What is THORChain? How Does It Work?

Decentralized finance (DeFi) platforms have developed alternative solutions to provide services for assets on different blockchains, due to the fact that blockchains cannot interact with each other. Synthetic cryptocurrencies, known as wrapped tokens, are used to solve this issue. THORChain, in addition to being a decentralized finance platform that operates across blockchains, is an infrastructure that has managed to provide assets in their original form across different chains. In this article, you can find answers to questions such as: What is THORChain? How does THORChain work? How to buy RUNE? How to store RUNE?

What is THORChain?

THORChain is a Layer 1 blockchain that allows cryptocurrencies from different blockchains to be swapped in their original form and provides various passive income opportunities as part of its decentralized finance infrastructure.

Built on the Cosmos blockchain, THORChain can interact with many different blockchains thanks to this foundation.

How Does THORChain Work?

THORChain has a swap structure different from other decentralized finance platforms. Typically, when you want to swap cryptocurrencies from two different networks, either bridges are used, or a solution is produced with synthetic tokens. However, since various security vulnerabilities have been encountered with both solutions in the past, THORChain has built an infrastructure that allows each cryptocurrency to operate on its original network. To understand this system, you first need to learn about THORChain’s node system and liquidity provider rules.

What is THORNode?

The validators that enable transactions on THORChain are called THORNodes. Each THORNode is required to run a “full node” for both THORChain and the other blockchains that THORChain supports. This allows THORChain to have its own vaults in each blockchain it supports. Thanks to these vaults, THORChain doesn’t need to transfer the assets while using original cryptocurrencies.

Liquidity Providers

In traditional decentralized finance systems, a liquidity pool is created for each trading pair. Liquidity providers lock their assets in these pools to make them available for trades and earn commissions from transactions. In THORChain’s infrastructure, however, pools are not opened for each trading pair. Instead, pools are created for each asset. For instance, while two separate pools are normally opened for ETH/USDC and ETH/USDT, THORChain opens only one pool for ETH, one for USDC, and one for USDT. This results in fewer pools on THORChain compared to similar platforms, but these pools are larger and deeper.

When liquidity providers contribute their assets to these pools, they must also add an equivalent amount of RUNE coins. So, if you are adding 100,000 USD worth of ETH to a pool, you must also add 100,000 USD worth of RUNE. Thus, each asset pool contains an equivalent amount of RUNE coins alongside the corresponding asset.

How to Make a Swap on THORChain?

Let’s assume you want to swap 1 Bitcoin for ETH on THORChain:

• The user sends 1 Bitcoin to THORChain’s vault on the Bitcoin network.
• Since the Bitcoin pool on THORChain contains both Bitcoin and RUNE, an equivalent amount of RUNE coins to the user’s Bitcoin is transferred from this vault to THORChain’s vault on the Ethereum network.
• The RUNE coins transferred to the Ethereum vault are then swapped for an equivalent amount of ETH.
• The swapped ETH is sent to the user’s wallet.

As seen, two additional swap transactions occur behind the scenes in THORChain’s swap infrastructure. First, there is a Bitcoin-RUNE swap, followed by an ETH-RUNE swap, enabling cross-chain transfers via THORChain’s native cryptocurrency, RUNE. This eliminates the need for users to use synthetic assets or bridges.

What is RUNE Coin?

RUNE is the native cryptocurrency of the THORChain blockchain and has multiple functions on the network. RUNE can be used to pay for transaction fees on the network, and it also grants voting rights in governance decisions related to THORChain.

Additionally, incentives on THORChain are paid in RUNE. Liquidity providers and THORNode operators receive their earnings in RUNE.

RUNE can also be staked, allowing users to earn passive income.

Since RUNE is the main component of THORChain’s swap system, it forms the foundation of the entire THORChain infrastructure.

Get to Know It Better

• THORChain received investment in 2019 and launched in June 2022.
• THORChain was developed by anonymous developers.
• THORChain is a non-profit structure. All income from transaction fees is distributed to liquidity providers and THORNode participants.
• RUNE is the native cryptocurrency of the THORChain blockchain.
• For more detailed information about THORChain, click here, and to visit its website, click here.

How to Store THORChain (RUNE)?

RUNE exists on multiple blockchains. Depending on which network your RUNE assets are on, you can use wallets that support the relevant network. To store RUNE on its original network, you can use browser, web, desktop, mobile, and hardware wallets that support the THORChain blockchain.

How to Buy and Sell THORChain (RUNE)?

To buy and sell THORChain (RUNE) with Turkish Lira or Tether (USDT), you can use the BtcTurk | Kripto website or the BtcTurk | Kripto mobile app. If you are not a member of BtcTurk | Kripto, you can sign up immediately on our website or mobile application and buy THORChain (RUNE). You can deposit Turkish Lira 24/7 using one of our seven affiliated banks.