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What is RUNE ?
ThorChain’s consensus is proof-of-stake and built on Tendermint (Cosmos), with network validators (nodes) required to bond their native token, RUNE. RUNE has a token model that increases in value as the utilization of the network grows. This means that the more liquidity is deposited into ThorChain liquidity pools, the more valuable RUNE gets.
RUNE is needed for two fundamental reasons:
(i) In liquidity pools, it acts as a base pair so a 1:1 ratio of ASSET:RUNE is required (e.g. BNB.RUNE, ETH.RUNE). This is because ThorChain does not actually operate by direct asset transfer, it needs RUNE to move from one asset into another and to activate ThorChain’s Bifrost Protocol. This protocol is the bridge that enables multichain connectivity within ThorChain and requires RUNE to operate.
(ii) RUNE is bonded as collateral by nodes for security sake following a 2:1 bond:stake ratio. Thus, RUNE is not intended to be a governance token. ThorChain will be governed more like Bitcoin, where nodes running can determine what direction it takes. This also means that ThorChain is not only limited to traders looking to trade spot tokens. It is also intended to be used by liquidity providers and node operators.
Therefore, with a 2:1 bond:stake ratio, combined with the 1:1 pool stake ratio, the amount of RUNE needed in the work is thus three times the amount of the non-RUNE assets locked. This 3:1 ratio is just the minimum value of RUNE.
RUNE serves these five purposes
1. Liquidity: as a settlement asset
2. Security: As a sybil-resistant security measure and a mean for driving economic behaviour
3. Governance: To signal priority on-chain
4. Incentive: as part of incentive mechanism, RUNE is used to pay out rewards, charge fees and subsidize gas
5. Amplifier: to elevate assets that are on ThorChain
Users who utilize ThorChain’s cross-chain services between the pools will need to pay fixed network fees as well as a variable slip fee. The fee is paid due to gas fees on external services and for fast execution. Besides offering a seamless service to traders, users can also become liquidity providers on ThorChain.
Liquidity providers on ThorChain can add liquidity to various pools, which are then tied to RUNE in a separate vault. The project’s Continuous Liquidity Pool (CLP) incentivises any ThorChain participant to supply liquidity in exchange for a reward. The CLP is one of the cornerstone concepts driving the project, mainly because it is an economic paradigm that is a solution to liquidity shortage issues faced by most exchanges. ThorChain’s CLP has its own on-chain and trustless ‘basket’ of liquidity and incentivising participation in filling it, which means that thorchain’s liquidity pool is a unique exchange environment that never requires a pairing of buyer and seller to transact. The Bifrost protocol also tracks the ratio of RUNE to the asset in the CLP.
The THORChain project was founded in 2018 under the premise that the use of centralized exchanges to transfer cryptoassets between different blockchains was flawed. Non-custodial exchanges, otherwise known as decentralized exchanges (DEXs), were the long-term solution. Therefore, the THORChain team set out to build an independent blockchain that could bridge to external networks and thus facilitate cross-chain transfers, functioning similarly to a DEX.
The problem often facing DEXs is finding sufficient liquidity. Traders gravitate towards platforms where they won’t lose any value due to slippage. But these same traders are the ones to provide enough liquidity to prevent slippage in the first place. In response, the THORChain team plans to implement an adapted model of Bancor’s “smart token” to create what it calls Continuous Liquidity Pools (CLPs). These pools of available assets give traders access to liquidity without needing to find or contact another buyer or seller.
THORChain also distributes rewards in the form of RUNE (the network’s native token) to any user that adds tokens to a liquidity pool. At the same time, token owners can stake their assets and earn the fees accumulated from other users accessing the pool.
THORChain is a Tendermint–based chain, and therefore uses Tendermint BFT (Byzantine Fault Tolerance) as its consensus mechanism. It also employs Proof–of–Stake (PoS) for Sybil resistance. As part of the PoS element, a system of validators can stake RUNE tokens to run network nodes and validate transactions. THORChain allows token holders to delegate to these validators, which keeps validators in check and permits delegators to a portion of each block reward.
