I didn't explain it very well in this one but I did in my other posts.
- The collateral you send them is dumped for Rune.
- This Rune is then destroyed.
- Your loan is measured using an internal non-tradable stable-coin called TOR.
- They note on their ledger that they owe you back X collateral (BTC.BTC or ETH.ETH).
- When you pay back the TOR loan (using any token) they create Rune to pay you back.
- The maximum amount of RUNE possible is 500M (circuit breaker).
- Several mechanics in the Thorchain ecosystem burn Rune.
You do need to test it out yourself it will make more sense.