Given what’s transpired this week, it’s safe to say anyone and everyone in this space is shook, from the apes of retail to the most stringent of fund managers.

One of the main things running through my mind since the start of this literal shit show, was Erik Voorhees’ ‘An Introduction to THORChain for Bitcoiners’ in early 2021, which had a profound impact on my way of thinking pertaining to DEX design, the nature of trading in a decentralized manner, and beyond (privacy, identity, etc).

Since Erik posted, THORChain has reached significant milestones on its roadmap, and has also endured significant challenges, but still stands today after reaching Mainnet, as the most connected and seamless (bridgeless) way to trade native assets across 9 chains:

• THORChain

• Bitcoin

• Ethereum

• Binance Beacon Chain (BEP2)

• Avalanche

• Cosmos

• Dogecoin

• Bitcoin Cash

• Litecoin

THORChain Savers

THORChain Savers is a yield product that launched ~24hr ago, and pays native yield (BTC deposit → BTC earnings, ETH deposit → ETH earnings, etc) to depositors from swap fees generated in THORChain pools. This is all done without KYC/AML, custodial wallets, onboarding processes, removing the risks associated with entrusting ones assets with a trusted counterparty.

Dethroning the Old Guard

According to The Block, spot volume since Oct. 2018 (approx. last ~50 months) from the largest exchanges is $24,814,170,000,000 (approx. $24.8T), or an average of $496,283,400,000 ($496.28b) in trading volume per month. THORSwap, the primary Crosschain DEX on THORChain, generates .3% of transactions as a fee for executing trades, and distributes 75% of these fees to vTHOR stakers (tends to be typical among DEX’s, as opposed to CEX’s typical model of buy/burn exchange token).

Given the volume and exchange fee range, the imputed value captured by vTHOR stakers lies in the range of: $2.25M - $11.25B.

(Granted, THORSwap would have to pull more All Time volume than even Uniswap to reach the upper bounds of this range, but all in due time)

What does this mean for the value of RUNE though?

MDV (Minimum Deterministic Value) of RUNE

THORChain (RUNE) tokenomics are by far some of the most complex and value accruing, with value for the token (outside of speculation) being directly linked, and decreased or increased with the value locked on the chain itself.

This is described best in Erik’s piece:

RUNE’s 1:3 Ratio and Valuation

As discussed, LPs must deposit RUNE equal to 1x the value of whatever asset they are depositing.

Therefore, it stands that for every $1 of deposited assets, the THORChain protocol is holding $3 of RUNE.

Liquidity Providers provide…

● $1 of BTC in the pool
● $1 of RUNE in the pool
● This is enforced through arbitrage

THORChain Nodes provide…

● $2 of RUNE in the bond from validators
● This is enforced through competitive bidding and the Incentive Pendulum described above

RUNE can thus arguably be valued at 3x the total value (TVL) of non-RUNE assets in THORChain’s liquidity pools. This would be the base fundamental value, devoid of any speculative premium.

● $1bn of non-RUNE assets in the pools = $3bn baseline value of RUNE.

This formula assumes every RUNE is productively deployed in THORChain’s system; in reality, some significant portion of RUNE will always be on other exchanges, individual wallets, and cold storage, etc., meaning an even higher market cap would result (plus speculative premium).

This whole apparatus suggests a degree of value capture at the RUNE asset level that is impressive in any success scenario for THORChain.

Worth noting after reading this, is that today, users can single-sided LP on THORChain, where on the backend the network swaps half of their assets to RUNE, thus creating the 1:1 LP of ASSET:RUNE, instead of having to market sell half of their assets, to then market buy RUNE to LP with. THORChain effectively simplifies the process of providing liquidity, and even protects users from IL after 100 days (1% of IL protection per day, so if a user is an LP for 20 days, they receive 20% IL protection, and so forth.)

Here, we can see basic RUNE stats and calculate its MDV based on current THORChain TVL:

If $140.4M worth of RUNE is currently being put to use/securing the network (combining pooled RUNE worth $42.1M, and bonded RUNE worth $98.3M) we can assume that the liquidity of non-RUNE assets is valued at an equal amount of the RUNE pooled, or $42.1M, as shown below (half of the ~$84.2M is non-RUNE assets):

Using Flipside’s data on current MDV & speculative multiplier, we gain a better grasp on how the fluctuation of the minimum deterministic value of RUNE (through network activity) moves in sync with its market value.

TLDR;

• More liquidity deposited on THORChain =

  • Increased RUNE buying pressure as non-RUNE assets are swapped to RUNE on the backend to pair 1:1

  • Increased RUNE being bonded (bringing the total RUNE “locked” on the network up to a 3:1 ratio - RUNE:ASSET)

  • Increased speculative premium on RUNE as these stats show network growth and confidence

  • Deeper liquidity → Less slippage → Better trading UX

  • Better Trading UX → More traders → More fees being captured

  • etc

All of this leads to the ultimate goal of capturing the vast majority of on-chain trading volume, and even bringing the vast majority of crypto (+ stonks? RWA?) fully on-chain, with crosschain capability in a bridgeless, self-custodial manner.

Closing Thoughts

After making it to the end of this hopefully concise explanation as to why I’m bullish THORChain, weirdly enough, the builders behind it actually knew we’d see a situation similar to the likes of that which has transpired with FTX this past week. The dominoes are just beginning to fall, unfortunately we (myself included) have placed to much trust in the hands of malicious actors LARPing as our saviors from financial tyranny. Funny enough, I don’t have a RUNE bag at the moment but as a fellow rebalancoooor this is at the height of my priority going into a market downturn, finding projects/assets working on dethroning the Old Guard, and writing about them in whatever form I please, as I feel this is the best way I learn.

IMHO, THORChain is one of the most important chains to bless the Cosmos IBC Hub. As more attention flows into the Cosmos ecosystem, I feel THORChain will quickly become the star of the ecosystem, as its made the greatest strides in connecting IBC (outside of Osmosis), and bringing IBC accessibility to the crosschain environment, providing traders and LPs opportunities to unite their assets under one hub.

It sounds counter-intuitive to write and publish something without filling ones bags, but at this point, I really don’t give a fuck. At this point, it’s a matter of putting out good material on what may or may not be the way forward after a collapse of this magnitude rocks our space and overall industry. Acts of selflessness are the reason we’ve even made it this far, like the creation and release of Bitcoin, Ethereum, and everything that came with these innovations. This is not about just me or you, this is about us as a collective space picking up the pieces, with our learnings deep in mind, and moving forward, united under privacy-preserving, and empowering technology that truly returns the power back to the hands of the users, where it should’ve been in this first place, not in the hands of over-inflated, over-leveraged megacorps, run by those that DO NOT have users’ best interests in mind.

P.S. if Mirror had a THORChain integration, I’d charge 1 RUNE to mint this piece to start building a position, kek ⚡️

Disclaimooor

This is me channeling my thoughts in written pieces that may summarize current market thoughts but will never be to endorse any project, or method mentioned nor give any financial advice. Blz do not fomo into anything you may read from myself or any anon(s) or pseudoanon(s). I also may or may not hold any of the tokens mentioned and/or contribute to any protocols/DAOs mentioned. Stay safe.

WAGMI,

0xOmnia