THORChain is a decentralized cross-chain liquidity protocol that utilizes the Tendermint consensus engine, Cosmos-SDK state machine, and GG20 Threshold Signature Scheme (TSS) to run. As an independent Layer 1 cross-chain decentralized exchange (DEX), THORChain is designed to allow users to exchange native assets between multiple chains without packaging or pledging assets. This design not only ensures price transparency and fairness, but also avoids the risk of relying on a centralized third party.
Core functions of THORChain
THORChain operates based on ongoing liquidity pools that are designed to maximize efficiency. Unlike traditional asset wrapping or staking, THORChain manages funds directly in the on-chain vault and protects these funds with economic security. Therefore, THORChain can be described as a "cross-chain automated market maker (AMM)", similar to Uniswap, or a "decentralized Binance".
THORChain Finance Based on the liquidity pool, THORChain pursues four important financial principles:
Exchange: Users can exchange {Asset X in Chain A} for {Asset Y in Chain B}.
Savings: Users can save {Asset X} on Chain A.
Lending: Users can lend {Asset X} on Chain A and borrow {Asset Y} on Chain B.
Liquidity Pool: Users can pool RUNE in a liquidity pool.
Opportunities for developers
THORChain provides developers with the opportunity to create innovative products that can be integrated with THORChain, including wallets, exchanges, and various services. Developers can profit through affiliate fees, which can be up to 10%, and these fees cover savers’ deposits. Developers only need to focus on creating an attractive front-end interface and attracting users.
For development details, please refer to the dedicated developer documentation and quick start guides, which cover features such as exchange, saving and lending.
THORChain Innovations: There are many innovations in the THORChain protocol that are designed from first principles to be decentralized, resistant to capture, and as sustainable as possible. Here are some key innovations:
Capped validator selection: This mechanism keeps the network decentralized and maintains a high Nakamoto coefficient.
Three-Day Validator Replacement: This mechanism prevents validator inactivity, proves the disposable nature of funds, and upgrades the network with minimal governance.
Asynchronous network upgrades: Allow validators to upgrade to new protocol versions in their own time, and the network is upgraded without breaking consensus.
Chain-agnostic Bifrost protocol: handles UTXO, EVM, BFT and Cryptonote chain connections, minimizing differences in core logic.
Incentive Pendulum: Streaming rewards to validators and liquidity providers to target network security ratios to ensure the safety of funds.
Continuous Liquidity Pool: Allows one-sided liquidity provision and uses liquidity-sensitive fees to resist price attacks.
Swap Queue: Orders swaps based on the price impact of each block, preventing sandwich attacks and other forms of miner extractable value (MEV).
Liquid synthetic assets: Enable fast low-fee exchanges in L1 pools and support single-sided savers. Synthetic assets are a mixed-collateral fixed asset design that contribute to liquidity.
The role of RUNE token
In the THORChain ecosystem, the RUNE token plays a vital role. As the native token of THORChain, RUNE is not only used to pay transaction fees, but also for liquidity provision and governance. Users can earn RUNE by providing liquidity, which not only promotes the development of the ecosystem but also provides users with opportunities to make profits.
In addition, the value of RUNE is also supported by liquidity pools. As more users participate in liquidity provision, the demand for RUNE will increase, further pushing its price upward. This mechanism ensures that THORChain's ecosystem can continue to operate and provide users with stable returns.
in conclusion
As a decentralized cross-chain liquidity protocol, THORChain provides users with a safe and efficient way to exchange assets. As the ecosystem continues to grow, the value and importance of the RUNE token will continue to increase. For developers, THORChain provides abundant opportunities to create innovative products and profit from them. In the future, THORChain will play an increasingly important role in the field of decentralized finance (DeFi) and become a platform that benefits both users and developers.