A Discussion about Thorchain with Bitcoin_Sage & TheThorLady — Part 1: Thorchain Basics
This is a transcript from my podcast interview with Bitcoin_Sage and TheThorLady, available here: https://www.buzzsprout.com/1729379/8513278
Archon: Welcome to the first episode of my podcast after the rebrand to Qi Podcast as part of the Qi Capital content program. Today, I have the honor to talk about Thorchain with two of its core community members, Bitcoin_Sage and TheThorLady. The first episode will cover the basics of Thorchain. The second episode will dive deeper into tot o earn passive income as a liquidity provider and the protocol’s future.
Hello, Bitcoin_Sage and TheThorLady; I’m delighted to have you here today to discuss Thorchain and how it can also be used to generate passive income as well as what we can expect from it in the future. I mean, you are both very involved in the core Thorchain community and you are some of the most respected members of it. And you’re always trying to increase adoption and helping people with onboarding onto the platform and the project. And as a starter, can you tell us a bit more about your journey into Crypto and how you stumbled across it in the first place, and when it was.
TheThorLady: Thanks for organizing this, I’ve always wanted to speak to everyone, and it’s an excellent opportunity to talk about the future of my journey with cryptocurrencies. So the first coins, we call them like “dino coins” now, but invested in Stellar, NEM, which is still prevalent here in Japan, Ripple, and of course, Bitcoin. Pretty much all of the coins that were. Then shortly after, a significant incident and a lot of my NEM tokens were stolen, and then the bear market came 2017, 2018. I held on to most of my coins but also took out some profits. And to answer the second part of your question, I discovered Thorchain through reading the initial Binance report. So I subscribed to the media and blog and followed them on Twitter and in as many channels as possible. I
I think it was closer to the end of 2019 when I really did more research and started investing.
Archon: Perfect, thank you and Sage, what was your story?
Bitcoin_Sage: Yeah, so I went to Crypto in 2013, so two cycles ago. Back then, there were not so many coins around, only 10 coins or so listed. So it was pretty easy to get into the pumps and make a profit on shitcoins. I lost it all on leverage. I guess I kept playing around for a few months, a few more years until I sold everything in 2015, pretty much at the bottom of the bear market, like a complete noob. So I taught a few lessons, and I went to travel the world and missed most of the 20016 and 17 bull markets. I came back during the final months, and since then, I never really left anymore. So since then, I’ve always been involved in the background, looking on Twitter etc. The first time I heard about Thorchain was via 4chan in the autumn of 2019. It got me interested. So I did some digging, some research about it in the months afterward and have been holding and accumulating ever since.
In September 2020, I decided to start to share some stuff on Twitter, which I never really did before. Yeah, that was a very, very good decision in hindsight, because I’ve come in contact with a ton of knowledgeable people, especially within the community with whom I collaborated on several different community projects like MeHowBrains and Larry; this was a ton of fun. And yeah, afterward I worked on the new Delphi Dashboard out of interest to improve upon that and make it more useful for users.
So I guess the takeaway here is for everybody, if you’ve got something to share, just do it, and who knows what’s going to happen to you afterward.
Archon: What I find very fascinating is that both of you were so captivated by this project that you both decided to work actively in the community and build stuff and help people on board, and not just like only passively invest.
But for everyone who doesn’t really know much about Thorchain, can you quickly introduce the concept behind it, like trying to be the most important cross-chain liquidity protocol in the world and why it is so revolutionary compared to what we have had until now?
Bitcoin_Sage: Yes, so Thorchain enables native layer one swaps, cross-chain, and all of this non-custodial. You always hold your own keys, you decide what you’re going to do with your assets. You’re not dependent on anybody else, which is why it is unique. You can also earn a great deal on your native digital assets, not on the wrapped version, but actually native versions of Bitcoin, Litecoin, Bitcoin Cash, etc., which wasn’t possible before.
Let me just go in a bit on the reasoning of Thorchain, why they support these dinosaurs like Litecoin and Bitcoin Cash, because, yeah, at first glance, it doesn’t really make sense, but they don’t care what the chain is about, they are chain-agnostic. It just about what generates the most income to the network. And if dinosaur coins, like Bitcoin Cash, have a ton of value (like there are multi-billion market caps) and these guys are just collecting dust in people’s wallets, they have no way to earn a yield on them. So they’re just sitting there, and Thorchain is the only protocol out there that enables these people to earn a yield on their coins. And they will also be able to use these liquidity positions as collateral to take out loans. And that’s that game-changer. I mean, on Bitcoin, you could earn yield. But like, that’s as high as five percent, and you need to trust a custodian.
Archon: Yeah, definitely will come to this in our second part about how to earn passive income with the help of Thorchain. But to sum it up, also right now, at the current situation of the multi-coin network monitoring network being in beta, what blockchains are supported at this point in time?
Bitcoin_Sage: So currently, Thorchain supports Bitcoin, Litecoin, Bitcoin Cash, Binance Chain, Ethereum, so it already supports quite a lot of chains. There are some other upcoming integrations, which I will look forward to, particularly, say, XHV or Haven with their XUSD and XBTC, which are privacy coins. So users have the option to completely go off the radar by swapping into one of these privacy coins. I’m also looking forward to the integration of IBC, which makes it possible to connect with all the other blockchains on Cosmos, particularly Terra Luna, because I’m very bullish on this ecosystem and own a lot of LUNA myself.
