THORChain Hits $10B Volume Amid Bitcoin Safety Debate

THORChain, a decentralized liquidity protocol, reached a historic milestone with over $10 billion in monthly trading volume.

For the first time in the history of cryptocurrency, the decentralized liquidity protocol known as THORChain has achieved a total monthly trading volume of more than more than ten billion dollars.

Bitcoin maximalists, on the other hand, are divided on the question of whether or not the platform provides sufficient safety to potential borrowers. The official social media account for THORChain declared the milestone in a post that was published on March 27 on X.

Runscan data reveals that the protocol has subsequently reached a total of $10.26 billion in this month.

THORChain Sparks Bitcoin Maximalists’ Safety Debate

A debate between Bitcoin maximalists broke out in a series of follow-up comments and blogs regarding the security of THORChain and the potential dangers that could arise for Bitcoiners who are interested in taking out interest-free loans against their Bitcoin utilizing the platform.

In a post that he made on March 27 on X, the mathematician and Bitcoin investor Fred Krueger stated that he was “willing to take the heat” for declaring THORChain to be “real.”

This statement is effectively stating that Bitcoin-backed loans on the protocol were a secure bet for Bitcoiners who were hoping to acquire more in the way of liquid funds.

On the other hand, Bitcoin analyst Dylan Le Clair refuted Krueger’s assertions during the conversation. In his statement, Le Clair said that a bitcoin collateralized loan that is based on the exchange rate of an alternative cryptocurrency in order to provide you with a “0% interest no liquidation risk” loan is only a form of risk transformation.

“You are shorting a tail that you don’t know how to quantify.”

The THORChain protocol is a decentralized liquidity system that streamlines the process of native asset exchanges between different blockchains. The protocol does not enforce liquidations or defined expiration dates, and it provides loans against key cryptocurrencies such as Bitcoin and Ether that do not incur interest as a repayment option.

The collateral requirements for Bitcoin and Ether were reduced from 400% to 200% as part of the most recent upgrade to the protocol, which took place on January 30. This change made it possible for users to borrow half of the total value of the assets they provided.

In his analysis published on March 10, Chris Blec referred to the no-liquidation loan model utilized by THORChain as “interesting.” However, he pointed out two significant drawbacks associated with the notion.

The first issue was that investors were willing to incur the more visible risk of lending their Bitcoin to a protocol that would otherwise fail or become vulnerable to an exploit. This is something that THORChain had already done in 2021, albeit the money were refunded.

The second issue was that investors are placing their faith in a centralized supplier to not alter its terms and conditions at a later time, which puts their loans at danger.

Particularly noteworthy is the fact that THORChain was compelled to suspend its mainnet on two separate occasions in 2023 because to concerns of potential security flaws in the protocol.