ThorChain founder JP Thorbjornsen and the development team have decided to pause the ThorFi Savers and Lending programs for the next 12 months. The decision, announced Thursday, comes after consultations with key community members, developers and node operators, according to the project's Discord.
Thorchain is a decentralized liquidity protocol that enables cross-chain asset swaps without the need for tokens or centralized exchanges. It allows users to trade native assets such as Bitcoin, Ethereum and others directly on the platform, using its native token, RUNE, to facilitate transactions and secure liquidity pools. But the protocol is undergoing a major refactoring to make it more secure and easier to understand.
The developers say that THORFi, a complex component of the ecosystem, has been identified as a major source of volatility, particularly due to unrestricted redemptions that drive away new participants and hinder progress on the 2025 roadmap. By pausing these features, the team aims to ensure Ensure that the protocol is ready to scale efficiently.
Read more: The vulnerability in the code creates an obstacle to runaway operation of RUNE
Under pressure
Inflation in the circulating supply of RUNE has directly contributed to the weak price movement of the token. There are several mechanisms behind this inflation, including block rewards distributed to validators. As with many series, RUNE is minted to reward participants, thus diluting its value. There is a growing consensus that these bonuses should be reduced, but the details and timing of such changes are a matter of debate.
Besides group bonuses, other mechanisms such as savings and loan programs added additional pressure. The Savers program, which was designed to create buying pressure for RUNE, instead exacerbated the situation by creating significant selling pressure when users withdraw their deposits.
The dynamic is simple: when users enter Savers, they must buy RUNE, but when they exit, they sell it. This cycle becomes problematic when RUNE performs poorly compared to Bitcoin. When users exit at lower prices, they cause the value of RUNE to decline further, creating a feedback loop.
Likewise, lending produced inflationary effects. Even though it has already been closed, its continued influence still affects the price of RUNE. The loans and guarantees, mainly backed by BTC and ETH, created liabilities that were difficult to repay as the value of RUNE declined. The situation is exacerbated by the fact that, given the current market state, more RUNE is being minted to cover liabilities, further diluting the token.
Sunset of Hafezin
In light of these concerns, community members called for immediate action to address structural weaknesses in the protocol. Even more pressing is the expiration of the Savers program, which continues to put downward pressure on the price of RUNE.
The proposed plan includes a 72-hour period for opposition and discussion, allowing the community to voice concerns and potentially campaign for the decision to be reversed. If no changes occur, a six-month “deadline” will follow, during which no further economic discussions or changes will take place. Developers will shift focus entirely to the application layer, improving bandwidth and accelerating the development process without the interference of THORFi-related distractions.
After six months, the idea is to tokenize lending and savings positions, providing holders with early liquidity in the peer-to-peer market. By 12 months, a restructuring plan will be introduced to provide liquidity to old THORFi holders, which may trigger a system income tax that will remain until all positions are liquidated.
Some have called for a more radical solution: forcing the closure of all outstanding loans. On X, ThorTrades Express He's worried about the sunset plan.
“If BTC trades at $75-85 thousand, Rune will probably trade at less than $3. It is better to use this bad moment in the market to get rid of something bad (loans),” he said, adding that such aggressive action should be taken immediately. “The right moment to force loans to close was above $6, but the second best moment may be now.”
So it seems that Thorchain is at a crossroads. The combination of RUNE's poor performance, bloated supply, and rising liabilities threatens to undermine the protocol's long-term viability. Clearly, some immediate action is needed to stop this spiral. The protocol has already made strides in decentralization and cross-chain liquidity, but to ensure its survival, the Thorchain team is looking to address these internal challenges head-on.
The question now is whether node operators will play ball, and what backlash from the community will result. As JB said, “Prepare your pitchforks,” and be prepared to make the tough decisions to save protocol.
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