And another thing I am looking forward to is the liquidity wars. I mean, like when some different coins or pools want to get activated on Thorchain. I believe currently, every three days, a new spending pool gets activated, and it only gets activated when there’s more than 10k of RUNE in the pool and when they’re the deepest spending pool in the pipeline. So you can imagine that everybody wants to get listed on Thorchain and it will generate immense competition. I’ve already seen that now with HOT and Kylin. I mean, they were very close together in terms of liquidity. And they’re both going to want to get listed. I’m curious how this will play out eventually, when like five or ten different assets wish to to get activated next.
Archon: So now, without going into too many technical details, what Thorchain is now delivering is revolutionary and a big change to obviously to digital trading assets in a decentralized way across chains. And this is something many have tried in the past, but without much success and other solutions that we see right now a far less ambitious, like they want to connect to two or three chains, perhaps like Ethereum, BSC and Polkadot but how is this possible that Thorchain can achieve this from a technical perspective? And why only now and not a few years back?
TheThorLady: So basically, anonymous node operators are bonded and connected to the vaults on the respective blockchains with the assets. When a user requests a BTC trade, the nodes perform the TSS (threshold-signature scheme) ceremony and agree on the validity of the request, and the nodes will make the required transfers from vaults so the user receives their BTC.
Archon: Thank you for this explanation. And so now, as a user I want to swap perhaps Bitcoin to ERC20-USDC, how easy is it for me? What steps do you have to go through and how long will it take? And how high will the fees be compared to go through a CEX. And then sorry — last question: which wallets can I use now and shortly?
TheThorLady: For the user, it’s straightforward. On multichain chaosnet (MCCN), just select the assets from the interface, indicate how much you want to swap, and then just proceed with the transaction. Most of the transactions take about five minutes or so. And I’ve also had some swap almost instantly. Sometimes the fees might be more expensive than on a CEX, but the process is much easier, and there is no KYC and no custodian — so you are in control of your money and you can set up a wallet almost instantly. And for wallets, there are lots of interfaces available at the moment. There’s the built-in Thorswap wallet and XDEFI and in the future, hopefully very soon, also Trustwallet and Ledger will be supported.
Archon: Thorchain is an automated market maker (AMM), just like Uniswap or Bancor, for example. And so each liquidity pool consists of 50 percent of the native RUNE token and the other asset like Bitcoin, Bitcoin Cash, or whatever. What role does the native RUNE token play in general?
Bitcoin_Sage: So like you said, Thorchain is «only» an AMM, but that’s just the foundation upon which everything is going to be built like ThorFi, which we will elaborate on a bit later. So we have the role of RUNE which the network. It’s not possible with any other token, it can only be achieved by using RUNE. It ensures that users are incentivized to keep the network safe. The incentive pendulum, which some people might be familiar with, plays a pivotal role in incentivizing either node more or liquidity providers more, depending on the situation. The second-order effect of this is the price model of RUNE. So for every dollar of non-RUNE assets added to the network, there are three dollars of value-added to the network in RUNE. If this wouldn’t be the case, eventually the network would become unsafe and the funds would be drained. And of course, we want to avoid that at all costs, and the incentives in place play a pivotal role to ensure that the right party is incentivized.
Archon: And so the also the price of RUNE then is deterministic, right? It’s based on the total value locked in the protocol, quite unlike any other token we know.
Bitcoin_Sage: Yeah, exactly. But the price of RUNE depends on the value of the assets in the system. So, I mean, if Bitcoin will drop in price, for example, then the value of RUNE would also drop as it’s tied to the broader crypto market.
Archon: So while you are exposed to the success of the protocol itself as a RUNE holder, you are also exposed to the performance of the overall crypto market. Good to know. And we as Qi Capital also provide a pricing guide (rune.qicapital.org) where you can see what’s the baseline price (deterministic price) and what’s the speculative premium, which is about 25 percent right now.
Now, we have a good overview of how Thorchain works and how to use it to swap layer one assets without any custodian. Next, we’ll talk about how to earn passive income on Thorchain as a liquidity provider.
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About Qi Capital
Qi Capital is a group of like-minded and experienced individuals from around the globe, sharing two common objectives: providing insights about crypto and DeFi, and proactively working with ambitious teams on the future of decentralized finance. Our core principle is to promote and foster individual creativity, growing not only as a group but also as creative thinkers and builders. To learn more about us, check out our website www.qicapital.org and our “Qi Podcast” via www.buzzsprout.com/1729379/ or engage with us on Twitter: @QiCapital.
Some members of Qi Capital own or farm RUNE. This statement is intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token or participate in any farms. This content is for informational purposes only and you should not make decisions based solely on it. This is not investment advice. All market prices, data, and other information are not warranted as to completeness or accuracy, are based upon selected public market data, and reflect prevailing conditions and the author’s own views as of this date, all of which are accordingly subject to change without notice.