The project is looking to launch its mainnet at some point in 2021. It has also launched an AMM on Binance Chain called BEPSwap.
Who Are The Founders Of THORChain?
According to an official representative of THORChain, the platform has no CEO, no founder and no directors. Instead, the further development of the platform is organized through Gitlab.
On top of this, those currently working on the project are largely anonymous. Again, an official representative of THORChain states that this is to “protect the project and ensure that it can decentralize.”
A Project sheds some light on the theory behind maintaining a project with an anonymous team, as quoted below:
“-> Developers work for the Nodes, by shipping code that makes the system more valuable.
-> Nodes work for the Stakers, by securing assets and being online.
-> Stakers bring capital, placed on-market for the Swappers.
-> Swappers pay fees, bringing economic activity.”
How Does THORChain (RUNE) Work?
THORChain relies on Tendermint as a network. Tendermint is a platform that allows developers to bypass the fundamentals of blockchain development, such as cryptography, and instead, concentrate on high-level blockchain and app development.
Tendermint is replication software that enables developers to create unique blockchains and decentralised applications (dApps). Tendermint is a low-level protocol made up of two components: a blockchain consensus engine and a general application interface.
THORChain implements a protocol called continuous lending pools, which is used by the Bancor DEX, to facilitate cross-chain swapping of non-native tokens. All accepted cryptocurrencies that aren’t native to the network, as well as the native token RUNE, are put into liquidity pools.
When a user starts a trade, the system immediately trades one token for RUNE before exchanging RUNE for the other token. Non-custodial exchanges using the THORChain protocol are enabled through double swapping with immediate execution.
Users can also put funds into liquidity pools for other users to borrow from, earning a return depending on the amount they put in. Operational nodes establish liquidity pools. In addition, nodes are responsible for confirming swaps for which they are compensated.
The Proof of Stake consensus process is used by the THORChain protocol, which necessitates the staking of native RUNE tokens.
Node operators are in charge of keeping the network software working. In order to receive RUNE incentives, they run high-performance IT infrastructure and bond RUNE.
They contribute to the network by monitoring transactions on External Chains and executing the protocol. Node operators, on the other hand, may be fined if they fail.
There are 100 to 300 validator slots available, with Nodes earning a validator spot by bonding at least 1 million RUNE. To accommodate network control, nodes are housed on an additional layer with enhanced security.
Liquidity Suppliers are compensated for contributing their assets to the network. Their assets are transferred to Swappers’ asset pools, which are used to exchange assets.
Before reaching the Tendermint limit, the multi-chain network can grow to 99 nodes. Even if the network expands to 99 active nodes, the capacity to share vaults allows it to develop further.
THORChain RUNE Token
As THORChain uses the Cosmos Tendermint Proof-of-Stake (PoS) consensus mechanism, network validators are required to stake the native RUNE token to secure the network. The RUNE token serves two primary functions. Firstly, the RUNE token serves as a base pair and settlement asset in liquidity pools. Secondly, the RUNE token is bonded by nodes as collateral with a 2:1 bond:stake ratio.
The THORChain RUNE token does not serve directly as a governance token for the THORChain ecosystem. Although, nodes that stake the RUNE token can determine the future direction of the protocol. However, the RUNE token is required to signal on-chain priority for transaction confirmations and is used to incentivize participants by subsidizing gas and paying out rewards.
The RUNE token is available on several crypto exchanges. This includes Uniswap, Binance, and the BEPSwap exchange. At the time of writing, the THORChain RUNE token is trading with a market cap of around $1.2 billion and a circulating supply of 271 million tokens out of a maximum supply of 500 million according to CoinGecko.
How Many THORChain (RUNE) Coins?
The THORChain network’s native token is RUNE. It is a multi-purpose universal token that facilitates all THORChain network operations and aids in the protocol’s operation.
