As the importance of cross-chain swaps becomes more and more apparent, many other protocols are working to bring interoperability among blockchains. This is the case of THORChain. Below are the main considerations for any lasting and sustainable cross-chain solutions:
1. Is THORchain non-custodial?
Full-fledged centralized exchanges (CEX) have been the de facto go-to for cross-chain swaps/trades in the past. Today, we also see some “simpler” platforms/websites offering cross-chain swaps without needing to log in or complete know-your-customer (KYC) requirements, but some are actually centralized/custodial on the back end. In essence, you are sending your coins “into the void” and hoping that the appropriate amounts are returned back to you.
THORChain (TC) is fully decentralized and open-sourced. All transactions are recorded on-chain and executed by anonymous validator nodes. Swaps will always be non-custodial.
2. Does it use native coins?
Many bridging, or cross-chain solutions use wrapped/pegged tokens (e.g. wBTC) which usually depend on centralized parties to back the pegging. Bridging or wrapping also introduces another major risk factor.
THORChain’s liquidity pools utilize native coins directly without any reliance on pegging or wrapping.
3. Is it chain agnostic?
Many bridges connect smart contract chains only, or Ethereum Virtual Machine chains only, or only Cosmos SDK chains, etc. In other words, many cross-chain solutions are preferential as to which chains are integrated, and which are not.
THORChain’s design enables any blockchain to be connected, including UTXOs, privacy chains, etc. The node operators simply need to start observing the network for it to be added to THORChain.
4. Is BTC supported?
Being the most valuable blockchain, BTC has also been one of the biggest challenges to integrate into a native cross-chain liquidity pool protocol.
THORChain was the first and still is the only protocol to successfully achieve the goal of earning APY on native BTC in a decentralized way. This in itself is a game-changing feature of THORChain, as it finally introduces decentralized apy for BTC hodlers.
5. Does THORChain feature atomic swaps?
Atomic swaps predate THORChain, but this is a peer-to-peer swap necessitating meeting of needs between two parties.
THORChain utilizes liquidity pools and Automated Market Maker design, offering always available peer-to-pool swaps.
6. How is the economic design / security budget?
Especially for securing pooled native assets spread on multiple external blockchains, the economic security of such a protocol is paramount.
THORChain’s intricate design with bonded RUNE vs pooled RUNE, incentive pendulum, etc. promotes rational economic behavior from all actors to ensure security from all angles.
7. How is the node/validator setup? TSS? Frequent churns?
Many other protocols secure users’ assets either custodially (e.g. most wrapping protocols) or on multi-sig setup with a small set of known/doxxed signers. There is a risk that these actors may turn rogue and run away with the funds
THORChain utilizes the Threshold Signature Scheme with up to 100 anonymous and constantly churning validator nodes. This setup greatly enhances the trustless nature of TC with constant confirmation that all funds are safe.
8. Is THORChain just a whitepaper idea? Is it live already? What is TVL?
Many projects claim to have the best design… in theory.
THORChain went live in 2020 with the single-chain BEPSwap “proof-of-concept”, and launched the “beta” multi-chain Chaosnet in April 2021; both with real funds. Total Value Locked was carefully curated to grow in a guarded way, and have demonstrated the robustness and security of the design.
9. Offering beyond swaps.
THORChain remains one of the only protocols offering yields via Liquidity Pooling for native BTC. Also, upcoming THORFi extensions (synthetic assets, single sided savings, lending, etc.) will further enrich and reinforce the concept of a liquidity “blackhole” that TC is proving to be.