Bankless - Is THORChain (RUNE) Undervalued? with Erik Voorhees and Chad Barraford

Episode Date: November 28, 2023

What is THORChain? Join David as we explore the liquidity protocol that allows swapping between BTC, ETH, and more without intermediaries. Chad Barraford is a core developer at THORChain, and Erik Voorhees is a Bankless staple who has found a deep resonance with THORChain's mission. Is THORChain helping build the Bankless future? Come find out. ----- 🏹 Airdrop Hunter is HERE, join your first HUNT today https://bankless.cc/JoinYourFirstHUNT  ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE ⁠https://k.xyz/bankless-pod-q2  ⁠ 🦊METAMASK PORTFOLIO | MANAGE YOUR WEB3 EVERYTHING ⁠https://bankless.cc/MetaMask  ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum  ⁠ 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo  👾GMX | V2 IS NOW LIVE  https://bankless.cc/GMX  💲 USDV | NATIVE OMNICHAIN STABLECOIN https://bankless.cc/usdv  ------ TIMESTAMPS 0:00 Intro 3:30 What is Thorchain 7:10 Erik and Shapeshift 10:20 How it Works 13:40 Is this a Bridge? 17:00 Staking and Security 20:00 Rune 28:45 Bitcoin and Ethereum 32:20 Latency 36:00 The Bull Case for Thorchain 38:40 Specialization 40:40 The Roadmap and Community 44:00 Get Involved ------ RESOURCES Erik Voorhees: https://x.com/ErikVoorhees?s=20  Chad Barraford https://x.com/CBarraford?s=20  THORChain Website https://thorchain.org/  THORChain Twitter https://twitter.com/thorchain  ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠ 

What is Thorchain? I don't know, but I'm here to find out. And to help me learn about what Thorchain is, I've brought on two people with me on the show today. First, Chad Barreford, one of the core developers of the Thorchain project, as well as Eric Voorhe's Bitcoin OG, who discovered Thorchane to be the spiritual, protocolized descendant of his old centralized shapeship exchange. If you are looking to understand what Thorchane is, how it works,

why the Rune token captures value, and how Thorchian can change the crypto landscape than this episode is for you. Bankless Nation, I do not own any ruin myself, and bankless as a company holds no position in this particular project. We are simply here to just learn and explore and to give projects like Thorchain that are in pursuit of helping build a bankless future a voice to the rest of crypto to showcase what they are building and why they are building it. So time to put your learning hat on.

Let's get into the conversation with Chad and Eric. But first, a moment to talk about some of these fantastic sponsors that make this show possible, especially Cracken, our preferred centralized exchange for crypto in 2023 and 2024. If you have any Fiat boomer bucks left, Cracken is the exchange for you to turn your Fiat bucks into crypto assets. That's the place where I do it. That's the place where you should do it too.

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in 2017. While participating in a Cosmos hackathon in 2019, Chris wrote some of the first lines of code that were committed to the Thor Chain Project and has been the largest code contributor ever since. Chad, welcome to Bankless. Thank you for having. I've been dying to

come on for quite a long time. I even shower today. That's how I'm exciting. I took a shower. Yeah, and the Thor chain community are right alongside you with you. I'm sure they're very, very excited to have this episode. In addition to Chad, we also have Eric Forhees, the crypto-O-G. You know him. He needs no introduction. Other than the fact that I suspect Eric's interests in Thorchain runs parallel to his creation of shape shift. A decentralized exchange that

has changed many shapes over the years, both as innovations in crypto has offered new solutions and also regulatory pressures has changed what's allowable in the cryptosphere. Eric, welcome back to Bankless. What's up, David? Good to see, man. Likewise. Likewise. All right, Chad, I'll throw this one back to you. What is Thorchain? Yeah, so Thorchain is a Dex. It's an AMM similar to Unuswap, so I'm sure a lot of your watchers and listeners are aware of that. And what makes Thorchains so unique and so different is that it's able to do a cross-chain swapping with layer one assets. It doesn't do wrapped assets. It doesn't do anything like fake Bitcoin or whatever, but it can transact between Bitcoin to Ethereum to Avax, to B&B, to Doge, to

lightcoin, to a bunch of different chains all at once. And that is a transformative, a number of much needed technology in our space. When you say decks, Chad, typically my brain and many others are just kind of going to go to a smart contract on Ethereum, something like uniswap, something like sushi swap. But that's not exactly what Thor chain is. Can you talk about the differences that Thor chain is bringing to the table in the pursuit of the goal, which is to be a decentralized exchange? Right.

