ThorChain (RUNE) Review

For the past few years, blockchain technology has indeed started to have an impact on the various technologies we use in everyday life. From use cases as varied such as governance, supply chain management to decentralized application building, there are a myriad of projects working towards unlocking the full potential of the technology and using it in a meaningful way.

What is ThorChain & How Does It Work?

ThorChain has been developed with the aim to provide a trust-less, and secure liquidity network which is decentralized. Thus, it can be described as a decentralized exchange protocol, supporting cross-chain bridges and a layer 2 payment network. The ThorChain project differs from other projects in several aspects, which we will discuss in the section below.

ThorChain has a multi-blockchain protocol, comprising of sidechains known as “Token Chains” along with a master chain called the “MerkleChain”. This is one of the technological aspects that make it standout from its peers. Here, the MerkleChain is responsible for syncing and tracking the entire state of the network. It also stores the latest hash of the MerkleTree to prevent the possibility of double spending. Side Chains in the protocol are labelled as first class citizens, having no delineation in terms of security, technology or preference in the validator.
The above mentioned Token Chains have a genesis account responsible for describing the characteristics of a token and only track transactions related to the token. The Token Chains are account based, like the Ethereum Network.
The team behind ThorChain is a mixture of professionals from countries such as South Korea, China, United States, Singapore and several European countries. The project currently consists of Engineer Paul Gangemi, Developers Mathew Nguyen and Gareth Walsh in marketing to name just a few.

What Are They Trying To Do?

The current cryptocurrency market is plagued with persistent problems such as a lack of liquidity, especially since the number of lesser known coins or altcoins have exponentially increased in the last few years. As evident from the current state of many blockchain projects, the prices of many tokens do not correlate with the fundamentals of the project, being based purely on speculation. The lack of liquidity in the market can thus pose many problems, some of which are mentioned in brief below.

  • The lack of liquidity in the current cryptocurrency market also has deep implications when it comes to the volatility of the market. Even though high volatility is preferred by retail investors because of the outstanding returns on investments involved, the market appears more as a gambling market to the majority of investors. Such volatility of the market is also reflective of the market’s infancy, which can discourage bigger institutions and institutional investors from taking part in it.
  • The reasons for slow or a lack of adoption can also be found in the illiquidity and volatility of the market. Assets such as Ethereum and Bitcoin are still struggling to establish themselves as global transactional currency because their markets appear unstable.
  • There are very few exchanges such as Binance or Coinbase US, which provide a more convenient trading experience to customers while offering higher liquidity. However, both of the above exchanges are highly centralized which makes it susceptible to common trust and security issues. Many centralized exchanges have also been accused of wash trading and other malicious activities which can deter any serious investor.

Thus, ThorChain aims to address all these shortcomings in terms of liquidity, by providing a whole ecosystem rather than just a single protocol.

How Do They Plan on Achieving Their Goals?

As mentioned before, ThorChain addresses these problems by developing a comprehensive decentralized liquidity network for the current digital asset marketplace. It will be chain-agnostic, which makes it capable of supporting any existing digital asset. The main aim here is to enhance the digital asset ecosystem by enhancing lesser known assets and tokens and connecting them to big, liquid decentralized networks. Thus, ThorChain solution works on the addressing the liquidity problem in the following ways.

  • ThorChain’s solution is chain-agnostic which makes it support almost all existing digital assets. This is radically different from other existing solutions such as Uniswap or Bancor, both of which support a single chain.
  • ThorChain’s network architecture involves staking and incentivising to address the current liquidity problems in the market. By providing the ability to swap any digital currency with another.

Thus, ThorChain’s solution is expected to remove volatility in today’s market which in turn would stabilize its price. Stable prices significantly favor the rise of adoption of newer technologies which would allow ThorChain to be adopted as a transactional payment method. This would ultimately result in removing a significant portion of volatility that exists in the cryptocurrency market.

Use Case of ThorChain

The main use case of ThorChain is to provide incentivised on-chain liquidity. The ThorChain protocol thus aims to cover three functions inside the ecosystem which includes:

  • Providing a trust less and secure platform which supports bi-directional bridging across any chain.
  • Allowing instant asset swaps as well as transcurrency payments for any two digital assets involved.
  • Incentivising asset holders so that they increase staking to maintain the liquidity.

ThorChain users are thus incentivised by the protocol to stake their assets on chain, rather than holding them off chain. On-chain staking is done on Continuous Liquidity Pools or CLPs. Stakers are incentivised with fees on the trades.

The other Use-Case related to the ThorChain project is Cross-chain bridging. ThorChain uses the BitFrost protocol for increasing interoperability inside the whole ecosystem.
BitFrost Protocol: The Bitfrost protocol is concerned solely with the issue of connecting all existing chains with one another. This is done to present a favourable trading environment, with incentives for staking and a much lower fees. The Bitfrost protocol currently supports both the Bitcoin and Binance Chains, along with those of Ethereum and Litecoin.

What Makes Them Unique?

Apart from the different features which are aimed at solving performance and stability related issues, ThorChain’s cross blockchain communication protocol makes it stand out from the crowd. This multichain approach allows users to set up tokens which represent other blockchain networks such as those of Bitcoin and Ethereum.
Thus, ThorChain’s solution is a unique one that unifies the whole digital asset market by combining the elements of decentralization, deep liquidity, scalability and interoperability.

What Are The Challenges and Advantages Associated with ThorChain?

There are several advantages associated with ThorChain as compared to other major projects in the market. Some of the benefits are explained in brief below:

  • The main players that can compete with ThorChain are Bancor and Uniswap, both of which provide staking and swapping benefits. While Uniswap only deals with ERC20 tokens, Bancor supports only EOS tokens for staking and swapping. Infact almost all other projects focus on a single chain or the other and are not interoperable with all. Here, ThorChain’s competitive advantage is its higher interoperability, extended across almost all digital asset chains. This is one of the reasons which has made ThorChain an exclusive liquidity solution for the Binance chain ecosystem along with others.
  • No matter how much some projects aim to provide liquidity for low marketcap digital assets; it is very difficult to trade with any given liquidity below the $1 mark. ThorChain provides an opportunity for these token holders to earn yield on their held assets while maintaining full ownership and custody of their tokens.

The only concern associated with the project is the lack of marketing as compared with other similar projects which would be a disadvantage for a project with such high potential.

Final Thoughts

ThorChain is a project that has immense potential both in the long term and short term. For a project with some solid fundamentals, it generated a lot of hype especially after announcing their crowdsale on Binance. This apparent high demand coupled with an initial low market cap makes it one of the more desirable assets for investors.
As of 4/11/2019, the ThorChain token (RUNE) is valued at $0.023749 USD with a total market cap of $2,504,481 USD according to coinmarket cap, where it is ranked 656th. The token is already being traded across three markets in exchanges such as Bilaxy, Binance and BitMax.
With future such as integrating free finance, establishing more commercial connectivity and consumer capital among other things, ThorChain is well on its way to become a major project in this regard. The fruition of the ThorChain project would allow all users to get rid of restrictions due to centralisation, working in a completely decentralised blockchain ecosystem.

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