THORChain

Network Architecture

Bifrost Protocol

THORChain connects to external blockchains through its Bifrost Protocol, a specialized module that monitors and processes transactions from connected chains. Each supported blockchain requires a specific Bifrost implementation that understands that chain’s transaction format and consensus rules. The Bifrost Protocol enables one-way state pegs that track transactions on external chains without requiring wrapped tokens or centralized bridges. This approach maintains the security and sovereignty of each connected chain while allowing assets to flow seamlessly between them.

When transactions occur on external chains, multiple THORChain nodes witness these events independently. They submit these observations to the network where consensus is reached through supermajority agreement. This multi-validator approach ensures that only legitimate transactions are processed, protecting against both malicious actors and honest mistakes in transaction reporting.

Vault Management System

Assets in THORChain are secured through a sophisticated vault system that distributes risk and enhances security. Primary vaults store incoming assets and require consensus from all active nodes on the network. This high-security approach ensures maximum protection for the initial entry of assets into the THORChain ecosystem. Secondary vaults handle outgoing transactions with smaller node groups for improved efficiency and transaction throughput.

The system implements specialized vault types for different functions. Asgard vaults serve as the main protocol-controlled treasury, holding the majority of pooled assets. Yggdrasil vaults are node-specific repositories that facilitate quick outbound transactions when users request withdrawals or swaps. This two-tiered approach balances security with operational efficiency.

The vault architecture employs Threshold Signature Scheme (TSS) cryptography, requiring multiple nodes to cooperate to approve transactions. This eliminates single points of failure and ensures that no individual node can unilaterally access or transfer user funds. The distributed nature of this system makes it highly resistant to attacks while maintaining transaction finality and user asset security.

Threshold Signature Scheme (TSS)

Instead of using centralized custodians or multisig wallets, THORChain employs TSS to secure assets across the network. With TSS, no single entity possesses complete private keys to the vaults. Transaction signing requires cooperation of multiple anonymous nodes, with each node holding only a fragment of the necessary signing information. The key generation and signing processes occur without revealing key fragments between participants, maintaining security even if some nodes are compromised.

THORChain’s implementation of TSS supports both secp256k1 (used by Bitcoin, Ethereum) and ed25519 (used by Cosmos, Polkadot) cryptographic curves. This versatility allows the protocol to connect with virtually any blockchain that implements these standard cryptographic methods. The result is a secure, distributed custody solution that can scale across the diverse landscape of blockchain networks without compromising on security or requiring trusted third parties.

Continuous Liquidity Pools (CLPs)

Asset Pairing Architecture

THORChain’s liquidity model uses RUNE as the settlement asset that connects all external assets:

• Each external asset (BTC, ETH, BNB, etc.) is paired with RUNE in a dedicated pool
• All swaps route through RUNE, enabling any-to-any asset exchanges
• Price discovery happens deterministically based on the ratio of assets in pools
• No external oracles are required for price information

Mathematical Framework

THORChain’s CLPs operate on a deterministic mathematical model that ensures:

• Predictable swap outputs based on pool depths
• Automatic price adjustment as swaps occur
• Protection against manipulation through slip-based fees
• Incentives for arbitrageurs to maintain price equilibrium

The core swap formula is derived from the constant product model:

Where:

• x = input amount
• X = input asset pool depth
• y = output amount
• Y = output asset pool depth

Liquidity Dynamics

Liquidity Providers contribute to CLPs by adding asset pairs to the network. To participate, providers must supply both RUNE and an external asset in equal value at current market rates. When assets are added to a pool, the provider receives pool share tokens representing their ownership percentage of that specific liquidity pool.

As trading occurs within the pool, the provider earns rewards from swap fees proportional to their share of the pool. Additional incentives come from protocol emissions according to the network’s economic model. These combined rewards create an attractive yield opportunity for asset holders.