So you can't actually build a cross-chain decks in the same context with a smart contract. You need to have your own validator set. They can use what's called threshold signatures to control a wallet once over 100, 105, I think the number is of validators. So we had to build it outside of Ethereum. I know if this actually function to work. And so everything is done by a cosmos chain. It's a cosmos chain itself with 105 validators right now. And so those all operate together to kind of custody those funds while you're trading or swapping or any of these kind of things.

Okay. So Thor chain is a, the goal is Thor chain is to be a. decks, but specifically a cross-chain decks. So there's many different blockchains out there. And Thorchain wants to make them a little bit more introprable, a little bit more integratable with each other, like a middleware layer between many, many blockchains to help them be able to swap assets with each other, correct? Right. And one of the key components with the key focuses, we want to make sure this thing could operate with anything. It could be UTXOs, could be EVMs, it could be a crypto note like Monaro, it could be a polka dot, it could be Cosmos, it could be

arbitrarily any chain that you can probably think of, Thorchain can probably support it. Okay, we'll get into the technical details about how that works, because I would imagine that is a pretty large engineering lift, getting blockchains to talk to each other. The answer is yes to that question. I'm sure, I'm sure.

Before we get into the tech details, though, Eric, maybe talk a little bit about your perspective and your journey discovering Thorchain and why it resonates with you so much. Yeah. Okay, so when we started ShapeShift, back in 2014, it was notable because it was non-custodial and it was a way to trade one asset for another. So this was like in the wake of the Mount Cox collapse and basically I wanted to create

an exchange that couldn't steal people's money because it didn't hold people's money. So an asset would come in and we'd send an asset back out. And so while it was non-custodial, we were still the intermediary. So a user's asset would come to us as a centralized customer. company, and we would send an asset back to that user right away. And that worked for a while. However, by the time, you know, the big bubble in 2017, 2018 happened, the regulatory pressure on ShapeShift became, let's just say, high. And we made the horrible, difficult decision to implement KYC on Shapeshift and basically operate like a financial institution. And what pulled us into that requirement was being an intermediary. So this was, this was very tragic for us, and I didn't really

know what to do, and it kind of floundered around for a couple years under that model. And then I saw, you know, Uniswap emerge, and Uniswap didn't have KYC. It had like that similar easy magic of trading one asset for another that ShapeShift had years before. And Uniswap, you know, was a company based in Brooklyn, and I was like, how the hell are they doing this without getting into all the legal mess that we have. And I end up, sorry, there's a phone, I end up learning that it's because as a smart contract, they are not an intermediary.

So they're not receiving funds of anyone. And I start learning about smart contracts more in depth. And I was like, man, this is great. I wish ShapeShift could do this, but there's a big problem, which is that Uniswap doesn't work on any chain other than ETH. So while you have all the tokens there, that's cool.

But we can't use something that doesn't include Bitcoin. So fast forward like a couple years. And I learned about Thorchain. And I learned that like it's a Dex like Uniswap, but it actually supports not only Bitcoin, but other major chains. And I realized we could actually just swap out the entire back end of ShapeShift for the infrastructure that Thorchain had built. And if we did that, we wouldn't be an intermediary anymore.

And we could remove KYC once again. And that was a wonderful day. So we ended up doing that. And Thorchain remains, you know, the only decks in the world that can trade between Bitcoin and Eith native layer one at scale. So very, very glad you guys are talking about it. Interestingly enough, Thorchain and Uniswap both started in 2019. Uniswap Mainnet V1 hit Ethereum, I think in November of 2019, which is the year that Chad here apparently started coding up Thorchain at that Cosmos hackathon. Chad, was that the actual inception of Thorchain?

Was that that hackathon? Talk to us a little bit about the genesis of the project. Yeah, so it actually started in 2018. And one of the other co-founders, along with other individuals, tried to build Thorchain in that time period. And unfortunately, it wasn't really all that practical. Cosmos hadn't really come out yet. We need to build our own blockchain. You couldn't just like throw it on Ethereum.

