A closer look at THORChain’s new synthetic assets

THORChain (RUNE) is up nearly 41% over the past seven days, according to data from Cointelegraph Markets Proand its recent price action is even leading the entire crypto market the first quarter of 2021. The mainnet launch, originally scheduled for last year, is one of the main factors that led to the recent price surge. But the other factor that has added momentum is the integration of synthetic assets into its network. Why was this such a big deal and how does it affect the future of THORChain?

THORChain is often compared to Uniswap as it offers traders the ability to exchange different tokens. The only difference is that THORChain allows users to trade Layer 1 coins in a decentralized manner, while Uniswap is limited only to the tokens that comply with the ERC-20 standard. Users can essentially exchange their bitcoin (Bitcoin) for ether (ETH) on THORChain without using a centralized exchange, and it Expectations have processed more than 1.64 million transactions since inception.

The addition of synthetic assets to THORChain is expected to increase network usage. Synthetic Assets are of course virtually tokenized derivatives where they mimic the value of another asset. Synthetic assets or synthesizers track real-world assets such as stocks, commodities or even cryptocurrencies and traders use them for various reasons such as:

THORChain synthesizer under the hood

THORChain allows users to mint synthetic versions of cryptocurrencies ranging from BTC to Aave (AAVE). To do this, users add either RUNE or the actual crypto asset to a THORChain liquidity pool. THORChain synths are quite different from other synthetic assets as THORChain synths are not only backed by the underlying asset and do not require a high collateral ratio.

For example Terra (LUNA) The Mirror protocol, another synth minting platform, has a 150% collateralization rate. A THORChain synthesizer, on the other hand, is backed by a liquidity pool that contains 50% RUNE and 50% of the underlying asset. This is done by collateralizing pool property.

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No temporary loss

One of the main benefits of THORChain is that it eliminates fickle losses achieved through its log structure. THORChain maintains a reserve pool of RUNE tokens from which it extracts to pay block rewards for node operators and liquidity providers. It is also the same pool from which the system draws the tokens needed to offset any difference between the exact value of the synthetic asset and that of the actual asset upon redemption, preventing temporary loss.