Out of a total of 500,000,000 RUNE, there are presently 296,541,793 RUNE in circulation. The token, like Bitcoin and several other cryptocurrencies, has a finite quantity. Because of the limited availability, no new RUNE tokens should be generated once the current supply has been depleted.
RUNE could be a useful long-term store of value because of its limited supply, which functions as an anti-inflationary mechanism.
The market cap is calculated by multiplying the amount of RUNE coins in circulation by the current market price of THORChain. RUNE’s market capitalization rates it against other cryptocurrencies and also determines its market dominance.
What Makes THORChain Unique?
Because of its novel solution to liquidity, THORChain is a one-of-a-kind project. The approach employs a charge that minimizes slippage and reduces the danger of liquidity loss while also neutralising the risk of temporary loss.
Another feature that distinguishes THORChain is its user-friendly interface, which is powered by a complex blend of revolutionary technology that allows for seamless crypto exchange.
To prevent Sybil attacks, THORChain employs a proof-of-stake (PoS) method. In a Sybil assault, the attacker subverts a network service’s reputation system by creating a large number of pseudonymous identities, which the attacker then exploits to exert disproportionately large influence.
It also employs the Byzantine Fault Tolerance (BFT) consensus mechanism, which guarantees that the network can keep operating even if some nodes cease to do so or act illegally
THORChain is a non-profit organisation, and its faceless crew does not keep any of the RUNE amount spent on protocol fees; rather, every RUNE spent on fees is distributed to network participants.
Users may also exchange tokens from prominent platforms including Ethereum, Bitcoin, Binance Smart Chain, Litecoin, and others almost instantaneously with THORChain.
Where Does RUNE Fit In The THORChain Ecosystem?
The RUNE plays various key roles in the THORChain ecosystem. From staking to covering transaction fees to providing liquidity, RUNE is essential to the running of the system.
- Staking – Network participants who wish to become nodes must first stake RUNE tokens. Staking is required for a certain period of time to prevent nothing-at-stake attacks.
- Payments – Users engaging with the THORChain network pay fees in RUNE – whether it’s a transaction, trading, bridging or liquidity fees
- Backing liquidity – When you add liquidity to the THORChain network, that liquidity is backed by RUNE in what’s known as ‘Continuous Liquidity Pools.’ In this way, RUNE acts as a settlement currency for the network
- Block Rewards – Block validators are rewarded in RUNE for protecting the network.
- RUNE is required as liquidity to join Liquidity Hubs
How Does ThorChain Differ From Others?
The attraction of ThorChain is that its chain-agnostic feature allows it to swap assets on a real basis. Unlike Ren, there is no wrapped BTC (e.g. renBTC) being created. Instead, we would be able to swap real ETH for real BTC. This is a milestone, as currently the closest Bitcoin is to DeFi is in its wrapped form. Thus, ThorChain brings BTC into DeFi.
Furthermore, as the network of new smart contract platforms grows (i.e. Solana and Polkadot), the number of chains is growing. The diversity of chains engenders the need for a trust-minimized and decentralized way to trade/swap tokens across chains, such as ThorChain. Currently, ThorChain is working on Polkadot, Solana, Monero, Cosmos (ATOM) and such, in anticipation of the launch of its mainnet.
So, what sets ThorChain apart is its cross-chain feature – which enables any asset to be swapped, and a pool created around it. This opens a whole new world of possibilities for DeFi users and its ecosystem alike. ThorChain has seen its popularity rise as it gained the attention of Multicoin Capital, where they announced that RUNE represents one of their largest public positions, because they believe that ThorChain plays an increasingly critical role within the crypto ecosystem. Currently, the multichain testnet is available and the mainnet is yet to be launched.
Products by THORChain
THORChain supports a few powerful products, which include the following:
1. BEP Swap
This is an application powered by THORChain that allows Binance coin (BNB) BEP2 token holders to swap assets or deposit them for liquidity and earn commissions from trades. It also enables traders to stay on top of pool prices and trade them more profitably.