So we needed something to build our own chain. And Cosmos wasn't quite a thing at that time. And then also we were missing like Tharchalt Signatures, which is like, kind of like a fancier multi-sig, for lack of a better term. And that didn't really quite exist at the time either. It wasn't really in 2019 where Cosmos were kind of relaunch, what's called GG18 came out in 2019 as well. And that just opened the door for like now the technology is there, the cryptography we need, the technology we need is now like all the ducks are in a row. Let's go. Let's do this thing. Talk to me about the tech stack that is Thorchain. So built on

cosmos and cosmos is meant to be an interoperability standpoint. to help facilitate some of this kind of stuff. How does Thorchane work as a technical system? Yeah, so we have our own validator set, and each validator runs a full node of every blockchain. So a full node of Bitcoin, a full node of Doge, a full node of Ethereum, so forth and so on. And so each blockchain, each valetor will watch these blockchains

and look at the addresses that the network kind of owns, right, or maintains. And it just makes observations of... That's a Thorchane network owns on respective blockchains, correct? Right. So the network holds, or right now I think it's six different Bitcoin addresses, like BC1 addresses, and, you know, six different OX addresses on Ethereum and Avax and, you know, so forth and so on. And so these nodes just kind of observe these addresses and watch for inbound activity or outbound activity. And that's reported on chain to say, hey, I saw, you know, David sent one Bitcoin to us.

And in the memo, or called an operturn in Bitcoin speak, says, oh, I want to swap to ether. and here's my OX address and here's what I want to execute. And then all the nodes is, you know, observe this transaction on the Bitcoin network, push that observation into the Thorchain network. And then once a two-thirds majority, all agree that this Bitcoin came into the network, it executes some business logic to do the actual swap and trade of the AMM itself. And then we assign a transaction on the outbound to send you your, your, your, your, your, eth on the other side.

And when you do this, like, the only requirement to do this is just to be able to sign a Bitcoin transaction or sign an Ethereum transaction. You don't need to have a Thorchain wallet. You don't need to own ruin. You don't need to do all these things. If you can sign a Bitcoin transaction, you can access whatever asset you want that the network can support. Now, historically, Chad, me and Ryan, a bankless here,

have been resistant-ish to cross-chain bridges. And this kind of feels like a cross-chain bridge, because when you span multiple blockchains, you are giving up sovereignty of a single set of trust assumptions, and now you are having dual trust assumptions. So like having a bridge that spans Ethereum and Thorchain, into Thorchain and then into another ecosystem, usually historically with other bridges,

that means that you are beholden to a new set of trust assumptions that are new threat models to your asset ownership. Is this concern present here? in the Thorchain model or how does Thorchain alleviate some of these concerns? Can I take this one, Chad? Go ahead. Yeah. I think this is one of the misnomer's that confuses people a little bit.

Like Thorchain's not a bridge. It's an exchange. It's an AMM exchange. You don't use Thorchain to move an asset from ETH to Avalanche, for example. You trade a native asset that you had on the Ethereum network for a native asset that you want on avalanche. So the chains are not communicating with each other at all. You're not taking like a bridged, you know, avalanche version of ETH over onto Avalanche. These worlds stay in their own isolated islands. And Thorchane just lets you trade one for the other without an intermediary

in between. Yep. Understood. Okay. So they're, the previous threat model that if the famous like wormhole hack, for example, left a lot of ETH stranded on. Solana. There's like wrapped eth on Solana and Eric, you're saying, well, that's just not what Thorchain is up to. Thorchain will let you sell your ether on Ethereum and purchase Solana on Solana and the assets stay in their respective ecosystems. This kind of seems like the spiritual descendant of ShapeShift, where like there actually is, it is the protocol version of what you did in looks up. You were just kind of manually pushing things around. Thor chain is doing it as a protocol. Right. Yep.

And because the protocol is doing that instead of a business, the protocol does not comply with regulations. It is an amorphous machine that just operates. And it has no specific jurisdiction. So that's where the magic comes from. I agree with Eric that I wouldn't consider Thurtsin to be a bridge. Just like you wouldn't call it coinbase a bridge. You would call it an exchange, right?

And bridges are highly problematic, in my opinion, because they're there are wrapped assets that you're generally doing. And as long as you hold that wrapped asset, you're a prolonged exposure to that bridge risk. Whereas in Thorchane, you swap your Bitcoin to ether, whatever you're doing. As soon as a swaps over, the risk is gone, right, for you as a trader or a swapper. And a lot of times those bridges are designed in a way where you actually take on the risk of the protocol risk of a smart contract. and they also take on the centralized risk of the people who operate that system because oftentimes it's just like a trusted entities that they like, a handful of individuals who have access to the keys.

