INTRODUCTION
THORChain and its native utility token, RUNE, are poised to become a major disruptive element to traditional finance. The protocol's unique approach to trading and investing utilizing cross-chain native tokens is sure to garner great attention within the cryptosphere.
And with this new found attention, RUNE is set to ride the present market bull ride to new price heights. Let's looks at several of the reasons present that support this statement.
This article is submitted as a supplement to the THORChain Coin Guide and as a contribution to the Alpha Project - #LeoAlpha advanced by @khaleelkazi
MAKING A CASE FOR A BULL RUN ON THE PRICE OF RUNE
RECOVERY FROM THE JULY HACKS
THORChain was hacked three times in July of this year. Old news and already well discussed [See, e.g. Nagoda, K. Details Concerning the Exploit Against THORChain on July 15, 2021. (Accessed October 23, 2021). But what is key here is the professional and transparent fashion THORChain dealt with this situation plus the steps it took to fix the network to prevent it from happening again. THORChain suspended all its operations and went to great pains to fix itself.
Well folks, THORChain is back, all repaired and better than ever. Slowly but surely, trading on THORSwap has resumed with Ethereum trading just resuming in the past two days. And the results of the Ethereum resumption, a 35% jump in the price of RUNE:
THORChain has now returned to full operational capacity and investors may now trade assets between all network supported blockchains. The takeaway, THORChain has resumed operations as a stronger, safer, and better network. Once investor confidence is regained (which by the looks of the price chart should be sooner than later) RUNE price should significantly increase.
RUNE HAS REAL VALUE IN NETWORK OPERATIONAL MECHANICS AFFECTING DEMAND
In the THORChain network, RUNE has real value. And this value is deterministic. The RUNE token assumes a vital role in providing network security as well as enabling operation of the network. The importance of RUNE goes well beyond 'governance', which is what most native DeFi tokens offer (for example: UNI and YFI among others).
So operationally, why is the RUNE token a driver of price? To answer this question, we must look to how RUNE is utilized in the protocol. First, RUNE serves as the base asset pair in every pool in the network. As such, a 1:1 ratio is required for each and every RUNE:Asset network pair (to be balanced as required, a pool containing $1,000 of BTC would likewise have to contain $1,000 of RUNE).
Second, in the area of network security, THORChain requires network operators to post a bond to insure faithful discharge of their network responsibilities. It is required in this regard that the operators post a bond (in RUNE) in an amount twice the amount of RUNE staked. As such, the bond:stake ratio of 2:1 means for every $1,000 RUNE staked, network operators must post $2,000 RUNE to qualify.
Therefore, when you combine the 1:1 pool stake (RUNE:Asset) ratio with the 2:1 bond:stake, the result for THORChain operations is the requirement of three times the amount of RUNE to the amount of non-RUNE assets locked (3:1).
Assume $1,000,000 in value of tokens is staked and therefore locked on THORCHain. Correspondingly, $3,000,000 in value of RUNE tokens are required for the network to be operational, which sum would equal the market capitalization of RUNE. As we all know, in the world of finance, speculation on the future value of a token drives additional price appreciation - the 3:1 ratio requirement for THORChain represents only the minimum value of the RUNE token.
As more and more investors take advantage of the THORChain protocol for their investment needs, demand for RUNE will necessarily rise due to the 3:1 ratio. Given a fixed maximum supply of RUNE of 500,000,000, basic supply/demand economics demonstrates the upward price pressure increased demand causes with the fixed supply.
THE POTENTIAL FOR THE ADDITION OF SIGNIFICANT BITCOIN TVL IS PRESENT
In this area, THORChain is a breakthrough decentralized exchange. Why?
The Ethereum blockchain currently holds approximately $1,000,000,000. worth of Bitcoin in the form of wBTC. And, this number is increasing daily. The reason, well, with the advent of decentralized finance, investors do not simply want to store their assets but prefer to put them to work generating a yield on them. Ethereum is the destination as native Bitcoin has no DeFi applications available to make their assets productive.
However, most of the holders of Bitcoin are 'old school' and are against moving their tokens to another blockchain to be wrapped and demonstrate an adversity to dealing in the Ethereum blockchain under any circumstance. This 'old school' hesitation has resulted in approximately $200,000,000,000. worth of Bitcoin sitting idle in storage.
By utilizing the THORChain network, these hesitant Bitcoin holders now have a place to stake their native Bitcoin. Prior to THORChain, this opportunity was unavailable, but now the potential is there for billions of dollars of Bitcoin TVL to enter the THORChain network. This scenario also holds true for assets on other blockchains which likewise has the potential to add billions more to the THORChain network.
THORCHAIN IS UNIQUE AND VIRTUALLY IMPOSSIBLE FOR A COMPETITOR TO CLONE
THORChain is so much more than just a smart contract. It is made possible by hundreds of thousands of lines of code for starters. And, as there are literally dozens of node operators who are anonymous working in concert to maintain a secure decentralized network, a network fork and rehost would prove most difficult and probably unfeasible.
As set forth in the official THORChain materials, the network 'ruthlessly incentivizes' its investors providing liquidity. This being the case, it is hard to envision any competitor designing a protocol to provide greater returns than THORChain.
And finally in this respect, most other yield farms provide their triple digit returns through the issuance of worthless tokens. These tokens have no use, no value, and are basically created out of thin air. However, THORChain returns are real and possess value as the network's large returns are created from the slip-based fees charged as well as other system rewards.
CONCLUSION
Admittedly, things were looking quite grim for THORChain in July of 2021. But the vision survived and the protocol is back strong. THORChain is for real and for the reasons set forth herein, is poised to ride the bull run to the moon.
DISCLAIMER:
- Your author holds a long position in THORChain (RUNE).
- The content herein is presented for educational purposes only and should not be construed as investment advice. Any loss incurred as a result of investing in THORChain (RUNE) is yours and yours alone and may not be imputed to this author.