THORChain converts debt into equity, offering users a share in future network revenue to restore liquidity and stability.
THORChain Restructures Debt into Equity to Tackle Liquidity Crisis
THORChain, a decentralized liquidity protocol, has taken a significant step to address its liquidity issues by converting its defaulted debt into equity. On February 2, the platform's node operators approved a plan to mint 200 million 'TCY' tokens, each representing $1 of the platform's outstanding debt. These tokens will provide holders with 10% of THORChain's network revenue, paid out in RUNE, on an ongoing basis.
This move follows THORChain's January decision to halt its Bitcoin and Ether lending programs, which were necessary to avert insolvency. The platform paused its ThorFi redemptions for 90 days to allow the community to come up with a stabilization plan. The TCY token provides a way for users to claim one token per dollar owed and potentially liquidate their claims as the token's value increases with market demand.
Although the restructuring plan has received backing from the community, some have raised concerns about its complexity and long-term trustworthiness, questioning whether the revenue-sharing model could raise legal issues. With the final timeline and details still being worked out, THORChain's proposed solution aims to restore liquidity and stability, but its success will depend on future market reactions.
Stay tuned for updates as THORChain finalizes this ambitious plan.