What is THORChain (RUNE)?

THORChain is a decentralized liquidity protocol which functions as a Layer 1 cross-chain decentralized exchange (DEX) that enables seamless asset trading without necessitating user authorization or reliance on centralized third parties. This platform distinguishes itself by supporting direct trading of native Layer-1 assets, such as Bitcoin, eliminating the need for asset wrapping or pegging. Utilizing advanced security frameworks, including the Tendermint consensus engine, Cosmos-SDK state machine, and leaderless Threshold Signature Schemes (TSS), THORChain ensures robust network security and fund safety within its on-chain vaults.

Who Created the THORChain (RUNE) ？

THORChain is initially associated with Eric Voorhees, the founder of ShapeShift exchange. However, THORChain asserts that it is a decentralized project with no company, no CEO & no founders. Instead, the project has been open-sourced and auditable, emphasising a decentralized approach. Presently, a group of individuals and teams contribute from an engineering standpoint, actively shaping THORChain's roadmap and development.

How Does THORChain Work?

RUNE, the native token of the THORChain, can be used by holders for network participation and paying the swap/gas fee for RUNE pairs.
Swapping
In THORChain, asset exchanges are facilitated using the network's native assets. For instance, a swap transaction converting RUNE to BTC involves the user transferring RUNE into THORChain, which is then exchanged for BTC from one of the network's vaults. The transaction fees for such swaps are paid differently for each stage: the inbound gas fee is paid in RUNE, while the outbound transaction fee is paid in BTC.
Similarly, when converting BTC to ETH, the user sends BTC to THORChain, which then exchanges it for ETH from one of the network's vaults. Internally, this process involves a two-step conversion where the received BTC is first converted to RUNE (moving from the BTC liquidity pool to the RUNE liquidity pool) and then from RUNE to ETH, essentially making it a double swap (BTC to RUNE, then RUNE to ETH). Here, the inbound transaction fee is paid in BTC, and the outbound fee is paid in ETH.

Tokenomics

Token Utility

In short, RUNE holds 4 key utilities, namely settlement, network security, governance and incentives within the THORChain ecosystem.
Settlement: RUNE serves as the settlement asset for all pools. The ecosystem employs RUNE in a dual capacity, pairing it 1:1 with external assets within liquidity pools to facilitate swaps and maintain balance.
Network Security: For the sake of network security, THORChain requires the amount of RUNE bonded by node operators must be double the RUNE pooled. Node operators are, therefore, economically incentivized in order to align their interests with those of the network.
Governance: Governance mechanisms, though minimized, are designed to reflect community priorities through capital commitment, influencing asset listings based on RUNE backing. RUNE allows holders to deploy their liquidity to vote on the activation of specific liquidity pools. The process prioritizes pools with the highest liquidity, demonstrating a user-centric approach to network development and asset support.
Incentives: In addition to swap fees, Liquidity Providers and Node Operators are rewarded by block rewards on a predefined emission schedule. The fee structures within THORChain also incorporate both fixed network fees and variable slip-based fees to mitigate potential network attacks.

Token Distribution

Originally, the total supply of RUNE tokens was set at around one billion. Yet, in 2019, this figure was halved to 500 million through a token burn event. After this adjustment, 44.09% of the tokens were allocated to service nodes, with 10.4% designated for operational expenses. Additionally, 10% was distributed to the community, and another 10% was reserved for the team and advisors. The balance of the tokens was kept to bolster the project's further development and sustainability.