What Does The Thorchain Project Have In Store For Crypto Lovers?
Cryptocurrency does not need any introduction with its daily increasing popularity in the world. Now used as a medium of trade for buying goods and services online, it also doubles as a means of investment. With this increasing popularity, there is a new digital coin introduced into the crypto market at intervals. And for these digital currencies to continue to have accountability in terms of digital records of transactions, there are some best crypto tools used, generally referred to as Blockchains. A blockchain project recently launched in the crypto market that is set to make crypto trading even easier and better, by the name of Thorchain, is here.
Thorchain was developed and perfected in three years, which is almost a lifetime in crypto, and it was built as a standalone blockchain for decentralized crypto trading. Its machination is such that will potentially set things in faster motion in the $2 trillion cryptocurrency market. Thorchain functions like other automated market makers (AMMs) such a Bancor and Uniswap.
What makes Thorchain different from them is that it allows for real cryptocurrencies trading from completely different blockchains that are neither wrapped nor synthetic. The chaosnet of the crypto market, which is a pre-production environment that seamlessly operates across different cross-chain assets, continues to expand when a new blockchain trades over Thorchain. With this, you’d be able to swap freely from one chain to another and from one asset to another. If this standalone blockchain works as designed, crypto lovers will be able to make swaps with real currencies – not an ersatz version of currencies like the wrapped BTC on the Ethereum network, and this can be done without having to trust an intermediary.
The Thorchain project is also a reminder of the long-running competitive threats that decentralized exchanges pose to centralized exchanges like Coinbase ahead of the company’s hotly-anticipated stock listing. AMMs, the model that Thorchain is similar to, have been the leading model for decentralized finance. Centralized exchanges are trustless to many of the biggest chains and seem to always have the inkling to lose assets. Thorchain will allow trades to start with Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Binance Chain’s BNB. There will be more on the platform soon like the dogecoin, DOGE. Thorchain is based on Tendermint, the consensus protocol associated with the cosmos ecosystem.
The Thorchain project uses machination that’s similar to that started and managed by Bancor, the native token of the Thorchain is RUNE, all token in Thorchain is matched with a value in RUNE that’s equal to it. When a crypto lover on the platform starts a trade between two digital currencies such as BCH and LTC, under the hood it becomes two trades. When the user first trades the BCH for RUNE, the RUNE then gets traded for LTC. When all this is done quickly, it should look similar to swapping BCH and LTC directly. Unlike the Bancor and Uniswap models, Thorchain is capable of trading real assets of multiple unconnected blockchains and not representations of them. Although you still have to trade for RUNE before you can swap, the Thorchain project team is developing a wallet known as Asgard X that will allow for direct interaction with Thorchain and all its included blockchains, so it can store the coins from those networks. Thorchain’s token is already available for trading at $11.20, increasing almost 90% in the last 30 days.
Thorchain has been around for a while, and the first version was initiated and abandoned in 2018. The project was brought back to life in 2019 when the idea of a trustless exchange
between blockchains was reviewed and redeveloped to incorporate some new advances in technology. Thorchain started rather anonymously to avoid attention and its core team members have stated that they want to disband in summer 2022 and turn everything over to the RUNE holders.
As with other Automated Market Makers, the Thorchain project needs liquidity providers to be part of it, so it can work as seamlessly as possible. If there are crypto lovers willing to buy or sell an asset, the final price of it will vary largely from the participants’ expectations. Also, users can post an equal amount of any token from any coin on the platform and RUNE to the system, so they can start earning a trading fee.
Thorchain addresses the issue of impermanent loss, that is, those who supply liquidity to networks. The model says if the value of one token in a pool goes down relative to the other, the value of their deposit can shrink in fiat terms even though their total deposit in the underlying tokens is increasing. However, the team notes that there’s rarely any impermanent loss when liquidity providers stay in the project for long. Also, Thorchain can effectively take snapshots of the value of any liquidity deposit, and if the user’s fiat value falls below where it was deposited due to rebalancing, Thorchain will make up for it out of RUNE reserves.
The liquidity providers will also get new RUNE emissions on deposits. The amount of RUNE that also goes into each pool is dependent on how much revenue has come from that pool in that block. The freshest RUNE goes into the most active pools, and very nearly all RUNE reserves will be distributed in the first two years of operation.