THORChain Hits $10 Billion Trading Volume Amid Bitcoin Community's Safety Concerns
Summary:
THORChain, a decentralized liquidity protocol, achieved over $10 billion in total monthly trading volume for the first time, drawing debate among Bitcoin proponents over the platform's safety. While some Bitcoin supporters believe that Bitcoin-backed loans on THORChain are safe, others warn that such loans, dependent on an altcoin's exchange rate, offer no guarantees against interest and liquidation risks. Critics also raise concerns about potential protocol vulnerabilities and changes in lending terms by centralized providers.
For the first time in its history, the decentralized liquidity agreement, THORChain, has surpassed $10 billion in total monthly trading volume. But critics within the Bitcoin (BTC) community are questioning the safety of the platform for potential borrowers. The official social media page for THORChain made the announcement on March 27, with Runscan data confirming the platform had achieved over $10.26 billion so far this month.
This announcement caused disagreements among Bitcoin supporters over the security of THORChain and potential risks for those seeking to leverage their BTC through interest-free loans on the platform.
Fred Krueger, a mathematician, and Bitcoin investor, stated on March 27 that he endorsed THORChain, essentially suggesting that loans collateralized with Bitcoin through the platform were secure for those wanting to access liquid funds. Bitcoin analyst Dylan Le Clair, however, challenged Krueger's assertion, stating that such loans depended on an altcoin's exchange rate and could not guarantee zero interests or no risk of liquidation.
THORChain allows for native asset swaps across several blockchains without requiring interest, fixed expiry dates, or enforcing liquidation. Its most recent upgrade on January 30 lowered the collateral requirements for Bitcoin and Ether from 400% to 200%. This reduction means users can now borrow up to half the total value of the assets they contribute.
However, this model has faced criticism. Analyst Chris Blec found the modell "interesting" but pointed out crucial limitations. Firstly, the risk associated with lending Bitcoin to a protocol that could potentially collapse or be compromised, especially given THORChain's history of such incidents in 2021, even if the funds were eventually returned. Secondly, borrowers entrust a centralized provider not to modify its terms and conditions in the future, potentially putting their loans at risk. It's worth noting that THORChain had to twice suspend its mainnet in 2023 after potential security vulnerabilities were discovered.
Published At
3/28/2024 8:59:22 AM
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