What is cryptocurrency THORChain (RUNE) and how does it work?

What is cryptocurrency THORChain (RUNE) and how does it work?

Cross-chain liquidity and efficient exchange of multiple assets have become increasingly important with the rise of decentralized finance (DeFi) and its associated products and services. THORChain is a prominent DeFi project that aims to provide interoperability and seamless multi-chain asset swapping without the need for wrapping.

Interoperability is a crucial feature for third-generation blockchain platforms to ensure a decentralized and frictionless experience. THORChain creates a cross-chain ecosystem where users can exchange cryptocurrencies from different networks using a single protocol. While THORChain initially launched on the Cosmos network, it transitioned to its mainnet in April 2021 to meet the growing demand for interoperable multi-currency swapping.

If you’re interested in THORChain (RUNE) but unsure about its purpose and where to start, this guide will provide you with the necessary information to understand the project and prepare you to participate in the user-friendly trading experience it offers.

THORChain is a multi-currency protocol with a cross-chain architecture that enables users to exchange tokens from various networks, such as Bitcoin and Ethereum, with tokens that belong to different networks. This is particularly useful for cryptocurrency traders and investors who need to swap between assets that are not native to the same network.

To address this issue, THORChain creates an interoperable environment where users can directly exchange different cryptocurrencies without leaving the protocol or relying on intermediaries. The project’s main goal is to enhance liquidity for all supported cryptocurrencies by providing a unified platform for buyers and sellers who want to exchange different assets without the involvement of central authorities.

Additionally, THORChain allows users to earn yields by depositing their cryptocurrencies into liquidity pools on the THORChain decentralized exchange. Within this system, users can quickly borrow cryptocurrency funds.

So, how does THORChain work?

THORChain employs a protocol known as continuous lending pools, which is also used by the Bancor decentralized exchange. Non-native cryptocurrencies that are supported by THORChain are deposited into liquidity pools along with the native token, RUNE.

When a user initiates a trade involving two non-native assets, the system automatically performs a double-swap process. It first exchanges one token for RUNE, then immediately exchanges RUNE for the other token, enabling non-custodial exchanges on the THORChain protocol with instant execution.

Furthermore, users can deposit their funds into liquidity pools, allowing other users to borrow them and earning a yield based on the amount they deposit. Liquidity pools are created by operative nodes, which also validate swaps as part of their role. The THORChain protocol utilizes the Proof of Stake consensus mechanism, requiring the staking of native RUNE tokens.

The network consists of 100 to 300 validator spots, and nodes need to bond at least 1 million RUNE to earn a validator spot. These nodes operate on an additional layer with enhanced security to maintain control over the network.

As for the founders of THORChain, the project was created by an anonymous team to preserve the protocol’s decentralized nature. There is no official foundation, development team, or CEO associated with THORChain. All development activities take place on GitHub, where new updates and upgrades are shared.

One aspect that sets THORChain apart is its effective approach to liquidity. The system utilizes a fee structure that prevents slippage and reduces the risk of impermanent loss. Additionally, THORChain offers a user-friendly interface driven by a combination of innovative technologies, ensuring a seamless cryptocurrency exchange experience.

THORChain is a non-profit organization, and the anonymous team does not retain any of the RUNE funds used for protocol fees. Instead, all RUNE spent on fees is distributed among network participants. Furthermore, THORChain allows users to exchange tokens from popular platforms like Ethereum, Bitcoin, Binance Smart Chain, and Litecoin almost instantly.