Liquidity providers can withdraw their assets at any time, receiving a proportion of the current pool contents based on their share. This means the exact asset quantities returned may differ from what was initially deposited due to trading activity and price movements—a phenomenon known as “impermanent loss” in the DeFi ecosystem. Despite this risk, the combination of trading fees and protocol incentives typically provides sufficient compensation to make liquidity provision an attractive proposition for long-term holders.

Economic Security Model

Bonded-to-Pooled Ratio

THORChain’s security is based on an economic principle that makes attacks financially irrational by ensuring the cost to attack the network exceeds any potential reward. This is accomplished through a carefully maintained ratio between bonded capital (RUNE staked by nodes) and pooled capital (assets in liquidity pools). The target ratio keeps 67% of RUNE value bonded by nodes and 33% in liquidity pools.

When this ratio is maintained, attacking the network would cost more than what could potentially be stolen, creating a strong economic disincentive for malicious behavior. The system continuously monitors this ratio and adjusts rewards to maintain optimal security levels. This self-regulating approach means the security of the network scales automatically with the value of assets it protects.

The bonded-to-pooled ratio represents a fundamental breakthrough in blockchain security. Rather than relying solely on computational power (Proof of Work) or static token deposits (basic Proof of Stake), THORChain creates a dynamic security model that adapts to the actual value at risk within the system. As more value enters the ecosystem, the security requirements automatically increase in proportion.

Incentive Pendulum

To maintain the ideal security ratio, THORChain implements an automatic balancing mechanism:

• When too much RUNE is bonded (>67%), node rewards decrease and liquidity rewards increase
• When too little RUNE is bonded (<67%), node rewards increase and liquidity rewards decrease
• This pendulum ensures the network naturally moves toward optimal security
• No manual governance or intervention required for security adjustments

Sybil Resistance

The network resists Sybil attacks (where one entity controls multiple nodes) through a combination of economic requirements and procedural safeguards. High bonding requirements for node participation ensure that controlling a significant portion of the network requires substantial capital investment. This makes it financially impractical for a single entity to dominate the node set.

The system implements random selection of nodes from the candidate pool, preventing predictable entry into the active set. Regular cycling of nodes prevents long-term collusion and ensures the node set remains dynamic and resistant to gradual compromise. Penalties for misbehavior that slash bond values create additional financial risk for attackers, further discouraging malicious actions.

These combined mechanisms create multiple layers of Sybil resistance without requiring identity verification or centralized approval processes. The result is a truly permissionless system that nonetheless maintains high security standards through carefully designed economic incentives.

Global Protection Mechanisms

THORChain implements additional safeguards to prevent catastrophic failures and protect user assets under extreme conditions. Separate primary and secondary vaults limit exposure by distributing assets across multiple secured repositories. If a vault is compromised, only a fraction of total assets would be at risk.

Emergency shutdown procedures can be triggered if security thresholds are breached, allowing for orderly return of assets to their owners. Circuit breakers automatically activate when unusual transaction patterns are detected, temporarily pausing specific functions until security can be verified. The protocol maintains reserves to handle unexpected events, providing an additional safety net for the ecosystem.

These protection layers work together to create a robust security framework that can withstand various attack vectors and unexpected market conditions. By combining economic incentives with technical safeguards, THORChain creates a resilient system capable of protecting assets across multiple blockchain networks.

Swappers

Swappers are users who exchange assets across blockchain networks through the THORChain protocol. They access deep liquidity across chains in a non-custodial trading environment, maintaining control of their assets throughout the process. Swappers pay slip-based fees proportional to their swap size, which contribute to system income distributed to other network participants.

The swapping process is straightforward by design. Users send assets to THORChain vaults with specific swap instructions, and receive their target assets in return, typically within 5-20 minutes depending on the blockchains involved. This process works seamlessly across different chains, allowing users to trade assets that were previously impossible to exchange directly.

Swappers benefit from THORChain’s deterministic pricing model, which provides predictable outputs and protection against front-running and sandwich attacks common on other DeFi platforms. The slip-based fee model also ensures fair pricing that scales with market impact, creating a more equitable trading environment than flat-fee alternatives.

