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THORChain Debt Crisis
90-day Restructuring Plan: Converting Debt to TCY Tokens
Distribution and Initial Liquidity of TCY Tokens
RUNE Price Drops, but Network Trading Volume Remains Active
THORChain is currently facing a severe debt crisis, with accumulated debt of nearly $200 million. This debt primarily stems from the “Savers” and “Lending” programs in its THORFi service. Due to flaws in the protocol design, particularly in the absence of a liquidation mechanism for loans, the debt has been continuously accumulating, eventually exceeding the protocol’s repayment capacity.
On January 23, THORChain suspended its THORFi service, including the “Savers” and “Lending” programs, to address the financial uncertainty. Currently, the protocol is implementing a “90-day restructuring plan” to address the debt accumulated from these programs.
According to The Block, the approved proposal is to “convert debt into equity” by creating a new token called TCY (Thorchain Yield) with a total supply of 200 million tokens. This means that users participating in the THORFi loan and savings programs will have their assets converted into TCY instead of being repaid in the original assets such as BTC or ETH. However, the specific redemption period is still unclear. The proposal states that users holding TCY will “permanently receive 10% of THORChain’s network revenue.” The THORChain team stated, “THORChain will convert approximately $200 million in debt into equity by issuing a new token that will permanently receive 10% of the network revenue.”
According to the proposal, THORChain will mint 200 million TCY tokens and distribute them in proportion to the default debt at a ratio of 1 TCY to 1 US dollar.
In addition, the THORChain core team will establish a RUNE/TCY liquidity pool, initially injecting $500,000 in liquidity, with a pricing of $0.1 per TCY token, funded by the remaining $5 million inventory. This means that users participating in the THORFi loan and savings programs will have their assets converted into TCY instead of being repaid in the original assets such as BTC or ETH. However, the specific redemption period is still unclear.
Despite the announcement of the restructuring plan, RUNE has plummeted 35% in the past week, dropping from $2 to around $1.3, with a cumulative decline of over 70% in the past 30 days. However, despite facing market pressure, THORChain’s network trading volume remains active, processing $270 million in transactions in the past 24 hours, demonstrating that its ecosystem still has some market liquidity.
