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Author: Admin | 2025-04-28
Understanding THORChainTHORChain is a cross-chain decentralized protocol that allows native swaps between different blockchains.What are automated market makers and liquidity providers?Automated market makers (AMMs) are decentralised exchanges (DEX) that pool liquidity from users and price the assets within the pool by using algorithms. The exact mechanics vary from exchange to exchange, but generally, AMMs offer deep liquidity, low transaction fees, and 100% uptime for as many users as possible.Liquidity Providers (LPs) are network participants who deposit their assets into these pools (i.e. virtual, asset-specific reservoirs), and by doing so, come to own a share of that particular pool for as long as they retain their assets within. In exchange for adding their assets to the pools, LPs earn rewards, as swappers (who use pools to exchange assets) incur fees, which are proportionally distributed to the pool owners. Some protocols also boost the liquidity APY by emitting block rewards (for example, $BNT by Bancor and $RUNE by THORChain).THORChain is an independent blockchain that operates as a Layer 1 cross-chain decentralised exchange (DEX). Built using the Cosmos SDK, THORChain enables the exchange of assets across disparate blockchains in a non-custodial manner. THORChain is the backend for many user interfaces.Key selling points of THORChain are:The ability to swap Layer 1, or native, assets across multiple chains - e.g. native BTC to ETH swap.No user-registration required - simply send a transaction and THORChain will execute it.No wrapped assets - all assets are natively secured.Transparent, fair prices, without relying on centralised third-parties.➜ An Introduction to THORChain for BitcoinersTHORChain features a native token RUNE, which owners can use to participate in the network and is used to pay for the swap/gas fees for RUNE pairs. RUNE has specific utility within the THORChain ecosystem, as it fills four key roles:RUNE as a Settlement AssetRUNE is the settlement asset for all pools, so a 1:1 ratio of RUNE:ASSET is required for pooling. For example, a pool with $100,000 in BTC will necessarily hold $100,000 worth of RUNE. Within a pool, all assets will have a 50% pairing with RUNE regardless of how assets are added or withdrawn.RUNE for Network SecurityIn order to provide network security, THORChain requires twice as many RUNE to be bonded by Node Operators as there is RUNE pooled. For this security provision, node operators are economically incentivised to work within the network’s best interest.RUNE for GovernanceUsers can vote with their liquidity (RUNE:ASSET symmetrically added) for the pools they want to be active. The pools with the most liquidity (i.e. deepest) become active.RUNE as IncentivesBlock rewards are paid to Liquidity Providers and Node Operators on a set emission schedule - which are in addition to swap fees.Swaps in THORChain use native assets. Example: When a
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