And because of that, we've seen $200,300 million hacks where they exploited some smart contract risk of some sort of bug in the code in one case or another case where they just emailed one of the devs, a malicious PDF that he opened and then exposed all these private keys and then all the funds were lost. And so you're concatenating or adding the risk of C5. and defy into a single system, which to me is highly risky, which is why we saw so many bridges get absolutely wrecked in the last year, whereas Thorchain just has that kind of protocol risk,

like the same as what Uniswap has. Certainly, certainly. Okay, so, yeah, the bridge risk doesn't exist because it's not a bridge. But yet there is a security model for Thorchain. Maybe you can kind of get into, like, how does the Thorchain system, how is that enforce honesty? How does that enforce the protocol to work as intended? Yes.

So one of the core concepts of Thorchain is this concept of economic security, right? So if I wanted to give you, say I want you to be secure some assets, right? And so in order to give that privilege, you know, lock up $100, right? And some account or some way of doing so. And then I give you, all right, cool. I'm going to give you $1,000 of my money right now. Now, is that very secure? Well, no.

you gave up 100 bucks, now you got a thousand in your pocket, you're going to go ahead and run off and have a great day, right? You just made a bunch of money. And so that's what we call a lack of economic security. And almost every cross-chain system, with the exception of Thorchain, has that risk, where you're assuming that the value that is securing the assets is going to be worth more than the assets that you're securing. And Thorchain's specific design, in all cases in scenarios, it doesn't matter if Roone's price is pumping or Roone's price is diving or Bitcoin's prices pumping or Bitcoin's prices dumping, and all cases in scenario is economically always ensures that the value of the assets that the network is securing is always worth more than

the validators put up at risk of their own money. So even if you were to acquire and you have to civil attack the network and have two-thirds consensus of all the nodes, the amount of money you'd have to spend to get there would be so much more money than the Bitcoin and the ETH and the Doge and the light coin and the B&B, all those assets combined is you would always lose money in that scenario. And so what is the incentive to stake? I'm going to go ahead and guess that the Thor chain asset, the native asset of Thor chain is the thing that you stake. What is the incentive to stake? Like, why are stakers staking in the first place? Like, what do they get? Yeah. So the network has what I would consider real yield, right? So people are trading, swapping, they're adding Bitcoin,

they're taking out ETH, and they're paying fees into these pools along the way. And so the network will split this income, right? There's two sources of income. One is the block rewards of the system, and two is like the trading volume. And this is about, less than I looked at it's about 50-50. Half the rewards are from block rewards. Half the rewards are from fees collecting from traders and swappers. And the network will take this income and decide, I'm going to give some percentage it to the LPs who are providing liquidity and some percentage it to the validators, the nodes who are committing blocks, these kind of things. And it has a mathematical equation that uses to balance between these two entities.

If we have too much security and not enough LPs, the validers make less money, the LPs make more money to incentivize, hey, you can kind of leave here and join over here, right? If there's too much liquidity in the pools and not enough security, the pendulum swings to the other side, giving validators more income and LP's less income to incentivize them to either, you know, leave and for more validators to show up and become, you know, stake more ruin to earn more rewards. Okay. And then the issuance of the Thor asset that is to secure the blockchain like all

blockchains. Yeah, the ruin asset. the Rune asset. Excuse me, the Rune asset. The token is called Rune. Thorchain Rune. Okay. Yep.

And then what are the economics of that? Is it purely an inflationary asset and more people just buy it so that they can stake it to earn more fees? What's the economic system of Rune? Yeah. So it is a hard cap set of 500 million tokens. It's not like an infinite Mint Cosmos token, which is commonly true. And so you can you can stake it on the run of validator. Every pool is comprised of two assets, which is a big.

Bitcoin and Rune, ETH and Rune. USTC and Rune. And so if you want to be an LP, you can provide the liquidity that way and kind of earn rewards in that context as well. But everything that you do with the network, whether you're swapping, whether you're an LP, whether you're a saver, while you're opening a loan, whether you're running a validator, all these things inherently and directly derive value into the token. And that's partly why we've seen this big, huge movement in not just in Roon's adoption of

the last couple months, I thought it was adoption of the couple months, but the price. has moved with it because all that additional trade volume pushes value into that ruin asset. Whereas, like, in the uniswap's case, the unitoken has no relationship to the AMM at all. It's just a governance token, right? So you could have a trillion dollars of trade volume on uniswap, and the token is decoupled or detached from that. Well, that's not the case of the room. The more adoption we get, the more kind of value is driven into the ruin asset. Yeah, I'll explain that slightly differently.

