ThorChain Earn is a new product on ThorSwap Finance that enables any investor to provide liquidity and earn yield in the provided cryptocurrency without any exposure to RUNE or impermanent loss. This allows any user to park safely his/her asset in the ThorChain Earn decentralized smart contract and earn from it. There is no lockup period and anyone can withdraw the provided assets whenever needed. The only thing that taps into the earnings is the slippage fee on entry or exit on the earning contract, but that should be well covered through the provided yield.
What assets can you use on ThorChain Earn?
While it is a new product, ThorChain select a few cryptocurrencies to be part of it which probably have a high trading volume based on the available liquidity pools. I believe that these will extend as time goes by and as the depth of the liquidity pools along with new one's increases. But for now, there is a good bunch of assets that we can use as single-sided assets on the ThorChain Earn smart contract:
- Bitcoin (BTC)
- Ethereum (ETH)
- Binance coin (BNB)
- Avalanche (AVAX)
- Cosmos (ATOM)
- Dogecoin (DOGE)
- Bitcoin Cash (BCH)
- Litecoin (LTC)
How is the yield performed on ThorChain Earn?
The yield for the native assets deposited on the ThorChain Earn smart contract is provided by the implemented mechanics that put those assets at work. Here are the steps on how these perform.
- Provided cryptocurrency goes into the liquidity pool to mint a synthetic token which is 1-to-1 redeemable for the native cryptocurrency.
- The asset deposited is swapped to RUNE, and the RUNE is deposited in the pool to mint the synthetic asset.
- The synthetic asset is backed by the liquidity pool and redeemable 1-to-1. This synthetic asset, which is now a part of the liquidity pool, earns a share of the yield that the pool generates from swaps. By taking on just the single side, the regular Asset:RUNE Liquidity Providers take on the extra price risk to RUNE and guarantee the redemption of the synths.
- The single asset yield is obtained from the pool earnings of approximately 50% of what the dual-sided (Asset:RUNE) liquidity provider earns.
I think that with these mechanics there is a fair split ensured by those that are providing single native assets which are wrapped into synths and those that provide RUNE to pair them with and create Liquidity Pools. This offers an earning alternative to parking your assets on a Centralized Exchange and probably taking a higher risk going that path. While a not long time ago I was holding assets on CEXex (It caught me in offside with some assets on Celsius, but at least didn't have any assets on FTX), seeing such solutions I am inclined to choose them instead of relying further on CEXes. Decentralization is king and finding such solutions to still put our cryptocurrencies at work I think is the way.