THORSwap hammers the point: aligned incentives are a crypto superpower


THORChain has not had an easy year. After three exploits in the span of a month over the summer, the protocol’s native token (RUNE) took a beating, dropping from an all-time high of over $ 20.00 in May to a low of over $ 20.00 in May. ‘about $ 3.50 at the end of July.

Billed as a way to exchange crypto assets between different blockchains without a middleman, the protocol completely disabled exchanges as it sought to harden the network against exploits. With the relaunch of Ethereum swaps in late October, however, THORChain’s recovery was all but complete – and the price of RUNE was again at a distance of $ 20.00.

And then there was the THORSwap public sale.

THORSwap, a decentralized exchange powered by THORChain, had a successful initial cap sale that was 198% oversubscribed as community members racked up a maximum of $ 300. But a second uncapped sale took a turn for the worse, as bots led Dex’s initial offering (IDO) and THORChain’s treasury seized tokens before the public could even access the app.

Yet a day later, a drop in the price of RUNE appears to be reversing and previously disgruntled community members on Twitter are singing the praises of Team THOR. So how has THORChain succeeded where countless other DeFi projects have failed to recover from hacks or exploits?

Why, as a result of the three feats, did some wallet holders actually make a donation Ether (ETH) to THORChain protocol to help cover losses? And why, following a botched IDO, does the THORSwap Twitter account receive comments like “That’s right @THORChain. They know how to be with the community. They know how the community should be treated.”

The answer, according to some community members, does not lie only in the fact that there is a deep commitment among the participants to the decentralized ethics of the project; or even that the mostly anonymous developers and managers behind the THOR ecosystem are as diligent on community development as they are on technical implementation.

It is a virtuous circle of aligned incentives between developers, managers, moderators and the community that creates a truly anti-fragile economic system.

Following the IDO, THORSwap and THORChain quickly addressed the community’s outrage at the errors that kept many supporters from participating in the sale.

In a post mortem, the THORSwap team stated that “launching the $ THOR token on THORChain was, frankly, a bad experience for everyone involved. lessons have been learned and we hope to regain your trust. ”

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But rather than just apologize, the THOR team went much further – with the THORChain Treasure at the start. promising to return 10% of its tokens to the liquidity pool, and then reallocate its entire THOR position of $ 11.25 million to be distributed among the liquidity providers who were unable to secure the tokens.

The THORSwap administrator, an anonymous contributor to the protocol, told TBEN that “THORSwap – the products, ideas and contributors – literally grew out of the community, so we took it personally when the launch didn’t. met the expectations of the community We have worked feverishly to offer a solution that suits as many people as possible.

Additionally, the THORSwap team have announced their intention to conduct an additional airdrop to prove that “We love the THORSwap and THORChain community and are absolutely dedicated to you.”

But even excuses and “free money” have their limits. This is why THORSwap has been developing a community of enthusiasts for almost a year. “We have over 18,000 members on our Discord channel,” says pseudonymous rep CrowdPleasr, “And we always provide 24/7 one-on-one support whenever a community member has a question. response is on average less than 30 minutes, and I don’t think any other DeFi project has worked so hard to serve their supporters.

Moderating Discord channels is a challenge that has stalled many crypto projects – they often turn into spam and phishing cesspools – but THORSwap’s senior moderator and product manager, “The Bull,” explains that the extremely positive atmosphere of their channel was fostered by the transparency and continuous communication of the team. “We’ve always been the first to make announcements about hacks,” they explain, “And we announced every phase of the recovery… so the community would feel comfortable speaking with a member of the team. . “

The THORSwap team have been deeply involved in moderation, actively recruiting and paying for experienced community mods rather than relying on volunteers to keep the peace.

Beyond their attempts to create a safe environment for users in online communities, THORSwap has introduced several product lines that specifically reward positive contributors to the project; a trend that has accelerated as non-fungible tokens (NFTs) become an increasingly popular (and let’s face it, inexpensive) way to build loyalty.

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THORChads DAO has its own website, described as “… a LAUNCHPAD and … the main destination for all THORChain creative projects” where users who meet various criteria can “prove their Chadness” and enjoy rewards such as avatars, NFTs, airdrops and increased allowances in the recently closed public sale. It will also serve as a launching pad for developer grants to further develop the ecosystem.

(Although the online etymology of “Chad” has incel world connections and aggressively alpha male characteristics, it has been adopted by the cryptosphere to relate specifically to daring or fearless traders. Not to mention, Chad Barraford is the THORChain tech manager and one of his most visible supporters.)

CrowdPleasr is particularly excited about the charitable aspect of THORSwap, which he describes as “a chance for the community to decide where we should allocate 5% of the revenue, as very few people do that and we think it’s important to take some of the gains outside of this crypto bubble we live in.

In total, around 75% of THORSwap’s income is expected to go to the community, says the THORSwap administrator. He describes the success of the project as being based on the theory that the alignment of incentives will lead to greater scalability and a ‘trading black hole’ in which lower trading fees lead to more volume, which results in increased volume. increased income, which leads to greater added value to the community, which leads to further reductions on trading fees…

All of these aligned incentives have had a tangible result. Community support for the public sale enabled the project to secure more than 5,000 attendees in the first round of the public sale, with 100% of the required funds committed within the first 17 minutes, which CrowdPleasr says was completed “at the same price as private investors”.

And despite the missteps in the execution of the IDO, the community seems to be happy (for the most part) with the solution the team has created.

As a component of the THORChain world, THORSwap is a microcosm of the larger support that the protocol has benefited from since its inception.

Erik Voorhees, a staunch community-derived power advocate who founded the recently decentralized ShapeShift platform, describes THORChain as “… such a leap forward that most haven’t addressed it yet.” There is nothing else remote like this available.

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And Terraform Labs founder Do Kwon suggested that “THORChain is interesting because I think the future will be intertwined and interconnected. What THORChain has the potential to fill is that it can bring Bitcoin in – which is huge.

Even so, there is some truth in the idea that the best technology doesn’t always win. Betamax vs VHS is the classic example of a walled garden with superior technology (Sony’s Betamax) that fell to a competitor whose ecosystem offered more appealing products to consumers, such as when JVC’s VHS established stronger relationships with film companies.

We see the same phenomenon today – Bitcoin is not the most technologically advanced cryptocurrency and has many drawbacks that would instantly kill any new project. But it has a community of developers, supporters, and integrations that provide it with what has been, at least so far, an unbeatable advantage. Community may well be the main reason Bitcoin Cash is not Bitcoin today.

Although technically advanced, THORChain and its ecosystem projects have identified that in the rapidly expanding cryptoversy, technology alone is not enough. Technology can be copied, improved, made obsolete… but communities and systems survive when interests are aligned.

As Barraford, one of the protocol’s main developers, noted in a brief video in which he compared the consequences of THORChain’s exploits to the effects of the Mt. Gox hack on Bitcoin, those incentives go both ways. “This community is, I mean, obviously this community is absolutely amazing. You only have diamond hands. I totally appreciate that everyone stays and continues to support the project. It was crucial for me to continue to put all of my energy… to get this support from all of you.

And that’s why THORChain is still here, while smaller DeFi projects have been scrapped in the face of exploits.

Incentives aligned are a core innovation and a promise of the cryptocurrency experience. And when executed correctly, as evidenced by the pragmatic builders of THOR’s decentralized ecosystem, they can create antifragile economic systems that quickly recover from black swan events like a high-profile hack or IDO.

Which, after the 2008 financial crisis, should be a desirable innovation indeed.