So like assume a certain level of liquidity in the pools, like $100 million of capital in the pools for Thorchain. And then people are finding the decks useful, right? Like people are trading an increasing amount of ETH to Bitcoin. As that volume increases on that $100 million of pooled capital, the fees going to those providers are getting higher and higher and higher. So the yield from being an LP is getting higher and higher and higher. eventually that that will incentivize people to put more funds into the pools. But every pool in Thorchain is asset plus ruin. So if you're going to come in and put a million dollars into these pools because the yield is so high,

that's going to be $500,000 of ETH and $500,000 of Roon. So as trading volumes increase, there's an organic demand created there for a Rune because it's always 50-50 paired with the liquidity in the pools. That's a simple way to think of it. So if I'm swapping my ether for Bitcoin, start with Ether on Ethereum, send it over to Roon, ether gets sold for Roon, and then that Roon gets sold for Bitcoin inside of the Thorchain blockchain, and then I find my Bitcoin out on my Bitcoin address on the other side, correct? Correct.

And then a fee is taken on both swaps, or it kind of doesn't really matter. There's just like an aggregate fee, a cost that's made to make this trade happen. And then that stays inside of the Roon system to the, liquidity providers. Correct. We call that a double swap. It happens totally in the back end. You're not even aware. You're not really in an act room with it. But we call that double swap. But because of our newer feature we have called streaming swap, it just grows really highly capital efficiency on these trades and swaps, you can do that trade and pay a five basis points on that trade. Even if you're doing a million dollar trade, even if you're doing a five million dollar

trade from Bitcoin to ETH or ETH to Bitcoin, five basis points you can get on that trade, which is absolutely incredible. Okay. So I have two thoughts here. the uniswap model of putting ether against USDAC directly and not having an intermediary token, I've always thought was elegant because let's not inject an intermediary token where it doesn't need to be. If people just want ether and uniswap, let's not add a third token, which is always why I've been in my previous wars with the Bankor people, that was more or less the subject of the debate. It's like why I put in Bankor as an intermediary token when you have uniswap and you can just trade assets directly.

But I think the counter argument here is that the Rune asset is what allows the Thor chain system to maintain non-consodial nature. Because if you wanted to trade directly Bitcoin for Ether, you would need to host those assets on the Thor chain system itself. The Thor chain would need to have state of these assets. And then we're kind of back to the bridge problem that we were discussing earlier. Is this correct analysis? Yeah, there's probably two reasons for it. One is we don't want to fraction the liquidity across 100 different pools, right? If you want to get from Ethereum to Bitcoin, whatever it is, we want all that liquidity

to be focused in a single pool to give you the best price execution. If you break up into 10 or 30 different pools, that's inherently becomes problematic. That's the first reason. The second reason is that... Sorry, just to drive that point home, Rune is... So rather than having Ether trade against Bitcoin and Ether trade against USC and Ether trade against USDT, Ether just trades against Rune. Rune is like this substrate upon which all assets trade against.

And so only adding one new asset doesn't add like 17 different new pools for every single permutation of other assets is everything just trades against Rune. Right. Yeah. Think of it like on Uniswap. How many pools are paired with USDC, right? Like at least a dozen big ones. Imagine if there was only one USDC pool on Uniswhip. off, right? It would be very deep and you'd get great price execution. The only way to do that in

practice is to have an intermediary asset. Yeah. Understood. The other reason why it's really critically important for us is that I was mentioning earlier about economic security, right? So if the value of Rune were to dive today, say we're down 80%, whatever it is, the security goes down by 80%. Because each pool is comprised of Rune plus some other asset, the Rune price in the pool, obviously, it's going to go down 80% as well, which means arbitrage bots are going to, you know, put Rune into the pool and take out Bitcoin to ensure that the value of the pool always is less than the value of the security behind it. This is part of a critical component. If you don't do that, then you've decoupled the security of the network and the value of the assets that you're securing

and you no longer have economic security, which to me is inherently flawed. Okay. Yeah. So to to state that again, this is a key point that I didn't quite understand the magic of it first, but all the validators are securing the network, and they put up exclusively Rune. It's their bonds that they put up to swear allegiance and say that they'll be honest. The value of that capital rises and falls in direct proportion to the value of Rune.

Separately, you have these liquidity pools, and let's say, for example, that Rune wasn't paired with each asset, that each asset was paired with USDC or with ETH or something. you could and would often get into situations where the value in the liquidity pools was worth more than the collateral state by the validators, right? And as soon as that happens, there's an incentive by the validators to steal money. And that's not a tail risk. That would happen often in the vagaries of the market.

