidation, and no expiration date lending products, meeting users' borrowing and leverage needs. So, how is interest-free, non-forced liquidation, and no expiration date achieved?
This is mainly due to:
Interest comes from the income of pledged assets, rather than being paid by the borrower, thus achieving interest-free lending.
The additional collateral asset ratio is as high as 150%-250%, reducing liquidation risk; liquidation decisions are entirely based on smart contracts and protocol rules, with no human intervention.
Borrowers only need to continuously supplement collateral assets to use borrowed funds for the long term, thus there is no pressure of expiration date, and the borrowing period is only constrained by the duration of the collateral.
Borrowers pledging ETH to obtain stablecoin loans can earn income through liquidity mining, offsetting borrowing costs and gaining net income.
Liquidation comes from the transfer of collateral asset premiums, without the need for borrowers to actively bear the risk, thus controlling the risk.
The launch of Thorchain Saver Vault along with Lending has further increased Thorchain's total locked value (TVL). Saver Vault allows DeFi users to deposit native tokens without bearing the risk of $RUNE price fluctuations, effectively attracting users to deposit assets and providing a source of basic assets for long-term collateral. These innovative measures provide users with more choices and convenience, and are expected to promote the growth and development of the Thorchain ecosystem.
Competitor in the same field - Maya
Maya Protocol is a decentralized cross-chain protocol built on top of Thorchain, launched in March of this year. It is a friendly fork project of Thorchain and is supported by the Thorchain community. In terms of cross-chain AMM mechanisms, Maya Protocol differs significantly from Thorchain, with the following main differences:
As a friendly fork of Thorchain, Maya Protocol's goal is not to replace but to enhance Thorchain, providing backup support and resilience for decentralized infrastructure, similar to how dual engines on an airplane can improve reliability.
Maya introduces some unique designs for capital efficiency, security, and value acquisition, such as liquidity nodes, dual-token mechanisms, and impermanent loss protection.
Maya also plans to support more public chains such as Arbitrum, Cardano, and smart contract chain Aztec to expand the entire cross-chain ecosystem.
Through collaboration, the two have also achieved some functional integration, such as one-click cross-platform aggregated trading, streaming swaps, allowing users to seamlessly operate between the two platforms.
In general, Maya and Thorchain have built a complementary cross-chain alliance, addressing the limitations of a single solution and collectively driving the development of decentralized finance.
Competitor in the same field - ChainFlip
Unlike Maya Protocol, which is a community-based fork project, Chainflip has a significant background as one of the top-tier projects with tens of millions in funding. It was led by Framework Ventures and received investments from Blockchain Capital and Pantera Capital in 2021 and 2022, raising a total of $16 million. It finally launched its mainnet this year, but its product has not yet been opened for use.
Chainflip is a hybrid decentralized trading protocol that allows seamless value transfer between any blockchain (including BTC, EVM, and underlying networks). It aims to combine the advantages of centralized exchanges and DEX to achieve efficient asset trading and risk management.
Its biggest selling point is the Jit AMM mechanism design, which aims to solve cross-chain challenges by minimizing slippage and providing precise pricing. This addresses the drawback in Thorchain where providing liquidity requires users to bear significant losses. It allows market makers to join single-sided liquidity. Additionally, it has improved the user experience by allowing the use of regular wallets for value conversion on any chain, addressing the specific wallet installation experience required by Thorchain.
Overall, Chainflip claims to have a better product experience and design compared to Thorchain. However, while its mainnet has been launched, the main product, the cross-chain DEX, has not been opened for use. Whether it can effectively attract TVL in the future and whether the product can survive in the long term are key factors, especially considering Thorchain's years of experience in this field.
Author's Opinion
Scott @GryphsisAcademy
I analyze and discuss from a trading perspective. We initially added $RUNE to the watchlist because of the explosive growth of Bitcoin's ecosystem in May. At that time, we conducted an analysis of the Bitcoin ecosystem, and ThorChain, as a native cross-chain DEX for Bitcoin, was included. Additionally, ThorChain is built on the COSMOS SDK, and the recent explosive growth of the COSMOS ecosystem, including TIA, INJ, and KUJI, has attracted attention to the speculation in the COSMOS ecosystem. Therefore, ThorChain has the potential to benefit from both the Bitcoin ecosystem and the COSMOS ecosystem.
Furthermore, ThorChain's strong value capture capability in its economic model, first-mover advantage, and the team's active innovation during the bear market, such as the introduction of Streaming Swaps and "Ponzi" lending in July and August, sparked market discussion and attention. This also laid the groundwork for the growth of TVL and volume in the bull market. Therefore, it has demonstrated strong alpha capabilities in the Bitcoin and COSMOS ecosystem tracks.
The emergence of Maya Protocol and ChainFlip as competitors to ThorChain has also provided a valuation anchor. At that time, many on Twitter were conducting comparable valuation analyses, concluding that they should invest in $CACAO and $FLIP. When more and more competing new projects emerge, new projects can break through the barriers of old projects by offering higher token incentives, which is an interesting aspect of Web3 governance and economics. Additionally, the emergence of more competitors will divert investors' attention. Therefore, at present, we will appropriately reduce holdings based on some funding indicators.
@19971122 DT
In my opinion, with the current trend of the booming Bitcoin ecosystem, the demand for cross-chain transactions between EVM public chains such as Ethereum and the recently popular Solana ecosystem and the Bitcoin mainnet will become increasingly strong. Cross-chain DEX is indeed a growing business in this context. However, the recent surge in Rune is more inclined towards the launch of Thorchain Lending, which brings more use cases for Rune and effectively causes a deflationary effect, rather than purely due to the demand for growth in the cross-chain DEX business. In the current market sentiment, it is quite normal for similar concept tokens to rotate in the short term. However, in the long run, I will focus more on Thorchain itself, because I believe that a large part of Thorchain's success is not because its product is outstanding, but because the project team has a strong connection with the community. Many educational materials about Thorchain are created by the community, and the fact that it has persevered through multiple hacking incidents demonstrates the determination of its project team. Therefore, in this field, Thorchain is definitely the leader and will continue to be so in the short term.
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