Thorswap Halts Trading - Is this The Beginning of the End for Thorchain?

Two nights ago, I wrote a blog post titled Are Decentralized Protocols Like Thorchain Responsible to Stop Hackers?. In it, I talk about Thorchain and the recent usage of it by the FTX hacker who has been moving millions of dollars worth of Ethereum through the Thorchain decentralized liquidity pools. Thorchain remains as one of the only options to transact native BTC through liquidity pools.

This morning, I covered the news (and other crypto news) as I always do in my Crypto Daily Podcast. This story is developing and we'll see how the Thorchain ecosystem plays all of this out.

The whole situation has caused a massive rift in the Thorchain community. Most of them are pro-decentralization. I say them, but I am them to a large extent. I am vocal about Thorchain but I don't always talk about it - since I have a lot else going on to talk about - but I do consider my self a community member and rather large stakeholder in RUNE.

I believe the project has a ton of upside in the world. Both in terms of RUNE's price as an asset but also in terms of net good for the world.

Thorchain is delivering on cross-chain, decentralized trading at scale. Interfaces like Thorswap also give us a beautiful UI/UX to do our trading through.

Honestly, since the advent of streaming swaps - Thorchain has become more price efficient than CEX's in a lot of cases.

Imagine that? More price efficient than CEXes + you hold your keys and have a trustless layer to convert assets. It's pretty amazing. Honestly, it's a dream come true from last cycle to this cycle. I hope all the incoming crypto chads also become ThorChads and learn about this amazing technology.

Thorswap Shutters Operations Under Pressure

This is something nobody wanted to see. The TLDR; of the situation (again go read my blog post from yesterday/listen to the crypto daily episode from this morning for more details) is that the FTX hacker - who is still unknown - has been using a few different decentralized protocols to bridge/convert stolen ETH.

Thorchain is one of the protocols he's been using. Whether or not he was using Thorswap specifically is unknown to me. I don't think there is any sort of transaction signing data that tells us that he was using Thorswap as his UI to Thorchain.

But that's beside the point. Thorswap halted trading for the forseeable future until this gets sorted out. Note: Savers & Lending are not halted.

The debate surrounding this decision to shutdown the trading operations from the Thorswap UI (Again - as media outlets are fudging the info terribly - this is not impacting Thorchain as a protocol whatsoever. Simply one UI amongst 20+ UIs who offer trading on Thorchain's DEX) are heated.

A lot of people have dumped THOR - the token for Thorswap's DEX:

THOR is down 40% on the day. Again, this is much different than RUNE.

RUNE is down 10% on the day. Likely due to either:

1. People mistaking Thorswap for Thorchain
2. Negative press around Thorchain. People wondering if regulators will try to go after it

What is the Community Saying?

Like I said, this has caused quite a rift in the Thorchain community. I'd say most people are pro-decentralization, so the shuttering of a UI at the first sign of trouble is where a lot of ThorChads are getting upset.

That being said, if you are pro-decentralization, this is likely a big win for you. Everything is about perspective.

Yes, Thorswap is the #1 (and likely for the reason of it being the best UI/UX) exchange interface for the Thorchain DEX, but if you are pro-decentralization - wouldn't it be good to see less transactions on Thorswap and more on other UIs?

I would surely think so. Thorswap is awesome but we shouldn't be beholden to one UI. Same goes for Hive. Same goes for Bitcoin. Same goes for any crypto - why would you hold yourself to one point of failure?

The only people I could see being super upset about all of this are the THOR holders. This obviously isn't good for them in the short-term.

ThorMaximalist on X made some really good points about this.

Try to place yourselves in the shoes of the operators. They’ve dedicated the last few years of their lives trying to build a financial inclusivity tool.

They’re not suspending operations happily.

This was likely a very hard decision by the Thorswap team... but they are heavily based out of the U.S. and it would be very bad for them to have a regulator come knocking. Look at what happened to the Tornado Cash dev.

Obviously Tornado is much different than Thorchain where their intent was specifically for privacy-focused trading (mixing) and Thorchain's is nothing like that. That being said, being the UI or the DEX that facilitates a malicious actor is a lot of bad attention. Especially being tied to FTX.

My Opinion

The TLDR; of my take is that Thorswap is doing what it needs to do. Is it good? Is it right? Only Thorswap can answer that.

Everyone will have their own perspective on it. From Thorswap's, it is most likely unavoidable. Otherwise they wouldn't have done it.

From a RUNE holder and Thorchain proponent, I think the impact is minimal. We'll see some short-term blip in the price of RUNE from bad press but ultimately, I actually believe this could make Thorchain stronger.

Just as the hacks of the Thorchain protocol did years back. These set-backs are temporary and test the protocol's strength.

If one UI shuttering takes Thorchain down for the count, then was Thorchain strong enough to be the DEX of the future? Absolutely not.

But will other UIs step up to the plate and take the reins? Aiming to eat up some market share from the temporarily closed Thorswap? That's up to them and in my opinion, great for decentralization in general.

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PSA, LEO Rebrand!

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Hope to see you there in the threadcast, X space, YT livestream! We've got some cool giveaways, announcements and events planned. You won't want to miss it!

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