THORChain, a decentralized exchange (DEX) protocol, aims to enable cross-chain token swaps. In March, it finalized a proposal to burn 60 million RUNE tokens. This decision is a testament to the project’s trajectory toward a completely community-governed model. Combined with the burn, the goal is to create a healthy token supply that incentivizes long-term network participation and growth. It marks a significant milestone in THORChain's journey from a centrally controlled project to a decentralized autonomous organization (DAO).
The protocol would be further refined to enable seamless, native asset swaps between lacked compatibility blockchains. It enables users to swap tokens without needing to trust centralized exchanges or use wrapped tokens. THORChain has become a fully community-run project, governed by 100 decentralized nodes.
THORChain's Decentralized Exchange and RUNE Tokenomics
THORChain operates as a decentralized exchange (DEX). This means their token bridges are fundamentally different in that it empowers users to natively trade their tokens across blockchains without using wrapped tokens. Such transferability is essential for users who want to directly transfer assets such as Bitcoin converted into Ethereum without needing a centralized exchange.
"THORChain allows users to swap digital assets across multiple blockchains with the help of continuous liquidity pools." - [“THORChain vs. Uniswap” - 99bitcoins.com]
Underlying all of THORChain’s operations, the RUNE token plays a crucial role. While ETH is used for staking and governance now, it was created to incentivize network participation. RUNE has a hard-coded maximum supply of 500 million. As of now, about 425.64 million RUNE are circulating.
THORChain employs a dual incentive mechanism. Additionally, it compensates validators and liquidity providers via block rewards called “Protocol Reserve emissions.” The “Incentive Pendulum,” a complex but fluid mechanism, weighs these rewards against one another to ensure proper network security and liquidity.
From Testnet to Cross-Chain Swaps
JP Thor, originally John-Paul Thorbjornsen, the founder of THORChain. The development team released the initial whitepaper in July 2018, charting the course for a true decentralized, cross-chain exchange.
The project released its first public testnet in 2020. This enabled developers a comprehensive opportunity to test its features and troubleshoot bugs or other potential problems. By April 2021, THORChain’s blockchain went live. This revolutionary cryptographic technology provides a simple way for users to swap assets between Bitcoin, Ethereum, Bitcoin Cash, Litecoin and Binance Chain.
Token Burn and Community Governance
The recent decision to burn 60 million RUNE tokens demonstrates how seriously THORChain takes its decentralization mandate. The tokens were never issued, as the tokens were held in the Standby Reserve. This move will help tighten the circulating token supply and increase the value of the remaining RUNE.
"THORChain is now a mature and battle-tested cross-chain Defi protocol. Over the past 4 years, THORChain has transitioned from a centrally controlled project to a community-driven project whose network is solely controlled by 100 decentralised nodes.”" - [THORChain. “$60M RUNE Burned — Lending Caps Increased.” - Medium]
THORChain uses a set emission schedule. The shape of the emission curve determines how many new RUNE tokens are generated per block. Further, the total value of RUNE remaining in the Reserve plays a role in this process. This predictable emission schedule adds both transparency and predictability into the network for all participants.