Learn more about the swapping process in our Swaps Guide.

Liquidity Providers

Liquidity Providers are capital contributors who enable the network’s trading functionality by depositing asset pairs into liquidity pools. They earn ongoing rewards from swap fees and protocol emissions, creating a passive income stream from their cryptocurrency holdings. This represents one of the first opportunities for holders of assets like Bitcoin to earn yield without surrendering custody to a centralized platform.

Providers deposit equal values of RUNE and an external asset, receiving a proportional share of pool fees and incentive rewards. Their capital makes trading possible while simultaneously providing price discovery for the assets. As trading occurs, the ratio of assets in the pool may change, creating exposure to impermanent loss if asset prices change significantly.

The reward structure compensates for this risk by distributing trading fees and protocol incentives proportional to each provider’s share of the pool. Liquidity providers can exit at any time and receive the current value of their pool share, with no lockup periods or withdrawal restrictions. This flexibility, combined with competitive yields, makes liquidity provision an attractive option for long-term asset holders.

Discover how to start providing liquidity in our Liquidity Provider Guide.

Node Operators

Node Operators are technical participants who run the network infrastructure that powers THORChain. They process transactions, secure assets, validate consensus, and maintain the overall health of the protocol. Node operation requires both technical expertise and financial commitment, as operators must bond a minimum amount of RUNE to participate.

Node responsibilities include witnessing external chain transactions, participating in TSS signing ceremonies, validating blocks, and maintaining high-quality infrastructure. The role demands reliable hardware, stable internet connectivity, and ongoing maintenance to ensure optimal performance. In exchange for these services, nodes earn bond rewards from protocol emissions and excess liquidity fees.

The system implements penalties for nodes that fail to perform their duties or attempt malicious actions. These penalties result in the loss of a portion of the bonded RUNE, creating strong incentives for reliable operation. The combination of substantial rewards and potential penalties creates an alignment of interests between node operators and the broader network.

Node Operators cycle in and out of the active set regularly, with approximately 1/3 of the active node set changing every few days. This rotation prevents long-term collusion, ensures the network stays up-to-date with software improvements, and distributes opportunities among a wider set of participants.

Learn about node operation requirements in our Node Operator Guide.

RUNE Tokenomics and System Income

RUNE Utility

RUNE serves multiple critical functions in the THORChain ecosystem, making it central to the network’s operation and security. As the settlement asset, all swaps route through RUNE as the connecting medium, creating consistent demand for the token with each transaction. This settlement function gives RUNE a velocity and utility that underpins its fundamental value.

As a security token, nodes bond RUNE to participate in the network, ensuring they have skin-in-the-game and aligning their interests with the system’s health. The value of bonded RUNE must maintain proper proportion to the value of assets in the system, creating a direct relationship between RUNE’s market value and the network’s security capacity.

RUNE also functions as a governance mechanism, with asset listings determined by RUNE pool creation rather than centralized decisions. All protocol incentives are distributed in RUNE, creating a consistent distribution mechanism across the ecosystem. Network fees are paid in RUNE or its equivalent, establishing the token as the native currency of the THORChain economy.

System Income Sources

THORChain generates revenue through two primary mechanisms that fuel its economic engine. Slip-based swap fees are charged on every transaction based on trade size and impact on the liquidity pool. Unlike flat percentage fees common in other exchanges, these fees automatically scale with demand and liquidity depth, increasing as trades represent a larger portion of available liquidity. This mechanism protects pools from manipulation and flash loan attacks while generating substantial revenue during periods of high trading activity.

Block rewards represent the second income source, with new RUNE emitted according to the emission schedule. These emissions decrease over time to maintain long-term sustainability, starting higher to bootstrap network security and liquidity before gradually reducing. The newly minted RUNE is distributed to secure the network and incentivize desired behaviors from all participants.

The combination of trading fees and emissions creates a robust income model that functions in all market conditions. Even during periods of low trading volume, the emission schedule ensures continued rewards for network participants, maintaining security and liquidity until trading activity resumes.

