THORChain Deep Dive

October 2023

What's better than CEX?

And more than just another DEX?

Introducing THORChain:

Discover this innovative DeFi platform where you can swap, save and borrow all in one.

Here's my October 2023 research report on RUNE.

Here's what we'll cover in today's edition:

1. Overview

2. Use Case

3. Adoption

4. Revenue

5. Tokenomics

6. Treasury

7. Governance

8. Team & Investors

9. Competitors

10. Risks & Audits

11. Summary

Don't forget to bookmark this post for future reference.

THORChain is a decentralized exchange that enables cross-chain swaps.

Users can easily swap native BTC for native ETH without the need to bridge assets or rely on centralized exchanges.

It was developed using the Tendermint consensus engine & Cosmos-SDK state machine.

THORChain offers a true decentralised alternative to centralised exchanges.

It also provides the following benefits:

• Removes bridging risk (Native swaps)

• No user-registration or KYC

• Transparent & fair prices (no centralised 3rd parties)

• Continuous Liquidity Pools

The lending product was launched in August, enabling users to lend their native L1 assets (BTC & ETH) and borrow USD-denominated debt.

Key features:

• 0% interest

• No liquidations

• No expiration

A total of 2.06m $RUNE has been deposited as collateral into the protocol.

TVL currently at $119m, range-bound for the past 17 months ($70-$170m).

Lower than the ATH of $500m but has formed a solid foundation during the bear market.

October has seen some very strong trading volumes on THORChain with one day reaching a peak of $350m.

There are 2 ways THORChain accrues fees and rewards:

• Liquidity fees

• Block rewards

Over the month of September, THORChain generated:

• $848k Liquidity fees

• $1.5m Block rewards

• $2.35m TOTAL

This would put it 3rd amongst DEXs and 16th overall (DeFiLlama).

RUNE is the asset which powers the THORChain ecosystem and has four key roles:

• Liquidity

• Security

• Governance

• Incentives

Overall, the price of RUNE is determined by 2 factors:

1. Deterministic value based on the liquidity within the network

2. Speculative premium

For every $1 of non-RUNE assets on the network, the network incentivizes $3 of RUNE to be locked (min deterministic value of RUNE).

For example, if you had $1m of non-RUNE tokens staked on THORChain, then the min market cap of RUNE would be $3m.

These are the current supply stats:

• Circulating supply = 300m

• Max supply = 500m

• Market cap = $462m

• FDV = $768m

• Market cap/ FDV = 0.6

In total, THORChain has approximately $44m USD in their Treasury.

Comprising:

• Liquid: $18.3m

• Working: $26.3m

• Total: $44.6m

They also have approximately $87m in Standby Reserves.

A decentralised governance forum is in place to decide on the following:

• Which assets are listed/delisted

• Which chains are listed/delisted

• When the protocol gets upgraded

• The economic limit – how many nodes can participate

Key focus on decentralisation & security.

The project was founded in 2018.

It has no defined organisational structure and is fully community owned. Some significant early contributors include:

• @ErikVoorhees

• @CBarraford

Investors included Delphi Digital, Multicoin Capital, Zee Prime Capital, & X21 Capital.

THORChain currently holds the 10th position among DEXs in terms of total TVL (DeFi Llama).

It faces tough competition from DeFi giants like Uniswap, PancakeSwap, and Curve.

However, THORChain sets itself apart with its unique ability to perform native cross-chain swaps.

It has shown some impressive growth recently and continues to innovate with their lending platform recently launched along with streaming swaps.

I expect them to continue climbing up the TVL rankings in the near future.

The project has been audited and has been given a security score of 89.75 by CertiK.

However, as with many DeFi projects, there are always risks involved including:

• Code vulnerabilities

• Hacks & exploits

• Liquidity risk

• Impermanent loss

Overall, I am quite optimistic on RUNE and the THORChain protocol. There are a number of upcoming bullish catalysts:

• Memo less transactions

• Order books

• Perpetual contracts

• THORSwap

• Ecosystem & integrations expanding

Overall weighted score = 8.65

Note: I am NOT an ambassador or advisor of THORChain. This is NFA.

Some useful links:

https://docs.thorchain.org/

https://dashboards.ninerealms.com/#lending

https://medium.com/thorchain/thorchain-q3-23-ecosystem-report-7c102e41540e

https://flipsidecrypto.xyz/Polaris_9R/thor-chain-network-stats-9hsNPI