THORChain (RUNE) Tokenomics

THORChain’s economic model is centered around its native token, RUNE, which serves as the primary vehicle for security, liquidity, and governance within the network. The system is designed to create a "liquidity black hole" where the value of RUNE is deterministically linked to the total value of non-native assets locked in its pools.

Issuance and Allocation Mechanism

The total supply of RUNE is capped at 500,000,000 tokens. The distribution of this supply was designed to balance community growth, developer incentives, and investor participation.

Note: Some categories overlap or represent different snapshots of the allocation strategy. For instance, the "Service Nodes" and "Operational" figures represent targeted allocations at launch.

Usage and Incentive Mechanism

RUNE performs four critical functions that drive its economic value:

• Liquidity Settlement: RUNE is the mandatory settlement asset for every liquidity pool. All pools consist of a 50:50 ratio of RUNE and a connected asset (e.g., BTC, ETH). This ensures that the network can facilitate swaps between any two assets by using RUNE as the intermediary.
• Security (Proof of Bond): THORNodes (validators) must bond RUNE to participate in consensus. This bond acts as an economic guarantee; if a node attempts to steal assets, its bond is slashed to 1.5 times the value of the compromised assets.
• Incentive Pendulum: This algorithm dynamically adjusts the distribution of system income (block rewards and swap fees) between node operators and liquidity providers (LPs). The goal is to maintain an "Optimal State" where 67% of RUNE is bonded by nodes and 33% is pooled by LPs.
  • Under-bonded: If too little RUNE is bonded, rewards shift toward nodes to encourage more bonding.
  • Over-bonded: If too much RUNE is bonded, rewards shift toward LPs to encourage more liquidity provisioning.
• Governance: RUNE holders influence the network through their participation. LPs can influence asset listing priorities by staking RUNE, while node operators use their bonded RUNE to vote on network parameters via "Node Mimir."

Locking Mechanism and Unlocking Time

THORChain utilizes several locking mechanisms to ensure long-term stability and security:

• Node Bonding: To qualify as a validator, a node must bond a significant amount of RUNE. As of early 2024, the minimum requirement was approximately 538,600 RUNE, with the median bond reaching roughly 953,200 RUNE.
• Investor Vesting: Early seed investors were allocated 26 million RUNE, which vested over a four-month period following the mainnet launch.
• Team Vesting: The 50 million RUNE allocated to the team and advisors was reported as fully vested as of February 14, 2024.
• Node Commitment: In certain agreements, investors were allowed to access tokens from the treasury early in exchange for bonding them into a node for 12 months or until the mainnet launch, whichever occurred first.
• Impermanent Loss Protection (ILP): To protect LPs, THORChain offers ILP that scales linearly over time. Full protection is achieved after 100 days of providing liquidity, ensuring LPs at least break even compared to simply holding the assets.

Deterministic Pricing

A unique feature of THORChain is the deterministic value of RUNE. Because node operators must bond twice the value of non-RUNE assets in pools, and every pool is 50% RUNE, the network requires $3 of RUNE to be locked for every $1 of non-RUNE value on the network. This creates a theoretical price floor for RUNE based on the Total Value Locked (TVL) of external assets.