THORChain observes incoming user deposits to vaults, executes business logic (swap, add/remove liquidity), and processes outbound transactions. THORChain is primarily a leaderless vault manager, ensuring that every stage of the process is byzantine-fault-tolerant.

THORChain's key objective is to be resistant to centralization and capture whilst facilitating cross-chain liquidity. THORChain only secures the assets in its vaults, and has economic guarantees that those assets are safe.

THORChain is an independent blockchain that operates as a Layer 1 cross-chain decentralized exchange (DEX). Built using the Cosmos SDK, THORChain enables the exchange of assets across disparate blockchains in a non-custodial manner. THORChain is the backend for many user interfaces.

Key selling points of THORChain are:

  • the ability to swap Layer 1, or native, assets across multiple chains - e.g. native BTC to ETH swap.

  • No user-registration required - simply send a transaction and THORChain will execute it.

  • No wrapped assets - all assets are natively secured.

  • Transparent, fair prices, without relying on centralized third-parties.

  • Continuous Liquidity Pools that maximise the efficiency of the protocol.

Value capture

The fees need to capture value from those accessing the resource and pay it to those providing the resource, and in this case, the resource is liquidity. However, liquidity is relative to the size of the transaction that demands it over the depth of the market that will service it. A small transaction in a deep pool has less demand for liquidity than a large transaction in a small pool.

Access control

The other reason for fees is access-control; a way to throttle demand for a fixed resource and let natural market forces take over. If there is too much demand for a resource, fees must rise commensurately. The resource in this case is liquidity, not market depth, thus fees must be proportional to liquidity.

Resource subsidization

Every swap on THORChain consumes resources (Disk, CPU, Network and Memory resources from validators). These costs are fixed in nature. In addition, every outgoing transaction demands resources on connected chains, such as paying the Bitcoin mining fee or Ethereum gas cost. As such, THORChain charges a single flat fee on every transaction that pays for internal and external resources.

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