What is THORChain (RUNE)?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 6 min
In short
THORChain is a network built so that native assets on different chains — Bitcoin, Ethereum and others — can be swapped directly without being wrapped. Built with the Cosmos SDK, its nodes watch each connected chain, custody the assets, and route every swap through RUNE.
Key points
- Swaps native assets across chains without going through wrapped tokens
- Every liquidity pool is paired against RUNE
- Node operators bond RUNE as collateral that is slashed for misbehaviour
- Was exploited several times in 2021 and halted the network in response
Definition
A decentralised liquidity network that lets native assets on different blockchains be swapped directly through a common asset, RUNE.
The usual way to swap assets across chains is to deposit on one chain and mint a receipt token on another. That makes the issuer or contract behind the receipt a single point of failure, and bridges built this way have been attacked repeatedly for very large sums.
THORChain avoids that structure: its node set jointly manages a vault on each connected chain. Send Bitcoin in, and the network receives it and sends the corresponding Ethereum, or other asset, directly on the destination chain. The user never holds a receipt token.
Every liquidity pool pairs one asset against RUNE. Swapping BTC for ETH executes internally as BTC to RUNE to ETH. That removes the need for a pool per asset pair, and it also ties the size of the network to the amount of RUNE held.
Node operators bond RUNE as collateral, which is slashed for invalid signatures or for leaving improperly. Operators rotate on a schedule so that no single node holds keys indefinitely. In 2021 several exploits targeted flaws in its contracts, and the network was halted while fixes were made and losses reimbursed.
Watch out for
- · Because nodes custody assets on several chains, a flaw in the signing scheme can cause wide-ranging losses
- · Liquidity providers are exposed to movements in RUNE as well as in the asset they deposited
- · The network has been halted for fixes more than once, and nothing can be swapped or withdrawn while it is down
Frequently asked questions
How does this differ from using wrapped Bitcoin?
A wrapped token is a redemption claim on assets held by an issuer or contract, so you must trust that party. With THORChain you receive the destination chain's native asset itself, so no redemption claim remains after the swap.