THORChain Debt Crisis: Debt-to-Equity Swap Aims for Long-Term Stability
Governance Proposal 6 has been approved by THORChain’s governing board as part of its restructuring measures to address the platform’s debt crisis. The proposal seeks to provide a potential remedy for financial stability by turning defaulted debt into equity tokens.
The proposal that has been adopted by the community is to turn debt into equity, more precisely into a new token with a 200 million supply called TCY (Thorchain Yield). Lenders and savers will essentially convert their debt claims into equity in the THORChain ecosystem by receiving TCY tokens instead of bitcoin or ether for loan repayment.
THORChain will convert ~$200M of debt into equity through a new token that will receive 10% of network revenue in perpetuity,
the THORChain team
THORChain Approves Debt-to-Equity Plan, But RUNE Price Plunges 76% in a Month
According to the proposal, 200 million TCY tokens will be minted and distributed at a rate of one TCY for every dollar of delinquent debt. With $5 million from the Treasury, the core team is anticipated to establish a RUNE/TCY liquidity pool with $500,000 in liquidity at $0.1 per TCY. This implies that instead of being returned to the original asset, the holdings of people who have money in the network’s lending and savings programs (ThorFi) are transformed into TCY. However, it is yet unknown how long it will take for recovery to occur.
On the other hand, according to The Block’s pricing page, RUNE saw another 49.51% price decline over the previous week amid a larger altcoin sell-off, falling from $2 to $1.21 at the time of writing, despite the announcement of restructuring efforts and proposal 6. In the last 30 days, the token’s value has decreased by 76.08%.
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