THORChain for Dummies – THORChain explained

hi everyone i'm archer from multi and today we're gonna be talking about store chain so at a glance thor chain is a decentralized permissionless network that allows the swapping of digital assets such as BTC eath B&B and so on by continuous liquidity pools basically it's a cross chain uni Schwab with its own native token where liquidity providers create pools of BTC rune II threw and B&B rune that allow you to swap between these cross chain assets they also earn rewards for doing this the network is secured by anonymous nodes that create molds and validate incoming outgoing transactions the and the network token rune is used in the liquidity pools and is bonded by the nodes this also serves an important security function so as I mentioned Rouen is the network token which needs to be bonded by the nodes as well as staked into each of the acid pools so and for optimal security the value of rune bonded by the nodes should always be twice the value of Rouen staked into the liquidity pools so this the logic here is that the rewards from compromising the network needs to be smaller than the investment required to compromised at the network how is Thor chained not restricted by chains so Thorin connects to the networks by a one-way state pegs this means that the assets are not pegged on the network just the state of the transactions on the corresponding network so for example the BTC network or each the nodes basically listen to each connected chains transactions and only Thor chain related transactions are synced by the nodes so for example if you want to swap BTC to be NB so your BTC never gets locked to the network the node simply listens to the to the Bitcoin network and broadcasts that I saw someone send one BTC to the Thor chain BTC vault and the mall being essentially the wallet where the where the liquidity pool is held after that the nodes sent B and B to your BMP wallet from the Thor champion B walk bolt so as I mentioned the the close comparison to Thor chain is uni swamp however there are some main some main differences so Union swamp runs on the proofs proof-of-work consensus algorithm namely etherion Thor chain is a proof of steak network using the Kosmos SDK unis book does not have an native token which means that the value creation technically is built around eath Thor chain has its own network token rude unis web supports ethan ERC 20 thor chain on the other hand supports B&B BTC and the entire vision is for it to be completely cross chain Union swap will be able to support cross cross chain tokens however this will be done by a wrap token solution solutions such as red in terms of stages you swap has been is probably one of the most famous Texas and has been tremendously successful they've been live for over one and a half years and and as of today there's around between 40 to 50 million staked into various pools thor chain is expected to launch its main net in june july 2020 now a major difference between yuna swamp and thor chain is is the pool logic so units were notably you uses the XY k formula which is which is originally ideated by metallic boot aaron and essentially assumes a constant value of both the pool assets now this poses like problem because for example how it works is that you have you got ass out there always needs to be an equal value of both assets in the pool so for example you add 1000 die into the pool and 110 eighth worth $100 but now when when eath goes to 120 then essentially what happens is that the thousand die still remains there will no longer be 10 me there but $1,000 equivalent of E and in a trending market this causes an effect called impermanent loss which basically means that the liquidity providers have have had a hypothetical loss versus if they would have simply held the asset and this is Thornton on the other hand uses an approach called continuous liquidity pool which incorporates a slip based fee and this slip base fee means that traders are penalized for causing a slip for causing larger slippage so for example if my trade causes a 3% slippage in this particular pool I would be paying a higher fee than for example if I would have caused a 1% slippage and another case is that Eunice wops fee a flat fee model makes it relatively prone to to price manipulations and either of them of the protocols require an Oracle however units for fee model makes it essentially quite cheap to manipulated its prices whereas the slip base fee aims to make it considerably more expensive for for bad actors to manipulate so Thornton's network consists of three participants there's the users the liquidity prior providers and the nodes so users they exchange different cross-trained assets between the pools and pay a corresponding slip based fee as I mentioned the slip based fee penalizes those looking for a fast execution with the higher fee and the fee is also used to cover the gas costs on external networks for the nodes and it must be noted that the entire swapping process is noncustodial permissionless and it's technically not restricted to any chain liquidity providers stake assets into various pools each pool is a is in a separate one with PEG to rule and each asset is held in advance the key feature of liquidity pools is also that as I mentioned that it doesn't require a price feed so there's no Oracle problem and for this the liquidity providers are rewards depending on the fees generated by the particular pools there they've staked their – and the liquidity rewards are paid out when the assets are withdrawn from the poured so now the nodes which the most complex part the anonymous nodes carry three purposes so firstly they born Droon to qualify as a note today it's a requires one million room to qualifies note which is around one hundred thousand US dollars are worth and most importantly room cannot be delegated so similar to so for example unlike a OS where nodes or block producers essentially communicate and stay and thus taken can be delegated in rules case this can be done nodes also they create molds which are essentially the wallets where the pool pause pools are held and they witness transactions which is they produce blocks and another interesting part is that the nodes naturally gets cycled or turned every couple of days in order to constantly renew the network so this means that older nodes get kicked out automatically but this is this is not there's nothing wrong with this they can