The recent revelation that THORChain’s lending service may not have enough bitcoin to repay its creditors has caused a stir in the crypto community. A Twitter post by atebites pointed out that the lending pool only had 592 bitcoin, while the amount to be repaid to depositors was 1,604 bitcoin. This imbalance raises concerns about the protocol’s stability and potential risks to investors.
According to Lava founder Shehzan Maredia, when borrowers use THORChain’s lending service, their bitcoin collateral is sold for the platform’s token, RUNE. This token is then used to repay the loan when due. However, the mechanics of this process are complex and have raised questions about the platform’s ability to meet its obligations.
Screenshots from THORChain’s website provide insight into how the lending service operates. The primary issue at hand is that a significant portion of the borrowed funds were obtained when bitcoin was trading at lower prices. As the price of bitcoin has risen, THORChain now needs to mint 24 million RUNE to cover its liabilities. This could lead to a price decrease in the token, further complicating the platform’s ability to repay creditors.
Prominent figures in the crypto space, such as Erik Voorhees and Nine Realms, have expressed confidence in THORChain’s resilience. However, the concerns raised by atebites and others highlight the potential risks associated with the platform’s lending service.
In light of these developments, investors who have collateralized their bitcoin with THORChain may want to consider redeeming their loans to mitigate any potential risks. While the platform’s supporters remain optimistic, it is essential for investors to assess their exposure and make informed decisions.
This article provides a take on the current situation with THORChain’s lending service. The opinions expressed are those of the author and may not reflect the views of BTC Inc or Bitcoin Magazine.