Op-Ed: The Bull Case for THORChain, RUNE, and TCY

by Boone Wheeler (https://x.com/boonew)

If you’ve been following THORChain at all, you’ll be aware of the recent collapse of THORFi and users of the Savers and Lending features losing ~$206M in assets. While this event was extremely tragic (I personally lost funds), its aftermath has created enormous opportunity. In this piece I explain why I’m more bullish than ever, despite TC’s recent failure.

I won’t spend much time on the collapse of THORFi (details are easily found elsewhere), only focusing on what it means for TC going forward.

The Bad News

It is incredibly shameful and a huge black eye for TC to be unable to honor ~$206M in user-deposited funds. The collapse of THORFi has angered a huge user base and greatly damaged TC’s reputation for years to come. This reputational damage will have ongoing negative financial repercussions for TC.

This said, TC is doing its utmost to make its users whole. The primary mechanism by which it will attempt to do so is through the creation of a yield-bearing token, $TCY. Affected users will receive 1 TCY token for every dollar they lost to the THORFi collapse. The newly created 210M TCY tokens (~206M for affected users & ~4M for seeding of TCY/RUNE pool) will share, in perpetuity, 10% of TC’s income. This can be thought of as TC converting its debt into equity in the protocol. We will discuss the merits of TCY later on, but for now will simply acknowledge that losing 10% of its income is not advantageous to TC.

Lastly, dealing with the aftermath of THORFi will consume quite a few dev cycles, and thus will delay new features that would otherwise have benefited the protocol sooner.

One very important thing to note about the collapse of THORFi is that the failure was one of economic design and NOT of cryptographic security. No funds were taken from or lost by the protocol. What did happen was risk was obfuscated and TC took on far more leverage than it ever should have. While this distinction will probably read as cope, I do feel it’s an important one to make. The removal of THORFi also removed this economic design risk, while the core cryptographic security remains solid and unchanged.

The Bear Case for the THORChain Protocol

As I see it, there are three main bear cases for TC.

First is the universal one for DeFi apps — some kind of hack. A large hack would likely be the nail in the coffin for TC. Thankfully, TC takes security very seriously and has multiple layers of protections in place. TC did have a series of small hacks in the summer of ’21, but then did a big security overhaul and has had no incidents since then.

Second, competition. TC was the first cross-chain DEX, and does still enjoy a strong first-mover advantage. However it is no longer the only cross-chain DEX since Chainflip and Maya have launched. CF can’t match TC on swap rates for larger swaps, but isn’t burdened by past mistakes the way TC is. TC still has a comfortable lead in swap volume, chains integrated, and front-end integrations, but cannot rest on its laurels.

Third, there is a shadow of legal issues from the collapse of THORFi. I have no idea how to evaluate the danger of this. Frankly though, if TC is vulnerable to a lawsuit it is not decentralized enough and is not the thing it was meant to be.

The Good News

As horrible as the THORFi collapse was, there are quite a few silver linings that have come out of it.

The first is the removal of both pieces of THORFi — Savers and Lending. They were collectively a cancer on TC, and the protocol is so much better off without them. It would of course been far preferable to have removed them without users losing access to funds, but that’s not how the cookie crumbled. Their absence is an unalloyed good for the protocol because it removes a big source of systemic RUNE sell pressure.

The second big silver lining is that the Node Operators (NOs) voted to take this moment of flux to indefinitely suspend Block Rewards (BRs) (see my previous Op-Ed, The Case for THORChain Suspending Block Rewards). This removes the other big source of systemic RUNE sell pressure.

With both THORFi and BRs gone, there is now no systemic RUNE sell pressure. In following Maya Protocol’s unprecedented example, TC might be only the second crypto protocol to have all tokens fully vested and to have eliminated token issuance entirely — existing solely on earned fees. This is no small feat—kudos to Maya Protocol for showing the way.

The Bull Case for the THORChain Protocol

As I explain here, the only reason TC (and RUNE and soon TCY) has any value is because people are willing to pay fees to swap between native L1 assets. These liquidity fees (LFs) and expected future LFs are the entire basis for the value of TC.

The LFs paid to TC are a direct correlation of how much swap volume TC processes. The more volume, the more fees. Thus the value of TC is directly correlated to how much volume in swaps it does.

TC did $56.2B in swap volume in 2024. What can we expect of it looking forward?

New Sources of Swap Volume

Historically, there have been two main sources of new swap volume for TC: new frontend/wallet integrations and new chain integrations. Both can be expected for 2025.

Nine Realms (9R) is the primary dev team for TC. They are professionals and don’t disclose potential partnerships before they’re ready to ship. However they will occasionally drop hints of things in the works, and recently teased a big new frontend integration. We also know that they have several in the pipeline. So while I have no firm expectations to share with you, there is reason to be bullish on new front end integrations this year.

