Falling in nearly 200 million US dollars in debt crisis, the former star cross -chain project Thorchain starts the reorganization plan for self -rescue

Author: Nancy, PANews

As a cross-chain star representative project in the last bull market, THORChain is now facing a severe existential crisis. The high debt of nearly 200 million US dollars has caused community concerns. Therefore, THORChain plans to implement a restructuring plan to solve the debt crisis.

**Encountering an insolvency crisis, the agreement hides multiple

problems**

On January 24, TCB, a core member of THORChain, disclosed that THORChain is facing serious insolvency, pointing out that the protocol has problems such as high leverage risks, excessive liquidity incentives, and the protocol is too complex.

“If large-scale debt redemptions or depositor deleveraging with synthetic assets occurs, THORChain will be unable to meet its debt denominated in Bitcoin and Ethereum.” TCB pointed out that the current total debt of THORChain includes approximately $97 million in borrowing liabilities ( denominated in BTC and ETH) and approximately $102 million in depositor and synthetic assets and liabilities. But THORChain’s assets only include $107 million worth of external liquidity injected into the liquidity pool.

“THORChain’s lending obligations are met by minting RUNE and selling them into liquidity pools, which makes the design highly reflexive and the situation is worse than it seems.” TCB further disclosed that if anything happens Large debt redemptions and/or depositor and synthetic deleveraging, THORChain will be unable to meet its obligations denominated in BTC and ETH/

TCB revealed that it has been warning about the dangers of hidden leverage since it joined the community. He has argued for deleveraging since the launch of Impermanent Loss Protection (ILP), whereby protocols require less capital to fill because now active liquidity can participate in filling them. He believes that THORChain is too complex and must return to basic principles in order to grow. Until then, no smart capital can buy RUNE or LP because the risk is too great. Overall, in many past DeFi cases, a huge public debt will become a bait for liquidation. Without action, allowing all redemptions to proceed in a chaotic manner could trigger a "death switch." This will be a race to escape, and the value of the entire THORChain protocol will be wiped out.

In fact, not long ago, THORChain also stated in its latest roadmap that it will focus on the THORChain App Layer in the first quarter of this year to eliminate risks in the basic protocol layer. Specific goals include: Integrating with Base and Solana networks; scaling down THORFi - reducing base layer risk and focusing instead on the application layer; adding a CosmWasm execution environment called the App Layer; using IBC to bring more assets into the application layer; launching active revenue campaigns To improve the liquidity supply experience; upgrade the transferOutAndCall of the Ethereum router.

Affected by this, both THORChain tokens RUNE and TVL experienced varying degrees of decline. CoinGecko and DeFiLlama data respectively show that in the past 24 hours, THORChain token RUNE fell by 33.3%, while TVL fell by more than 8.9% to US$250 million.

**Agreement captures over $30 million in revenue and launches 90-day

restructuring plan**

"THORChain has gone bankrupt and suspended on-chain operations, similar to a bankruptcy freeze to avoid capital outflows. Is this the first on-chain reorganization?" Dragonfly managing partner Haseeb Qureshi said.

Although THORChain faces the risk of thunderstorms, TCB believes that the protocol is valuable. THORChain has a revenue capacity of approximately US$200,000 per day, an annual transaction volume of over US$50 billion, and revenue of over US$30 million. It has a good business model and only needs to remove the toxic debt on the balance sheet.

DeFiLlama data shows that as of January 23, THORChain’s cumulative fees reached US$47.45 million, and its revenue was US$45.54 million. Among them, THORChain captured approximately $30.5 million in fees and $28.59 million in revenue in the past year alone.

TCB pointed out that no-liquidation lending THORFi needs to be regarded as a mistake, and THORChain only needs to clear the toxic debt on the balance sheet and return to the original spirit: return to basic principles. At the same time, TCB proposed two solutions: one is to allow the situation to develop, about 5-7% of the value will be extracted by a few people first, RUNE will enter a downward spiral, and THORChain will be destroyed; the other is to default on debts and go bankrupt. part of the value and develop it as much as possible in order to repay the debt without affecting the viability of the agreement.

TCB suggested that if THORChain wants to survive the crisis, it can increase the possibility of protocol rescue by permanently freezing the positions of all loans and depositors, tokenizing and deleveraging all loans and depositors' claims, and he also proposed It is proposed to establish an economic design committee to help THORChain succeed by improving capital efficiency, never building leverage features into it again and ensuring that Rujira does not endanger the L1 ecosystem.

Currently, THORChain has suspended THORFi lending operations as part of a 90-day restructuring plan aimed at reducing issues related to “savings and lending” projects and preventing large-scale withdrawals. John-Paul Thorbjornsen, founder of Thorchain, said, "The protocol itself is still working well and making a lot of money, and once it is reorganized, it will be able to pay off its debt."