THORChain’s Liquidity Fees Surge by 71% Amidst Fee Increases, RUNE Shows Positive Momentum

On Aug 30, 2024

THORChain, a decentralized liquidity protocol, has recently witnessed a substantial increase in its weekly liquidity fees. This notable growth follows a prolonged period of over four months where fees remained relatively stagnant. However, last week saw liquidity fees break through the $500,000 barrier, reaching an impressive $744,800. This figure marks a 71% rise compared to the previous week, signaling a significant breakthrough for the protocol.

Users Continue to Engage Despite Fee Increases

One of the most remarkable aspects of this surge is that it occurred during the first complete week after the protocol implemented a hike in its minimum Layer 1 (L1) swap cost, raising it to 0.15%. Even with this increase in fees, the users of THORChain have shown remarkable resilience, continuing to engage actively with the platform. The average daily volume for L1 swaps remained stable at $30.8 million, despite the heightened costs. This stability underscores the value that users place on THORChain’s services, as they appear undeterred by the higher charges.

Significant Revenue Growth Driven by Fee Increase

The increase in swap costs has had a profound impact on the revenue generated by the protocol. Since the implementation of the fee hike, the average daily swap fees have surged from $9,100 to $47,600, representing a fivefold increase. What makes this growth particularly noteworthy is that it occurred even though swap volumes have remained steady, indicating that the protocol has significantly benefited from the higher fees.

Furthermore, for the first time in 2024, the fees generated by the network exceeded the block rewards distributed. In the last week alone, liquidity fees accounted for 51% of the total incentives distributed by the protocol. This shift highlights the growing significance of fee revenue in THORChain’s overall financial structure.

User Growth and Trading Volume on the Rise

In addition to the impressive financial performance, THORChain has also seen a substantial increase in its user base. According to recent reports, the protocol’s user base has grown by 41% in 2024, reaching over 510,000 unique users. This expansion in the user base has been mirrored by a corresponding increase in trading volume, which has now exceeded $71 billion. In a particularly noteworthy achievement, the protocol recorded $3 billion in trading volume within just a few weeks this year.

Meanwhile, the native token of THORChain, RUNE, was trading at approximately $4.10 at the time of writing. This price reflects a 4% increase over the previous 24 hours, placing RUNE among the top five gainers on CoinMarketCap during that period.

THORChain’s Strengths

THORchain, as a decentralized liquidity protocol, was designed to facilitate seamless and secure asset swaps across different blockchains without relying on centralized intermediaries. At the heart of Thorchain’s functionality is its unique use of Continuous Liquidity Pools (CLPs) and the Tendermint consensus mechanism, which allows it to operate as a multi-chain decentralized exchange (DEX) and liquidity provider. Unlike many other platforms, Thorchain enables users to trade native assets from different blockchains directly, without the need for wrapped tokens or synthetic assets. This direct cross-chain swapping is not only more secure but also eliminates the dependency on potentially vulnerable bridges.

One of Thorchain’s most recent innovations is the introduction of streaming swaps, a feature that allows users to execute swaps over a period of time rather than instantaneously. This is particularly beneficial for large trades, as it helps mitigate slippage—a common issue in crypto trading where large orders can significantly affect the price of an asset. By spreading the swap over time, streaming swaps reduce the impact on the market and provide users with more control over their trades. This feature further enhances the flexibility and efficiency of the Thorchain protocol, making it an attractive option for traders dealing with substantial volumes or those who prefer a more gradual approach to swapping assets.

Thorchain stands out in the crowded decentralized finance (DeFi) space due to its commitment to true cross-chain interoperability and continuous innovation. While many DEXs are confined to a single blockchain or rely on wrapped tokens for cross-chain functionality, Thorchain’s architecture enables native asset swaps across multiple blockchains in a decentralized manner. The platform also incentivizes liquidity providers by offering them a share of the fees generated from swaps, and it employs a dynamic fee model to safeguard against impermanent loss. With the addition of features like streaming swaps, Thorchain continues to push the boundaries of decentralized trading, offering users more security, flexibility, and control than many other similar projects in the DeFi ecosystem.

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