Out From Chaos Comes THORSynths

Our initial research piece on THORChain dates back to the end of December 2019. Since then, RUNE’s market cap has grown considerably to $1B today. The project migrated from a single chain DEX into a one-of-a-kind cross-chain liquidity network. More specifically it recently transitioned from Single Chain Chaosnet (SCCN) to Multi Chain Chaos Net (MCCN). We’re excited to provide a large update on THORChain, which we present in 3 parts. First, we will share our brief assessment on the recent unfortunate exploit. Next, we will analyze on-chain historical figures from THORChain MCCN and share our insights. Finally, we dive deep into the implications of two novel assets that will shape up THORChain’s future; Synths & iRune.

Expecting Chaos

As we were getting closer to publish our report, THORChain recently experienced an unfortunate exploit. The exploit was pulled by taking advantage of a recent feature that was added to enhance THORChain’s smart contract composability capabilities. The attacker tricked THOR Nodes into believing that he deposited ETH whereas instead, he was able to recycle the deposit amount back to his wallet using a wrapped contract. As a result, vaults thought they had way more ETH than they actually have and allowed ETH to trade at a very cheap price of around 350 USD. The exploit was followed by arbs who took advantage of the situation by purchasing cheap ETH. Prices on various pools diverged from those on external markets. This incident surely had undesirable consequences including a halt on the network, a hit on reputation, 4,240 ETH worth of insolvency, and a decline in Rune price.

On the other hand, the THORChain community also experienced many positives following the exploit. For one, THOR Nodes were quick to react to the exploit by halting the network, which proved the consensus mechanism was able to protect the network autonomously, purely driven by their financial motives. The team publicly announced that LPs will be made whole and encouraged participation from the community. Following this, the THORChain community quickly came together presenting numerous in-depth proposals on how to address the situation, both from a security and financial standpoint. Despite the depressed Rune price, the Treasury is flush with more than $60M worth of funds, ~$30M of those being Non-Rune Assets. Therefore the treasury is in a position to comfortably cover the loss without having to sell Rune. From a security perspective, even though the bug leads to a major exploit, devs agreed that it was an easy fix and already addressed it. In addition, the team hired two different security audit firms (Halborn and ToB) to perform technical due diligence on new updates planned to be released. One of the following software releases will also include an auto solvency checker, which was already so close to being merged and would have halted the network in a matter of minutes if it had been already activated. Trading is expected to resume shortly on all chains besides Ethereum. The community is currently going through a decision process on how to address the Ethereum chain.  Node Operators, devs, LPs, investors, and users are adding their perspective by listing cons & pros for each proposal, indicative of a community moving towards being a truly self-governing decentralized network.

Exploits are part of crypto. As the leading cross-chain network, THORChain is paving the way for inter-blockchain communication without having the luxury to re-deploy battle-tested code. As a member of the THORChain community, we believe lessons will be learned, THORChain will grow stronger and move onward towards Mainnet.

THORChain’s Multi-Chain ChaosNet

First things first