Decoding the THORChain (RUNE) Protocol: A Comprehensive Review

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THORChain is a decentralized liquidity protocol designed for cross-chain cryptocurrency exchanges. Built on the Cosmos-SDK, it utilizes the Tendermint consensus mechanism and has its own THORChain Network.

Origins and funding

In 2018, the THORChain project was founded by an anonymous group of developers under the pseudonym "Chaosnet". Later, some team members revealed their identities, including Chad Barraford, the lead developer and chief technical officer. It is likely that one of them is Eric Voorhees (also the founder of ShapeShift), yet this is not indicated in his social media profiles.

In terms of funding, the project's only known financial event was the initial sale of its RUNE tokens in 2019 on the Binance DEX platform, where it raised approximately $1.5 million.

THORChain operational mechanism

THORChain operates through a network of interconnected liquidity pools, each representing a separate digital asset. The protocol utilizes a continuous liquidity pool (CLP) model, which employs permanent market makers to form swap prices based on the current pool ratios. 

The THORChain project enables cross-chain swaps of native cryptocurrencies without wrapped tokens. Such exchanges are facilitated through a native token called RUNE, which serves as an intermediary for the protocol.
Visual representation of how liquidity providers earn rewards. Source:

Visual representation of how liquidity providers earn rewards. Source:

What is RUNE

RUNE is the native token of the THORChain protocol. Its functions include:

  • Liquidity provision in the cross-chain exchange process;

  • Network protection through nodes that bond RUNE tokens;

  • Governance. Token holders can vote for protocol updates and improvements;
  • RUNE serves as a payment method for swap fees and a reward for liquidity providers.

The RUNE token has a limited issuance of 500 million tokens. At the time of writing this article, 65% of the maximum supply is in circulation. It can be assumed that if there is a need to increase liquidity, the RUNE limit may be extended, probably through a voting process, due to the operational specifics of the protocol.

Prospects and challenges

The THORChain's cryptocurrency exchange mechanism for different networks stands out among others. However, there are concerns about the protocol's security due to reported hacking incidents in 2021. Additionally, questions arise regarding the project's funding, which appears limited based on available information.

When it comes to prospects, THORChain is still a fledgling project that launched its network in 2022. But who knows? It could spread its wings and soar during the next bull run. Recently, the protocol entered the Trust Wallet to enable cross-chain swaps, which is a step in the right direction for the project.

The RUNE tokens within the THORChain protocol have their own unique value, but their worth is contingent upon the demand for the protocol itself.

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