What is THORChain?

THORChain is a decentralised cross-chain liquidity protocol that enables users to swap assets across different blockchain networks.

A key innovation in decentralised finance (DeFi) is the automated market maker (AMM) model, which allows users to deposit cryptocurrencies into liquidity pools. These pools then facilitate trades, with the pooled assets acting as trading pairs.

While popular DeFi platforms like Uniswap and Balancer use AMMs to enable peer-to-peer, decentralised asset swaps, they mostly operate within a single blockchain, such as Ethereum.

THORChain addresses this limitation with a decentralised exchange (DEX) built on the Cosmos SDK. Its AMM protocol provides the technology to swap cryptocurrencies across previously non-interoperable blockchains.

THORChain's native token, RUNE powers the network. RUNE acts as a pairing token in liquidity pools, making it essential for executing trades. It is also used for paying fees, participating in governance, and securing the network, enhancing both its utility and value within the ecosystem.

How Does THORChain Work?

THORChain powers a range of products and services that leverage its cross-chain infrastructure. One such platform is THORSwap, the first multichain decentralised exchange (DEX) to use THORChain’s network as its interface. THORSwap allows users to select two assets for swapping, and the protocol automatically calculates fees based on network conditions.

These swaps are made possible by THORChain’s continuous liquidity pools (CLP), with RUNE acting as the intermediary for every trade. When swapping two assets, the trade occurs between two liquidity pools—each paired with RUNE. For example, swapping USDT for ETH requires first trading USDT for RUNE in one pool, and then RUNE for ETH in another.

This process happens seamlessly, without users needing to handle or convert their crypto into RUNE themselves. The CLP model also allows THORChain to adapt to changing liquidity demands.

THORChain participants have four primary roles:

Liquidity Providers (LPs)

LPs contribute assets to liquidity pools and earn block rewards and swap fees. Their rewards depend on the pool’s activity and the share of tokens they’ve provided.

Swappers

Users who trade between different crypto assets on THORChain.

Traders

Arbitrage traders help maintain balance in the pools by buying or selling assets that are mispriced compared to other exchanges, ensuring pool prices match market values.

Node Operators

These participants bond RUNE to secure the network and contribute to its proof-of-stake consensus. They remain anonymous and are periodically rotated through a process called “churning,” which evaluates their performance.

The History of RUNE 

THORChain was established by a group of developers at the Binance Dexathon in 2018. The project's founders and developers have largely stayed anonymous, leaving much of the public-facing image to be shaped by the THORChain community.

In July 2019, THORChain conducted an initial DEX offering (IDO) that raised $1.5 million. That same month, they launched BEPSwap, their first market product. BEPSwap is a decentralised exchange (DEX) that facilitates swaps between BEP-2 tokens on the BNB Chain (formerly Binance Smart Chain).

THORChain introduced the multichain chaosnet (MCCN) in April 2021, enabling cross-chain swaps among Bitcoin, Ethereum, Litecoin, and other assets. However, in July 2021, the network experienced consecutive hacks, resulting in a loss of over $13 million.

Following these incidents, developers focused on fixing bugs, refining the code, and enhancing network security. By October 2021, they had restored 4 out of 5 networks supported by the THORChain protocol. This period of renewal was marked by a private token sale in October 2021, which raised $3.75 million, led by IDEO CoLab Ventures.

What Makes THORChain Unique?

THORChain stands out because it’s very good at managing liquidity, which means making sure there’s always enough crypto available for trading. It uses a special fee system to prevent big price changes during trades, which helps keep the market stable.

THORChain is run by an anonymous team and doesn’t take any of the RUNE tokens used for fees; instead, it gives them back to the users who help run the network. You can also use THORChain to trade tokens from major platforms like Ethereum, Bitcoin, and Binance Smart Chain almost instantly.