We analyze if THORchain is a good investment in cryptocurrencies

It's no secret that cryptocurrency investing has given up this year. But let's look back a year, when everything was different. Bitcoin recovered from $33.000 to $48.000 between January and March, and the cryptocurrency RUNE THORchain's value quadrupled during the same period. If you are considering buy the dip and make an investment in cryptocurrencies, RUNE could be what you are looking for…

What makes THORchain unique?濾​

THORchain is a decentralized cryptocurrency exchange (DEX) platform. It is one of the fastest growing in the DeFi sector, and THORchain does something that other DEX projects cannot yet do: it allows users to exchange coins from different blockchains. For example, we could change BTC from the Bitcoin blockchain by ETH (from the Ethereum blockchain) using THORchain. In other DEXs we first have to create a “version” of bitcoin (WBTC), which is compatible with the Ethereum blockchain, and then exchange them for ETH.

With THORchain, we can exchange real bitcoins and not “versions” like WBTC. And not only for ETH, but for a wide range of other cryptocurrencies such as Litecoin, Dogecoin or Binance Coin among many others. Is that how it works:

1. First, our BTC would go to THORchain, where it would be exchanged for RUNE.

2. Next, the RUNE are exchanged for ETH.

3. And finally, THORchain sends the ETH directly to the Ethereum wallet address from one of its “vaults”.

THORchain has four types of users that keep this whole process running behind the scenes:

• Swappers: Regular DEX users who exchange different cryptocurrencies.
• Liquidity Providers (LPs): They provide various cryptocurrencies (i.e. liquidity) to the THORchain network to make exchanges possible.
• Node operators: Secure the network and process transactions by locking RUNE as collateral.
• Arbitrageurs: Regulate asset prices on THORchain by exploiting minor price differences to make profits.

What gives RUNE its value?

In the same way that ETH powers the Ethereum network, RUNE powers the THORchain network. And as the network grows, demand for RUNE should grow with it, which could drive the token's price up over time (all things being equal). As a native token of the THORchain network, RUNE is used throughout the network. To make our cryptocurrency investment on this network, transaction fees are paid on RUNE. When activity grows, demand for RUNE increases. Node operators also use RUNE for staking, and they need quite a bit of it. To secure the network, they must contribute twice the amount of RUNE than the total value of assets locked within the protocol at any given time.

In exchange for posting RUNE collateral and securing the network, node operators earn rewards in RUNE, as do liquidity providers who lock coins for exchange. RUNE holders also have voting rights over the governance of THORchain. Like companies giving shareholders the right to vote on corporate policy issues.

How do we take advantage of this cryptocurrency investment opportunity?‍​

DEXs may have some advantages over their centralized counterparts. There are no barriers to entry, and anyone from any country can make their investment in cryptocurrencies without having to hand over their personal information. DEXs may be less prone to outages and also have better security, as no centralized exchange is tasked with protecting our cryptocurrencies. We can also withdraw our funds at any time without delay, which is another common complaint with centralized exchanges.

When it comes to DEX projects, THORchain is doing something cutting-edge: it allows users to exchange assets from different blockchains without going through a financial institution. And it plans to grow its blockchain roster to include Cosmos, Dash, ZCash, Avalanche, and Monero, to name a few. That makes RUNE a good option to make our investment in cryptocurrencies in the DeFi sector. While THORchain works in a complex way, everything works seamlessly on the front-end. Users can interact with THORchain through DEX applications such as Asgard Exchange, THORWallet y Shapeshift, which seem much more intuitive than competing products.

If THORchain can also grow its asset base and number of users, that could position RUNE as the preferred one for cryptocurrency investment.

What risks are we exposing ourselves to?​

Investing in cryptocurrencies has many risks, and investing in RUNE also has its risks, of which we can highlight three:

Security issues‍☠️​

Over the past year, nearly $13 million worth of cryptocurrencies were corrupted from the network. Since then, its code has been audited several times and the general consensus among the THORchain community is that it should never happen again.

2. Regulation of DeFi​

There is a risk associated with investing in cryptocurrencies in the DeFi sector. Regulators have been circling the space for a while, which could slow DeFi in the near term as the sector tries to meet its demands. That said, DeFi is an innovative technology, and the technology usually finds a way to win in the end.

3. RUNE also has other “versions” of RUNE​​

There are actually three types of RUNE tokens at the moment. The RUNE that we can exchange on centralized exchanges like Binance, for example, is part of the Binance Smart Chain (BNB Chain) or Ethereum. That is, it is not the RUNE used in the THORchain network. To use RUNE on THORchain, we have to exchange those “versions” of RUNE for the “real” RUNE from THORchain (i.e. the wrapped RUNE token).

As part of THORchain's latest updates, they are phasing out all RUNE wrapped tokens except the one used on their own blockchain. This is known as "killswitch» and could be a decisive factor in deciding the future of the project. On the one hand, the killswitch would make THORchain truly decentralized and potentially help THORchain corner the DEX market. On the other hand, it could weaken RUNE's position in the centralized exchange market, as not everyone will support the move to list its token.