Learn more about system income in our System Income Guide.

Income Distribution

System income is distributed according to the Incentive Pendulum mechanism, which adjusts reward allocation based on network conditions. The target ratio allocates 67% to Node Operators and 33% to Liquidity Providers, but this adjusts continuously based on the current bonded-to-pooled ratio of RUNE in the system.

When the network achieves perfect balance, this distribution produces approximately a 50/50 net profit split after accounting for the differing costs faced by nodes and liquidity providers. This equitable distribution ensures all participants receive fair compensation for their contributions to the ecosystem.

As the network matures, excess liquidity fees above a certain threshold go to nodes as “Liquidity Deficit” payments. This mechanism acknowledges that as block rewards naturally decline over time, node economics must shift toward fee-based sustainability. This gradual transition from inflation-based to fee-based rewards ensures the long-term viability of node operations without requiring governance intervention.

Emission Schedule

RUNE emission follows a predetermined schedule designed for long-term sustainability and gradual transition to a fee-based economy. The initial higher emissions bootstrap network security and liquidity by providing attractive rewards to early participants. This approach helps the network reach critical mass in both security and trading volume.

Over time, emissions gradually reduce to reach approximately 2% annual inflation, a sustainable long-term rate. The protocol releases 1/6 of the Protocol Reserve each year, creating predictability for network participants. These emissions are tied to block production (approximately 6.3 million blocks annually), ensuring steady distribution regardless of market conditions.

The emission curve is designed to support network growth while preventing excessive inflation. As trading volume increases over time, fee revenue gradually replaces emissions as the primary reward source, creating a sustainable economic model that can function indefinitely. This careful balance between short-term incentives and long-term sustainability distinguishes THORChain from many other DeFi protocols.

Explore the emission details in our Emission Schedule Guide.

Minimal Governance Model

Design Philosophy

THORChain implements a minimalist governance approach that prioritizes security, decentralization, and resistance to capture. The system eliminates communication between nodes to prevent collusion that could compromise security or user assets. This design choice creates a trustless environment where participants need not rely on the good behavior of others.

The protocol removes centralized control points that could be compromised by internal or external threats. Rather than maintaining administrative keys or special privileges, THORChain operates as a truly permissionless system where no entity can unilaterally change rules or access user funds. This elimination of central points of failure creates robust security guarantees.

Instead of explicit governance mechanisms, THORChain leverages economic incentives to guide system behavior. Participants make decisions through capital allocation, with market forces determining optimal outcomes rather than votes or delegates. This approach creates a more organic system evolution that reflects actual user priorities rather than governance politics.

The governance philosophy allows market participants to make decisions through capital allocation, creating an emergent consensus that reflects real economic activity rather than political maneuvering. This market-driven approach reduces governance overhead while maintaining system responsiveness to changing conditions.

Asset Listing Mechanism

New assets are added to THORChain through a permissionless process driven by market demand rather than central committees. Users initiate the process by creating a bootstrapping pool, adding both RUNE and the new asset to a dedicated liquidity pool. These initial deposits signal interest in the asset and provide the foundation for trading.

As the bootstrapping pool accumulates sufficient liquidity, the asset becomes available for swapping without requiring votes, committees, or approvals. This market-driven approach ensures that assets with genuine user demand naturally receive the most attention and liquidity. Assets without sufficient community interest remain in bootstrapping phase or eventually get delisted due to lack of liquidity.

This organic selection process creates a meritocratic system where useful, in-demand assets thrive regardless of their origin or backing. By removing gatekeepers from the listing process, THORChain creates an inclusive ecosystem that can adapt quickly to emerging assets and changing market preferences.

Chain Integration Process

Adding support for new blockchain networks follows a technical process driven by community development rather than centralized decision-making. Developers create a Bifrost module for the new chain that enables THORChain to monitor transactions and interact with the blockchain’s native assets. These modules allow the network to witness transactions, create addresses, and broadcast transactions on the target chain.

