The Crowd Goes Wild for the Cross-Chain DEX

Market Meditations | March 18, 2022

You may have noticed Rune trending on CoinGecko this week or noticed its 50% climb in the past 7 days. If you are wondering what all the fuss is about, here is your guide to what is happening on the cross-chain dex, ThorChain.

  • allows anyone to trade a digital asset on one chain with a digital asset on another chain without using custodians and without wrapped tokens. In the background, every swap is Asset A to Rune, Rune to Asset B.
  • It’s the Rune tokenomics that Crypto Twitter is raving about. Every asset deposited on ThorChain must be paired with an equal dollar amount of Rune or Coin X + Rune.
  • This model differs from the Uniswap model (Coin X + Coin Y ) in that 10 traded assets could result in 45 potential pools on UNI, but in Rune’s model the number of assets = the number of liquidity pools. Developers expect these less fragmented pools will result in deeper liquidity.
  • security aspect of the tokenomics says that if there is $1 of BTC in ThorChain, and $1 of Rune, node validators must bond $2 of Rune. If a hacker wants to gain control of the network to steal assets from the liquidity pools, they must acquire more Rune to do so, but once word spreads that the protocol is hacked, the value of Rune would plummet.

A lot of the recent hype was generated when synthetics went live on ThorChain. ‘Synths’ allow for faster settlement, cheaper fees, and increased trade volume. Terra integration is up next on the roadmap, and the two protocols will be working together on a new project. It is important to remember that no asset is without risk and RUNE did suffer a hack less than 1 year ago.