So when you force half of the liquidity pools to be ruin, if Rune, if Rune, in price, the value of the liquidity pools also collapses in price, which means that there's never a point at which it makes sense for the validators to steal the money. And that's like really the key insight that made this thing work. So it's a natural constraint. It's a natural cap on the non-RUN supply of assets into the system. There can only be as so much assets into the Rune system as there are the run market cap and percentage of that state, correct? Half, yeah. Yeah.

Mathematically, there can only be half of the dollar value of non-ruin assets in the pools as there is Rune held by the validators securing it. Right. So if there's $10 million of non-Rune assets in the pools, there's $20 million of Rune held by the validators. And whenever those numbers get out of that exact ratio, the rewards of the system start changing such that it makes sense for arbitrage to come in and get it back to that point. Interesting.

So it's like a naturally balancing system with a constraint, with a cap, right? We can't just flood the system with non-bibrewn assets. If you wanted to get a Bitcoin multi-billionaire just to deploy everything they had into the protocol, the protocol wouldn't even allow it. It just would say, we can't do that. We would lose security and security is important. This is too much, right? Okay.

I would imagine that a lot of the activity that is, flowing through Rune is denominated in probably the fat side of the tail of assets. Probably, I'm guessing Bitcoin. Probably Bitcoin, actually, since it's the one that it doesn't really have an internal defy system. What is the activity that is flowing, flowing through the Thor chain system? Yeah, by far, it's, you know, Bitcoin and Ethereum are the two largest. And that makes sense because if you just look at the trading pairs and CFI, you know,

such as exchanges. It matches that. It matches that. People trade Bitcoin to Tether and Bitcoin to ETH. Like, that's the magic, right? And it's kind of crazy that we are, you know, it took us so long to get to a point where like we can do that in a decentralized way, right? Of the most important pairs in crypto.

And now that we've done that as a protocol, as Fortune has done, we are now seeing about 2% of the trade volume of Bitcoin is now happening on a Dex for the first time in history. And we're just getting started. 2% of the total Bitcoin volume globally across all exchange. is happening on Torcheting. Spot volume, yeah. Spot volume. Yeah, spot volume. That's not, that's no small number.

No, it's not. Especially when we've been trying to rip the location of price discovery away from centralized exchanges from a long time. Right. And a large reason why this happens is because we have this new thing I mentioned earlier called streaming swaps, just occurs incredible capital efficiency. Where now if you want to buy and sell Bitcoin, Ethereum, whatever ask you want to do, you can do it cheaper, better price execution on Thorstein.

than any sex or any decks on anywhere, anywhere. It's kind of crazy this to think about, but it's actually true. And to kind of put like a pin on this, this is like a real thing that happened last weekend, somebody traded $6 million in a single transaction from Bitcoin to WBC. The WBC pool is only $4 million deep. The trade was larger by 50% than the actual value. The trade was larger than the actual value of the pool itself, but because of the capital efficiency of streaming swaps,

It executed just 45 bips paid in fees. That's unheard of in the AMM world. It's like it's ridiculous in the AMM world. Like nobody would even believe me if I fucking told you. But I'm telling you it happened. And importantly, the way that works is the streaming swap happens over a duration of time. So that trade happened over probably a few hours. But the end result was a trade 50% larger than the pool happening over a few hours at like a price, almost competitive.

with a centralized exchange. Yes. And what's crazy is because you can have a relatively illiquid pool, like a $4 million pool for WBC, and do these massive $6 million trades, the fees that you're generating is massive relative to the size of the pool. So the yield on Thorchand, whether you're a saver, whether you're an LP or whatever,

is just like through the roof like crazy because we have the trade volume of a curve or a pancake swap, but we have the TVL that is one-fifth or one-scent, sixth of them. So there's a lot less mouse to feed. So the real yield we're generating right now is ridiculous, right? It's like some are like like right now, the Bitcoin

pool, you're 100% API in this current moment of actual real yield from actual trades actually up in the network, right? If you want to do a Bitcoin saver, which is basically no ruin exposure, just Bitcoin exposure and you just get Bitcoin yield on your Bitcoin. No IL, nothing to worry about in that regard. Even that, right

now is about 7 or 8% yield on that, which is absolutely ridiculous. Ethereum, I think It's like, I think about 16% yield in Ethereum, which is just crazy. What is the latency time for a trade? And Eric alluded to it being also a function of size. How does just time of trading work? Yeah. So when you do a stream to swap, you're taking one large trade,

and you're breaking up into little sub-trades, and you're trading it over time. How fast that is depending upon a number of things. For one, you can choose how fast you want to be. You can say every block do a trade or every 10 blocks do a trade or you can, you can do a DCA if you want to. If you want to like dollar cost average buy into ether, something like this, you could totally do that on a fortune over a longer period of time. But you can choose that, right? But then the network also says that it has a lower barrier of five bips that you can pay on your price execution. So it depends on the depth of the pools you're trading with.