simply cycle themselves back in but for this they need to update their their software to the latest version so this ensures that the network is constantly updating itself the network economics so the network participants are rewarded from distribution of the system income and the system income is made up of swap fees and block rewards swap these are the are the same slip based fees that are paid for by the users for exchanging the assets block rewards are distributed based on the emission schedule from a pre pre allocated reserve so by default the system income is distributed according to the same sixty-seven thirty-three percent ratio that ensures the optimal network security however the actual ratio is governed by something called the incentive handle so the incentive pendulum is basically what it does is that it aims to maintain or reach this optimal 6733 split so for example if there is a above optimal amount of room bonded in the notes then a larger portion of system income goes to liquidity providers to bring the ratio back to optimal and the same half is vice versa so the total supply of roon is 500 million tokens of which 100 million was sold to the public in three stages and 150 million has been allocated between reserves for the team community as well as operations and another 220 million is in the emission reserve reserved for the block rewards it also must be noted that the initials of the total supply was a was a billion tokens but in October 2000 19 the deep team decided to reduce or burn half the supply using all the reserve or using the reserves and the seed allocation so this means that the public publicly sell tokens were not affected to the emission schedule 44% of the supply or 220 million tokens has been set aside to be admitted over six years with one-sixth of the remaining total being emitted every year after the main that launched the network aims to emit again two thirds to the nodes and one-third to the liquidity providers however the real distribution is covered by the incentive [Music] hmm so torching aims to have minimal governance unlike other protocols where nodes for example communicate each other at coordinate and so on new assets get listed by creating a new pool with that asset so for example if there's an e or C 20 token that that does not have an existing liquidity pool on Thor chain I can simply send this asset in and it creates what is called it becomes what is called a bootstraps pool now this bootstrap pool is not so you can't other customers can swap with this pool but you can send assets in and every couple of days the biggest their deepest bootstrap pool is enabled for for real trading so this kind of ensures that the the most liquid assets are add are constantly listed but that ultimately basically any asset will be listed and adding new chains is a slightly longer process because every new chain requires the writing of new codes which requires some review from the core Dems but once it's proved then essentially 67% of the nodes need to be running this particular software so which is when where this the node churning or cycling comes in because essentially once the new software is approved then it's only a matter of time once enough nodes have been churned through and they've had to manually they've had to update their software so little history of Arun it was started in 2018 the team is semi-anonymous and they to sort of put the goal – I guess prevent this sort of Jesus Jesus effect that some other block chains have have suffered from they raised a total of three rounds as well as some OTC sales of operational tokens which is which is also which had been pre-planned the total amount we we we estimate to be less than three billion dollars on top of that there they have been credibly transparent weekly development updates as well as monthly Treasury reports and so on and they're good cop github is also very active so this is a one example of their monthly Treasury reports where they not only they share the balances of of each asset they also share information around past those OTC sales if they make changes to the OTC strategy if there's any upcoming large ticket expenses and generally what the runway is so as in May 20-22 team has around 22 years runway left where's room going where is it now so the binders chain test net and Kaos nets are live and they're currently undergoing coral audits of the three core components which are expected to finish in May 2020 so some of these audits are complete and some of them are still remaining after the audits they're expected to launch the main meds with initial support for by NASA chain and then to be followed by eath and BTC connections however the team has kind of signaled that because the audits have there's been some delays with the audits then a PTC pack might actually be there upon launch as well but this is this is not like an actual confirmation yet there's potential risks and criticism so it's still a pre-launch project so there's still a sort of general risk that it simply doesn't work out and something unexpected happens there's also been some criticism around the team's affiliation with some other previous projects as well as some icos and generally this sort of the documentation around thor chain is a bit fragmented and there's no official white paper which is but their justification for this is that they preferred the the current sort of they prefer the flexibility and official white paper will be released once once the main that launches so to sum up why do we need Thor chain so an interoperable decentralized exchange allows for completely new use cases at d5 because the current decentralized exchanges are said our own limited to their respective block chains I can't essentially can't talk to each other if you want to learn more about Thor chain then I suggest joining their communities which we speak to the team on telegram follow them on Twitter they have very active github as well they probably regularly publish content a medium and reddit is also quite active about briefly about multi so multi is an upcoming exchange focused on listing high quality altcoins that are under the radar we're margin first exchange with spotted margin trading as well as peer-to-peer lending we create in-depth research and the host regular events with industry participants and projects and we we have a strict no listing fee policy as well [Music]

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