As a cross-chain liquidity protocol, TC obviously benefits from the introduction of new chains. Each chain added exponentially increases the number of potential swap routes, and ties together new sources of liquidity. The most anticipated chain soon to be added is Solana, which has had a huge amount of mindshare and DeFi activity lately.

A change in security posture will introduce the use of RPCs by TC validators, making supporting new chains cheaper and easier. TC hopes to add one or two new chains per month going forward.

The Future is On-Chain

Zooming out further, the TAM of TC is the entirety of CEX volume. TC offers some big advantages over CEXs.

First, when using TC for swaps users retain custody of their L1 assets. Not your keys, not your coins. Think of Celsius, FTX, and the frequent occurrence of Coinbase freezing people’s accounts. Swapping from one chain to another in the safety of your own wallet is a huge UX improvement. Another huge advantage that TC offers over CEXs is the utter lack of KYC. Accessing TC is truly permissionless.

Over time, as crypto adoption progresses, everyday people will become more and more comfortable keeping their assets on chain. As adoption progresses, the above advantages of TC will be more and more valued by more and more people.

Lastly, it seems inevitable that AI agents will eventually control funds onchain. I predict that they will use TC to move liquidity across chains for exactly the reasons above.

As long as BTC has value, TC will have value.

THORChain’s App Layer and the Rujira Network

I am now going to contradict/correct something I stated earlier, namely “the only reason TC (and RUNE and soon TCY) has any value is because people are willing to pay fees to swap between native L1 assets.”

This is, and historically has been, true, but soon won’t be. This is due to the impending release of the TC App Layer and the Rujira Network, which will be a monumental expansion of the capacity of TC. The App Layer will enable CosmWasm smart contracts for the first time on the TC blockchain.

Until now, TC has only competed with CEXs on basic L1 to L1 swaps, which is only a small fraction of CEX volume and profit. Rujira will enable the full suite of DeFi apps available to most smart contract chains — with native, L1 capital of any chain that TC supports.

Rujira honestly deserves a post all to itself, but for now I’ll link you to this article that explains some of its potential.

Inside the scope of the present piece, the important thing to know is that fully 50% of all fees collected by Rujira will be given to TC as payment for access to TC’s liquidity, security, and blockspace. It’s impossible to predict how much usage Rujira will generate, and therefore how much it will generate in fees for TC, but the potential is huge.

I do fear that due to the collapse of THORFi adoption of Rujira will be slower than it would have been otherwise. This is one of the ongoing reputational repercussions I referred to at the beginning of this piece.

Push for Capital Efficiency

While probably still a few months out, there is agreement in TC that implementing Uni V3 style LPing is the way to go. This will improve the LP experience and encourage larger MMs to LP in TC.

The Bull Case for RUNE

As I stated above, the silver lining of the THORFi disaster is that the tokenomics of RUNE are fixed — they’re finally based on sound economic principles, and knowing what we know now, should continue as such in perpetuity.

With THORFi and Block Rewards gone, there is no systemic sell pressure on the RUNE token. There is in its place, however, a systemic perpetual bid. As I argue more in depth here, I believe this will create a strong upwards reflexivity effect once the market sees it in action for a while. Under current conditions, 80% of LFs are direct buy pressure on RUNE.

Additionally, 5% of all LFs are being burnt. So not only is RUNE no longer inflationary thanks to the removal of BRs and THORFi, but it is now deflationary for the first time in its history. As swap volume and Rujira fees increase, so does the buy pressure on RUNE.

RUNE Sellers all Sold

I think it is a safe assumption that RUNE sellers are exhausted after the recent collapse of THORFi, the attendant collapse in RUNE price, and the large amount of general TC FUD lately. Anyone who was going to sell has almost certainly done so. This of course puts in a nice floor to the RUNE price.

So what happens when there are no sellers and there’s a programmatic daily price indiscriminate bid?

This daily, price indiscriminate, bid is dependent on swap volumes. As volume increases, so will RUNE buy pressure.

The Bull Case for TCY

The supply of TCY will be 210M tokens. Those tokens will receive an equal pro rata share of 10% of TC’s income in perpetuity. There will be a small TC liquidity pool composed of RUNE and TCY that will be initially seeded with the price of TCY at $.10. At this price ~$20k will buy 1bp of TC’s future revenue. If you’re bullish on TC’s growth as a protocol, this could be a very attractive buy. The more TCY buys there are, the faster creditors can be made whole.

In addition to TCY’s yield, there will also be a permanent structural bid for TCY from TC itself. THORFi users will have to actively claim their TCY. The yield from all the unclaimed tokens will be used to buy TCY from the RUNE:TCY pool regularly. This obviously compounds — the more TCY TC owns, the more it can buy.

TCY could end up being a very attractive token to own, and there’s a decent chance that creditors could be made whole in not too, too long.