Once developed, the code undergoes testing and validation by the development community to ensure it meets security and functionality standards. Nodes can then update their software to include the new chain module, gradually bringing chain support online as more nodes adopt the update. When a supermajority (67%) of nodes support the chain, it becomes fully integrated into the network.

This bottom-up approach to chain integration ensures that THORChain can expand to support any blockchain with sufficient community interest. The process requires no centralized approval or governance votes, maintaining the protocol’s commitment to permissionless operation while ensuring technical quality through community review.

Protocol Upgrades

The network upgrades through a node-driven mechanism that balances continuous improvement with security and stability. Software improvements are developed by the community and made available for node operators to implement. Nodes voluntarily update their software when cycling off and back on the network, gradually increasing the percentage of nodes running the new version.

Upgrades activate when a supermajority of nodes adopt the new version, ensuring consensus around protocol changes without requiring centralized coordination. For major upgrades that change fundamental rules, the network may implement coordinated “hard forks” that activate at specific block heights. This approach ensures all nodes transition simultaneously to maintain consensus.

This upgrade process ensures the network stays up-to-date with technical improvements while maintaining consensus and security. The regular cycling of nodes creates natural upgrade points without disrupting network operation, allowing continuous evolution without compromising stability.

Getting Started with THORChain

Compatible Wallets

Access to THORChain is available through several user-friendly wallet interfaces that connect to the network. THORWallet serves as the official non-custodial mobile wallet for THORChain, offering a streamlined experience designed specifically for the protocol. ASGARDEX provides a desktop application with advanced trading features for more sophisticated users who prefer a full-featured trading experience.

For those who already use multi-chain wallets, several options offer THORChain integration. ShapeShift includes THORChain swap functionality alongside its multi-chain capabilities. Trust Wallet supports THORChain trading through its mobile interface. Thorswap offers a web-based interface accessible from any browser, making it convenient for users who prefer not to install additional software.

Each wallet offers different features and interfaces while connecting to the same underlying THORChain protocol. Users can select the option that best fits their preferences for security, convenience, and functionality without sacrificing access to the network’s core features.

Acquiring RUNE

RUNE can be obtained through multiple channels depending on user preference and existing holdings. Centralized exchanges like Binance, FTX, and Crypto.com offer RUNE trading pairs against major cryptocurrencies and fiat currencies. These platforms provide a straightforward entry point for those new to the ecosystem or those who prefer the familiarity of centralized exchanges.

Decentralized exchange platforms offer another acquisition route, with RUNE available on Uniswap (Ethereum chain) or PancakeSwap (Binance Smart Chain). These options allow users to swap directly from existing token holdings without centralized intermediaries. For the most direct approach, users can swap any supported asset for RUNE directly through THORChain itself, though this requires already having some cryptocurrency to swap.

Active traders may prefer platforms like Exness MT5 which offer RUNE trading alongside other assets in a more advanced trading environment. These platforms provide additional tools and features for those who take a more active approach to managing their cryptocurrency holdings.

Swapping Assets

Executing your first cross-chain swap through THORChain is a straightforward process that begins by connecting your wallet to a THORChain interface. Once connected, you select your source asset (what you’re sending) and destination asset (what you want to receive). The interface will display current rates and expected output based on THORChain’s deterministic pricing model.

After entering the amount you wish to swap, you’ll see transaction details including expected output and fees. The slip-based fee adjusts automatically based on your trade size relative to pool depth, typically ranging from 0.1% to 1%. Network fees cover the cost of processing transactions on both the source and destination blockchains.

Upon confirming the transaction, the swap process begins immediately. Completion times vary depending on the blockchains involved, typically taking between 5-20 minutes for full settlement. The destination assets are sent directly to your wallet without requiring further action. This entire process occurs non-custodially, with your assets either in your wallet or secured by THORChain’s decentralized vault system.

Providing Liquidity

Contributing to THORChain’s liquidity pools creates an opportunity to earn passive income from your cryptocurrency holdings. The process begins by acquiring both RUNE and an external asset you wish to provide to the network. These must be added in equal value at current market rates, though the exact quantities will differ based on relative prices.