The more shallow they are, the kind of the smaller each individual trade has to be to maintain that five-bips fee, and the more time it's going to take. So nationally, as we grow, we have about 300 million in TVL right now. And so say we get to a billion or a billion a half or something more similar to curve or, you know, or pancake or whatever, we would have orders of magnitude improvement in terms of speed. Selo is the mobile first, EVM-compatible, carbon-negative blockchain built for the real world. And now something big is happening.

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in trading volume today all settled on-chain, GMX is leading the charge in terms of opportunities for defy liquidity providers. The future is on-chain with your wallet. with your trades and with your money in your own hands. Try it out now at app.gmx.io. Eric, when you put on your, the hat that you once upon a time put on all the way back in like 2012, 2013, when you looked at and daydreamed about the future of crypto,

I would imagine some shape of Thorchain was like kind of in that daydream way back when. How do you think that Thorchain will impact or change the crypto landscape, like moving forward? Like, what do you think about when you look about Thorchain's role for shape, the future of crypto. Yeah. So it's important for the ecosystem for one very simple reason, which is that the largest digital asset in the world can now be traded without any intermediaries for the first time. It's horribly embarrassing that 12, 13 years into the Bitcoin project, 100% of the spot

trading of that asset was going through centralized intermediaries, right? Of course, there's a little bit of trading that happens peer to peer at, it's. Starbucks, but not any material number. And so we had this incredible, beautiful, decentralized monetary base, and all of the trading of it is happening on centralized exchanges. That was a big problem. And I think a lot of the Bitcoiners just accepted that. You know, like many of them haven't been willing to experiment with other chains and other tokens because they are wedded to the idea that other chains and other tokens are always worthless. And we see in the Ethereum world all this experimentation with defy, with smart contracts,

and Uniswap and Bankor, like when they created that model of the AMM, that was an incredible breakthrough so that now you could trade assets without any intermediary in this frictionless way. And users with spare capital can earn fees on that. That was an incredible innovation. And yet it didn't support Bitcoin. And this was like so tragic. So Thorchain now has existed and it has been live for two and a half, three years.

It's amazing how few people still know about it, especially people that want to go in and out of Bitcoin, right? Like the two major assets, if you want to trade them without an intermediary, there's one place to do it. So that's why this is so cool and so important. And ever since I saw it, I fell in love with it, you know, both as it was an echo of what ShapeShift was doing back in the day, but just like as a critical piece of infrastructure for this entire space. Chad, is there a notion of apps on Thorchain? Is there like an application layer to Thorchain? Or is it more narrow in that it just wants to do this one job,

which is cross-chain asset swaps and do it extremely well? Yes, it's much more narrow. So there's no smart contracting on top of Thorchain itself. There's no cosomwasum or solidity or something of the such. It does, it has expanded. into other kind of concepts over time. So we started with the AMM, which is really great. We moved to something called synthetics for highly efficient.

It gives like a 15x capital efficiency, which is great. We move to what we call savers, which is like a single asset yield, right, that you would get deposit a single asset and get yield in that asset without IL risk or any of these kind of things. We also move to our lending design, where our lending design is, can you deploy Bitcoin as collateral? We can do Ethereum as collateral and actually get. a loan out, right? And this loan is zero percent interest, no liquidations whatsoever,

and no expiry, which is truly transformative or novel concept of how you can actually structure a loan. It's very different done here. So we've expanded to all sorts of other defy kind of focused concepts to say that we can build defy in a way that is chain agnostic, that is asset agnostic. We can build defythe in a way. We can give the same access that Ethereum people have had for years now around the power, the flexibility you can do with Ethereum and the other assets on that chain. Now you can do that same kind of stuff with assets that have long time been isolated, like Doge, like Bitcoin, like like, whatever else.

And so to do that, to apply defy to the entire crypto space, not just to specific EVMs, is quite important and transformational technology for the industry. Does Thorchane have a roadmap? Like, what's next for the project? What are you working on, Chad, as one of the bigger code contributors to the project? What's next? So we've exploded over the last few months. We went from like the 12th or 11th largest decks to now with the third.

