What is THORchain?

Centralised exchanges make trading cryptocurrencies easy in a sea of blockchains. However, this convenience requires giving up asset custody to a central organisation.

Decentralised exchanges (DEXs) offer an alternative but cannot manage cross-chain trades. For instance, Uniswap handles Ethereum-based tokens well but struggles with Bitcoin and Binance SmartChain’s BNB.

Users have usually used wrapped assets or synthetic tokens to bridge this gap, but these options have security risks.

THORChain allows trustless and frictionless cross-chain asset trades to solve this problem. But what is THORChain and how does it work? In this blog, we’ll explain THORChain, its processes, and how it works.

What is THORchain?

Decentralised protocol THORChain facilitates asset swaps across blockchain networks. To ensure user trust and security, THORChain has no central authority, unlike traditional exchanges.

The anonymous team started the initiative to maintain decentralisation throughout protocol development. Without a foundation or CEO, all development is transparent on GitHub, where updates and improvements are shared.

Nodes are essential to THORChain’s operation. Stakeholders support these nodes with RUNE tokens and receive benefits. However, swappers pay fees for exchanges and borrowed amounts, fueling the protocol economy.

THORChain’s DEX, powered by the Cosmos SDK, allows seamless asset trading between Bitcoin, Ethereum, BNB Chain, Avalanche, and others. The native RUNE coin protects THORChain and appreciates as it grows.

Anyone can exchange native assets between supported chains or earn returns by providing network liquidity with THORChain. This novel solution allows users to conduct cross-chain transactions without intermediaries, advancing decentralised finance (DeFi).

What is RUNE?

RUNE is THORChain’s native coin. It serves as a basic pair for users to swap RUNE for supported assets in the network. 

It has 500 million users and four key uses: settlement, security, governance, and incentives.

1. Settlement Asset: 

RUNE is the main settlement asset in THORChain, enabling seamless liquidity pool exchanges. RUNE is 1:1 to the traded asset in each pool.

2. Security Bond: 

Node operators must bond twice their RUNE liquidity pool contributions. These bonded RUNE coins incentivize operators to protect the network by acting as collateral.

3. Governance Rights: 

RUNE holders can vote on THORChain ecosystem priorities. Pools with more committed RUNE have more decision-making power.

4. Incentive Mechanism: 

Liquidity providers and node operators earn RUNE tokens for block rewards and exchange fees. RUNE can also pay ecosystem petrol fees, encouraging participation.

RUNE powers this network, connecting many blockchain networks into a secure and cohesive environment. It facilitates the exchange of foreign coins, bonds, and stakes nodes and rewards stakeholders.

How does THORchain work?

THORChain’s ecosystem is built on cross-chain compatibility. Cross-chain swaps are possible thanks to the multichain DEX interface THORSwap, which controls this network. THORSwap users can choose which assets to trade, with protocol-defined fees adjusting with network activity. 

The native token RUNE supports the continuous liquidity pool (CLP), which enables these trades. As an intermediary, RUNE streamlines asset swaps between liquidity pools. When users exchange on THORChain, their assets switch pools.

 A USDT for ETH deal would first convert USDT to RUNE in one liquidity pool, then swap RUNE for ETH in another. This procedure shows THORChain’s capacity to enable cross-chain transactions while retaining user liquidity and accessibility across blockchain networks.

Why should you choose THORchain ?

1. Cross-Chain Compatibility: 

Thorchain stands out by connecting different blockchain networks, acting as a bridge for seamless interaction between various cryptocurrencies.

2. Decentralisation and Trustlessness: 

Operating in a decentralised manner, Thorchain ensures no single entity controls the network, enhancing security and reducing manipulation risks. Transactions are verified and executed without relying on a central authority, boosting transparency.

3. Increased Liquidity: 

Thorchain’s cross-chain capabilities broaden the pool of liquidity by connecting different networks, offering users more trading options and opportunities, ultimately improving market efficiency.

4. Accessibility and Ease of Use: 

Thorchain prioritises user-friendly experiences, simplifying asset swapping and trading across different blockchains. Its platform handles technical complexities in the background, making the process straightforward for users of all levels.

5. Community and Development: 

Thorchain boasts a vibrant community of users and developers who actively contribute to its growth and improvement. This community engagement ensures Thorchain remains adaptable and responsive to users’ evolving needs, shaping its future direction.

Conclusion

Finally, THORChain is a promising decentralised finance (DeFi) project. It pioneered cross-chain interoperability, solving crucial issues and ushering in decentralised financial networks. With its commitment to security, trustless asset trading, and community-driven governance, THORChain is a competitive blockchain competitor. 

Managing market competition, regulatory environments, and technological advances will determine its destiny. THORChain depends on its agility, user acceptance, and strategic advancements to lead decentralised financial innovation.

Users can easily exchange major cryptocurrencies across networks in a decentralised environment using its user-friendly interface. With non-custodial exchange services and a growing list of supported coins, THORChain makes cryptocurrency trading easy. With its revolutionary technology and technological prowess, THORChain could lead the DeFi industry.

Start your THORChain journey today and join the crypto revolution transforming finance.