Thorchain just took a massive crash in the likes of 30% sell off which seems to be due to potential issues that have caused the platform to pause it's Bitcoin and Ether withdrawals.
This is a result of community concerns around the settlements protocol solvency. This mainly affects the lending and savers programs they have going on is is set to prevent a potential insolvency risk.
A big one is that network node operators have also proposed and implemented a 90 day pause to create a plan to resolve debts. That's actully rather huge and shows that something in this system was not setup right. If you're collecting fees and so forth then you should be profitable not unsure how you're going to resolve your debts!
THORChain meets it's lending obligations by mining rune and selling it into liquidity pools.
The main thing here is that if anyone with a large amount of funds went to withdrawal it the would crash the system and they wouldn't be have the funds to payout the bitcoin and eth. This essentially makes the token insolvent as they don't have the funds to currently cover the debts. A once platform set to replace banks just made one of the biggest fatal mistakes ever that a bank can make.
Right now Thorchain is at least 200 million dollars in debt that this pause is aimed to figure out how to restructure everything to make it profitable again. 200 million dollars of debt is no small matter and with this new breaking and the token price falling that debt most likely has only increased.
There's a lot of ideas floating around right now about how to restructure the platform but right now mainly it's about shutting off the faucets something in the crypto world that shouldn't happen if it's "decentralized" as so many say. But really we should have never gotten here in the first place.
I hate to bring bad news but normally when platforms do this they lose all credibility and people stop using them only further making the issue worse until everyone just out right loses. I don't see how you're going to recover 200 million dollars in three months.
Right now there are a number of proposals up but there are also only 116 node operators for the blockchain.
Cross-chain functionality remains online as this is most likely the only way they are currently generating revenue from the fees of the swaps.
Is it all an over reaction?
I don't think so and it shows the pitfalls of when centralization happens and mathing and development go wrong. This is directly a result of the more risky DeFi options they provided which ended up backfiring on them in a big way.
Will this end up being the downfall of Thorchain or will they be able to recover and resume at least some sense of operation after? What are your thoughts?
Posted Using INLEO
This is big and why crypto projects have to be sustainable. I am glad I was not sucked in when RUNE was hyped by many people here on Leo because this is devastating and does not give you much time to recover before the end of this cycle.
Oh no! That would be really bad for the decentralized part of the industry
The no liquidation rule was idiotic to begin with the question for me from the beginning was when something like that would happen. The rune token has taken a big hit I I believe it will fall even more they need 75 million runes to cover their debt
Legit nuts and then wonder why I constantly say that LEO needs income from ads. I don't care if it's just $300 a month that's 10,000 LEO a month right now and is at least something!
I believe when they started they had some nice payouts from the adds but yes every $ counts and from what it seems the price action of leo is following Rune lately.
I've always been told that Thorchain was a great DeFi project, but the current situation shows a project in trouble.