We just surpass curve, right, in terms of trade volume. So we've had this huge explosion over the last few months, which has been awesome. But it's also kind of stretched the system in a lot of ways. Our bots kind of got stretched even themselves. So we've been making a lot of changes just to improve the efficiency and performance of the network. But once we kind of fix a few things we wanted to get done, which we'll probably get done in the next few weeks, is moving back towards a feature where you can only trade with Thorchain from any wallet in the world. Arbitrarily, any Walt in the world could actually trade or swap with Thorchon, which would really be valuable.

And the other thing I'm actually hyper excited about is order books and limit orders and being able to expand this network, not just to like swappers, but to traders, to people who actually want to expand to an entire new marketplace. place, right? And the other thing that's really fascinating about limited orders on Thorchane is that because you arbs can arm proactively rather than reactively, you that streaming swap we were talking that happens over time, that streaming swap can happen in a single block with the same price execution as if it happened over time because the arbops can arm within the block and swap back and forth between each other to get that speed of a single like regular swap like you see on uniswap, but the fantastic price execution of a streaming swap, like the best of both worlds put together. I'm really excited

about that. And then if you are looking to get talent or new community members or looking for contributions in the space, what kind of people are you looking to reach out to here after this podcast? Well, one of the things we're constantly doing is looking to expand into like integration partners, right? So we've been connecting with a lot of different worlds. We've been talking to ledger. They got integrated. Metamask is now integrated thanks to ShapeShift's work. trust wallets integrated, all these kind of things. And so we have lots of wallets we're talking to right now to kind of further expand our integrations with more things.

It's kind of non-surprising, but a lot of wallets want to be able to trade between Bitcoin and Ethereum in a trustless manner. That's not all that surprising, but they're really into it for some reason, right? And so we've been talking to a lot of different wallets. We're really interested in that. So if you know a wallet that would like to do that or a UI or even better, if you've got a dex, we already integrated with Trader Joe and a bunch of different deckses from other. environments, we can cross-chain, do daisy chain, multiple dexes together to give you any

asset to any asset in a single transaction, which is absolutely fantastic and fascinating. So if you are at decks and you want to integrate and you like have Bitcoin trading on your decks, even if it's on Avax or Ethereum or whatever it is, come talk to us. We can help you out. Yeah. So important point. So like in Uniswap, obviously biggest decks in the world and you can't buy Bitcoin. Right? This is a problem. Uniswap folks, hopefully you're hearing this. I know you've been approached about this before, but it would not be too hard to allow someone through the uniswap interface to trade, you know, USDC on ETH into Bitcoin.

and what would happen in the background is that the trade is going into the USDC whatever pool on Uniswap and then trading probably the most liquid asset like ETH for Bitcoin in Thorchain in the background and then Bitcoin is what gets spit out the other end. Obviously Uniswap should do that, right? Wouldn't be too much work and could be done with a really good UX for their users. Yep. Well, Chad, Eric, this has been a fantastic exploration into Thorchain.

So thank you for helping navigate me and the Bankless Nation through. this pretty cool project. Chad, if there are people that just want to get, learn more, for example, where, where should they go? Where, where is the canonical like Thorchene website or Twitter account or wherever you want to point people? Yeah. So the Thorchain website is thorchene.org at Thorchane on Twitter.

We got Discord, jump on the Discord, ask questions, you know, if you want to learn more about this project, it's, it's quite fascinating and quite important. So I encourage everybody just to learn. Don't buy, don't bother buying the token. I don't really care. Just do your research. learn about it, the more you read about it, than the more you're going to love it, I promise.

Eric, you handed me some material that we'll put into the show notes at the end of this, an introduction to Thorchain for Bitcoiners that you wrote as well as a few other articles. Or any other things you want to bring up to attention before you wrap up the show here, Eric? No, I would just echo the point of like, try this out, right? Like, everyone in crypto should try

an eth to Bitcoin transaction through Thorchain, like as part of your learning of how to use these systems. And so, you know, spend an hour to learn how to do that. And you'll understand why those of us who have learned about this are so excited. Well, Eric, Chad, thank you so much for coming on to the bankless podcast and exploring Thorchain. I appreciate it. Bankless Nation, you guys know the deal. Crypto is risky.

All things are risky. New things are always risky. Smart contracts are risky. DFI is risky. But this is the future that we are all signing up for. So we are glad you are with us on the bankless journey. Thanks a lot.