THORChain suffers from insolvency: THORFi service temporarily suspended, RuneTokenbig dump30%

The non-custodial Cross-Chain InteractionLiquidityprotocol THORChain was disclosed this morning to have temporarily suspended THORFi services due to financial difficulties, and initiated a 90-day restructuring plan aimed at resolving debt issues and stabilizing the platform. Its Token $Rune price quickly experienced a 30% big dump upon hearing the news, indicating significant market concerns about its ability to effectively address the Liquidity crisis.

( the FTX hackers continue to exchange coins and launder money, THORSwap announces that it has entered maintenance mode )

THORChain announces the temporary suspension of THORFi service

TCB users on social media X pointed out that THORChain, in order to resolve the accumulated unpayable debts in its 'savings and lending' service, will suspend its THORFi service and initiate a 90-day restructuring plan, leaving only basic transaction functions such as Cross-Chain Interaction to continue operating.

THORChain Incident Review: Reserve Shortage and Poor Design

Status: Nearly $100 million in debt

TCB first exposed that THORChain is currently facing a total debt of nearly 1.99 billion US dollars, including:

Loans and Debts: 97 million US dollars ( calculated in ETH and BTC )

Reserve Assets: about 102 million US dollars ( calculated in ETH and BTC )

The platform's total assets are approximately $107 million, mainly from funds in external Liquidity pools. However, these funds can be withdrawn or dumped at any time, which will further increase the platform's instability.

The main cause of the incident: protocol design flaws

Minting $RUNE to repay debt: The platform supports repaying debt by minting $RUNE, resulting in dilution of Token value.

Leverage risk: The excessive use of leverage driven by the platform's borrowers and lenders has put excessive pressure on the platform during market fluctuations, and price declines may further trigger liquidation and Liquidity crises.

Processing method: no intervention or restructuring

In response to this crisis, THORChain has proposed two options:

Non-intervention

In the short term, some investors may withdraw assets early, resulting in an outflow of about 75 million dollars.

The long-term impact is that the entire ecosystem may collapse, resulting in a loss of over 1.5 billion dollars.

bankruptcy reorganization

Take a restructuring plan similar to bankruptcy, including:

Freezing loans and funds: suspending all operations related to assets to prevent further losses.

Debt Tokenization: It is expected to convert all debts into tokens, allowing users to trade on the secondary market.

Establish a settlement module: 10% of system revenue will automatically flow into the settlement module to gradually pay off debts.

Pause Liquidity mining: Close Liquidity pool to prevent fund movement.

The goal of this plan is to gradually repay debts through continuous incoming revenue while preserving the platform's value.

Future recommendations

TCB also gave THORChain a few suggestions in the end, hoping that the platform will not repeat the same mistakes after recovery.

Refocusing on the basic service: refocusing on the core function of providing Cross-Chain Interaction transactions.

Establishment of Protocol Design Consultation Committee: To prevent future high leverage risks and improve capital efficiency.

Financial Transparency Mechanism: Ensure platform financial transparency and clarity, to rebuild user confidence.

Rune price big dump 30%

Once the news came out, THORChain's native Token $Rune suffered a big dump of 30% in price within a day, spreading market panic and concerns about a potential reoccurrence of the 2022 Terra/Luna incident.

(Terra Event Summary | UST Rebounds, LUNA Continues to Explore the Bottom, US Congressman: The Market Needs Failure to Understand What Can Run Effectively )

Therefore, in order to address the current crisis, THORChain has initiated a 90-day restructuring plan through node validators, aiming to fix structural issues in the 'savings and lending' service and stabilize the platform's Liquidity situation. More specific details about the restructuring plan have not been announced at this time.

The current challenges facing THORChain highlight the potential risks in the rapidly growing DeFi field. The future prospects of this protocol still depend on its ability to effectively address debt issues and restore investor confidence.

This article THORChain was hit by a financial crisis: THORFi service suspended, RuneToken big dump 30% first appeared on Chain News ABMedia.