After connecting to a THORChain interface, you select the liquidity pool you wish to join from the available options. The interface will calculate the optimal ratio of assets based on current prices and pool conditions. You then add your assets in the specified proportions and confirm the transaction to complete the process.

Once your assets are added to the pool, you immediately begin earning rewards from both swap fees and protocol incentives. These rewards accumulate continuously and can be claimed whenever you withdraw from the pool. There are no lockup periods or withdrawal restrictions, allowing you to exit at any time and receive your share of the pool’s current assets.

Detailed instructions for each supported wallet and interface are available in our Providing Liquidity Guide, which walks through the specific steps for each platform.

Roadmap and Ecosystem Growth

Ongoing Development

The THORChain protocol continues to evolve with several key focus areas shaping its development roadmap. Chain integrations represent a primary focus, with the team working to add support for more blockchain networks to expand the protocol’s reach and utility. Each new chain integration multiplies the possible trading pairs available to users, creating exponential growth in utility.

Development of synthetic assets will enable representation of assets that aren’t directly supported, expanding trading options beyond native blockchain assets. These synthetics will maintain price parity with their underlying assets while offering improved trading characteristics and availability. Layer 2 solutions are being explored to increase throughput and reduce costs, allowing the protocol to scale to meet growing demand without compromising on security or decentralization.

API improvements will enhance developer tools and interfaces, making it easier for third-party applications to integrate with THORChain. This focus on developer experience aims to expand the ecosystem of applications built on the protocol. Flash loan capabilities will enable advanced DeFi strategies directly through the protocol, allowing sophisticated users to execute complex transactions while maintaining the security guarantees of the underlying system.

Ecosystem Expansion

The broader THORChain ecosystem continues to grow through various initiatives and community projects. THORFi represents a suite of DeFi applications built specifically for the THORChain ecosystem, leveraging its unique capabilities to create new financial products and services. These specialized applications will expand the utility of the protocol beyond simple asset swaps.

Developer tools including SDKs and APIs are evolving to support integration partners and community projects. These resources make it easier for developers to build on THORChain, expanding the ecosystem through third-party innovation. Analytics platforms tracking network performance provide transparency and insights for users and developers alike.

Integration partners including wallets and exchanges continue to connect to THORChain, expanding access to the protocol’s capabilities. Each new integration brings the protocol to new users and use cases. Community projects driven by users further expand functionality, creating a diverse ecosystem that evolves organically based on user needs and interests.

Sustainability Plans

THORChain’s long-term protocol sustainability is ensured through several complementary approaches. Emission reduction follows a predetermined schedule, gradually decreasing new RUNE creation to reach a sustainable inflation rate. This controlled reduction prevents excessive dilution while maintaining necessary incentives.

The Protocol Reserve holds funds set aside for ongoing development, ensuring resources remain available even as emissions decrease. This reserve provides stability and continuity for core development efforts. Fee accumulation from network operations funds continued maintenance and improvement, creating a revenue stream independent of new token issuance.

These elements combine to create a self-sustaining economic system designed to operate indefinitely without central funding or governance. The transition from emission-based to fee-based rewards happens gradually over years, allowing the ecosystem to adapt naturally to changing economic conditions without disruption.

Join the Community

The THORChain community continues to grow across multiple platforms and channels. Twitter provides the most up-to-date announcements and news about the protocol, with the official account @thorchain sharing regular updates. The Telegram group hosts active discussions about the protocol and its development, creating a space for users to share experiences and ask questions.

The Discord server connects users with developers and other community members in a more structured environment, with dedicated channels for different aspects of the ecosystem. Technical users can explore the open-source code on GitHub, where protocol development happens transparently. Comprehensive documentation guides users and developers through all aspects of the protocol.

By joining these community spaces, users can stay informed about developments, contribute to the protocol’s evolution, and connect with others interested in cross-chain liquidity. The community’s diverse perspectives and contributions help shape the future of THORChain as it continues to expand and evolve.