THORChain — Decentralized Cross‑Chain Liquidity

Overview

THORChain is an open-source, decentralized liquidity protocol that enables users to swap native-chain assets (for example BTC, ETH, BNB) directly and permissionlessly. Unlike custodial exchanges or wrapped token bridges, THORChain routes trades through liquidity pools backed by real native assets and uses a native economic token, RUNE, to coordinate liquidity incentives and secure the network.

How THORChain Works

At a high level, THORChain is composed of liquidity pools, nodes that operate the network, and the RUNE token which aligns incentives:

• Liquidity pools: Pairs of native assets and RUNE create liquidity pools. Traders swap against these pools using an AMM pricing curve.
• Cross‑chain routers: THORChain coordinates cross‑chain settlement via a set of validators and on‑chain mechanisms that observe and relay transactions across supported chains.
• Network nodes: Node operators run the protocol and sign off on cross‑chain events in return for fees and rewards.

RUNE — The Economic Layer

RUNE is the native token of THORChain and plays several important roles: it is the base asset in every pool (providing deep price discovery), it secures the protocol through bonding by node operators, and it captures protocol fees. Staking or bonding RUNE is required for node operators; liquidity providers pair their assets with RUNE to supply pools and earn trading fees and rewards.

Use Cases

• Permissionless swaps: Swap native BTC for native ETH without wrapped representations.
• Liquidity provision: Earn fees and incentives by depositing asset pairs into pools.
• On‑chain routing: Use THORChain as a routing layer for decentralized apps that need cross‑chain transfers.

How to Use THORChain

Typically users interact with THORChain through web UIs, wallets that support cross‑chain messages, or integrated dApps. The general flow for a swap is:

1. Choose source and destination assets and the amount.
2. Sign the send transaction from your wallet to the THORChain router address.
3. Pay network and protocol fees; wait for cross‑chain settlement to complete.

Liquidity providers deposit pairs like BTC & RUNE or ETH & RUNE to enable swaps and earn a share of fees.

Risks & Security Considerations

While THORChain enables powerful cross‑chain primitives, it carries risks common to DeFi and cross‑chain systems:

• Smart contract and economic-design risks — bugs or unforeseen economic attacks could impact funds.
• Node operator risk — the protocol depends on honest node behavior and proper bonding of RUNE.
• Impermanent loss for liquidity providers during volatile markets.

Always audit sources, use reputable frontends, and consider splitting exposure across multiple protocols.

Getting Started

Begin by choosing a supported frontend or wallet, connect your wallet, and either perform a small test swap or provide a small liquidity position to learn the process. Keep private keys and recovery phrases secure and consider hardware wallets for large positions.