THORchain Savers and Lending Halts Operation for Up To 90 Days

Introduction

A recent development within the Thorchain ecosystem has made both Thorchain Savers (commonly known as staking) and Lending features unavailable for up to 90 days. In contrast, Thorchain’s core functionality of crypto-to-crypto swaps and liquidity pools currently remains unaffected. The swapping and liquidity pools features are what enables users to trade across various blockchains via the Thorchain DEX. As of the latest information, this halt in operations is isolated to Thorchain Savers and Lending in particular, with no direct indication that Thorchain’s swap operations are at immediate risk of disruption.

The Current Situation with Thorchain Savers

Thorchain has encountered significant financial challenges within its Lending and Savers features. Following a vote by the network’s node operators, these programs have been paused due to concerns over Thorchain’s solvency in these areas. It’s important to note that Edge is not a Thorchain node operator or validator – the decision to pause Thorchain Savers is unfortunately not something that Edge controls. Node operators made the decision to halt these programs to prevent a potential rush of withdrawals that could lead to insolvency for these features, given Thorchain’s current liabilities within the Lending and Savers protocols.

What Led to This?

  1. Bitcoin Price Surge: A rise in Bitcoin’s price has increased the value of Thorchain’s liabilities within Lending and Savers, which are largely in Bitcoin and Ethereum. This has strained the protocol’s ability to manage these liabilities, especially as:
  2. RUNE Price Drop: The price of RUNE, Thorchain’s native token, has dropped significantly, complicating the protocol’s ability to cover its debts using RUNE.
  3. Operational Risks: The design of Thorchain’s Lending and Savers programs has shown vulnerabilities, particularly with high reflexivity causing selling pressure on RUNE, further devaluing it.

Specific Risks and Impacts

  1. Savers and Lending Users: Those who have funds in Thorchain Savers or have taken out loans through its Lending program are directly impacted. Withdrawals and deposits have been halted, and there’s uncertainty about when and how these services will resume, though this is addressed in the “Next Steps for Thorchain” section below.
  2. RUNE: Instability in the Lending and Savers programs has led to a sharp decline in RUNE’s price, as the market reacts to these developments. This price volatility poses a risk to those holding RUNE, either as an investment or as part of liquidity pools.
  3. Liquidity Providers: Although liquidity pools are operational, the overall health of the ecosystem might influence the decision of liquidity providers on where to allocate their capital, potentially affecting future liquidity depth.

Next Steps for Thorchain

  1. Restructuring Plan: The core team is developing strategies to address the insolvency of the Lending and Savers features. This might include debt restructuring or creating mechanisms for depositors to recover their investments over time.
  2. 90-Day Pause: The pause on these services is set for up to 90 days, during which time Thorchain aims to stabilize these features and ensure a sustainable return for depositors.
  3. Revenue Utilization: Future revenue from swap operations might be redirected to pay back depositors in the Savers program, suggesting a long-term recovery plan.

How Should Thorchain Savers Users Respond?

  1. Stay Informed: Regularly check official Thorchain channels for updates on the restructuring plan and recovery strategies, and we will do our best to continuously update users on this information as it’s released.
  2. Understand the Impact: Since core functionalities remain operational, immediate threat to the overall protocol is not a given, though not an impossibility. However, patience will be necessary for those with funds in Savers as the Thorchain team establishes a solution to make users whole.
  3. Plan for the Long Term: Prepare for a potentially extended recovery period for Savers funds.
  4. Engage with the Community: Your participation in discussions and votes could influence the direction of recovery and future protocol adjustments.

Conclusion

While Thorchain’s core functionality of swap operations is currently functioning, halting the Lending and Savers programs reflects a specific issue within those features. Efforts are underway to resolve these challenges, and users should focus on staying informed, planning for potential long-term scenarios, and maintaining engagement with the Thorchain community for the best possible outcomes. As this situation continues to develop we will be informing Edge users on the latest information, especially as it pertains to recovering funds held within the Thorchain Savers protocol. For any questions or concerns, please contact our customer support team for assistance.

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