2. Flash Network
Flash Network is a layer-2 network that supports instant asset swaps on the THORChain network. It supports exchanges across multiple tokens and liquidity pools. Also, Flash Network is compatible with other layer-2 solutions such as Lightning Network, Raiden, and Bolt.
This is a staking interface that allows THORChain users to stake in and earn more RUNE. The team created RUNEVault to observe user behavior interactions and learn how to make an improved project for THORChain’s mainnet launch. When the mainnet launches, the platform will be retired.
4. Bitfröst Protocol
The Bitfröst Protocol is a cross-chain protocol that facilitates connectivity between disparate blockchains. It solves one of blockchain’s most persistent problems: interoperability. This way, THORChain users can seamlessly trade assets across any blockchain.
How The THORChain Decentralized Liquidity Protocol Works
In short, THORChain is a decentralized liquidity protocol like Uniswap. The way decentralized liquidity pools work — and this is true for THORChain as well — is as follows:
- Liquidity pools replace the CEX model of custodied assets and order books. Anyone can be an LP by providing two assets to the pool.
- Smart contracts automatically execute swaps between traders and the liquidity pool. This step removes the need for counterparties.
THORChain differs from the usual decentralized liquidity pool protocol because it can take assets from one blockchain and send out assets from another.
THORChain solves the cross-chain asset swap problem that’s plagued crypto for years with a rather complex yet brilliant mechanism: THORNodes.
Is THORChain A Good Investment?
THORChain would prove to be a pioneer in the entire cryptocurrency world based on fundamentals of reliability and robust exposure of liquidity. On a pessimistic scale, this digital asset, even though it may not blow the roof for the price but will surely stand firm feet on the ground.
According to our long-term crypto predictions, 2025 might mark as the benchmark year as THORChain is predicted to surpass $27 by all means. With mass adoption, the THORChain price is estimated to reach around $80 max by 2025 on the chart. A rise in price and demand for the cryptocurrency like never before in the market, and traders can invest after doing their own research in this currency at this price level to earn a significant profit in the long term.
Governance On THORChain
THORChain was created with minimal governance by design. The development team was interested in creating a system where the validators are responsible for creating their own cross-chain bridges as needed. New chains can also be added to the ecosystem through community or node participation in the governance. Larger amounts of staked capital mean new assets get added to the ecosystem.
Basically users create new liquidity pools on their own on an as needed basis. New assets are easily listed by creating a staking transaction with the new asset in the THORChain transaction memo. Once the new pool is created it is bootstrapped and swapping is disabled. Then, every few days the assets that have the deepest liquidity are enabled for swapping. The protocol will list new assets based on the amount of liquidity, with the greatest liquidity getting preference.
Key Features And Takeaways Of THORChain
THORChain is one of the top 100 cryptocurrency projects and RUNE, its native token, is one of the most popular cryptocurrencies in the industry, with the following features and takeaways:
THORChain is known for its anonymity with no one knowing who the founder is, or who the current CEO is. Each participant involved in its development remains anonymous to ensure that the project and network remain fully decentralised.
The main purpose of THORChain is to help users use the technologies with which they are presented. Fees that are generated by the protocol is given to users without the team taking any percentage.
THORChain makes use of several advanced technologies including the TSS protocol, Bifröst Signer Module, advanced state pegs, and more.
The protocols and technologies that are employed on THORChain are available, but they are hidden within the platform so that users are not discouraged.
THORChain offers a unique system that prevents impermanent losses, especially that faced by liquidity providers who lose when contributing to liquidity pools.
RUNE is available across a variety of blockchains including Ethereum as an ERC20 token, and Binance Chain, as a BEP2-type token.
Users can participate in the platform whether they run nodes, or provide liquidity, amidst several other functions, and they are rewarded for their participation.
RUNE is the native token that can be used as a security token and governance token; however, users must have at least one million RUNE to participate in the consensus mechanism of THORChain.