THORChain’s native token RUNE has taken a significant hit, plummeting over 35% within 5 hours, leaving investors panicking. The sudden decline occurred after the DeFi cross-chain liquidity protocol paused its network due to financial woes.
THORChain Faces Financial Crisis
THORChain is facing a severe financial crisis due to its massive debt obligation of around $175 million in Bitcoin and Ethereum. The protocol’s collateral, which is supposed to back its loans, is not supported by tangible assets but rather by a special type of RUNE token not circulating in the market.
The situation is further complicated because THORChain has to sell more RUNE tokens when borrowers redeem their loans for the necessary Bitcoin and Ethereum. This could drive the price of RUNE down even further, potentially below $1, which would be a disaster for the protocol and its users.
With around $100 million still owed to lenders, the future sell pressure on RUNE will likely intensify if the situation is not remedied. The incident has created an ugly situation in which the protocol risks being unable to pay its users. If unresolved, this could lead to a complete collapse of the protocol, resulting in significant financial losses for users.
THORChain Proposes a Solution
The THORChain team proposed a restructuring plan to preserve the protocol’s value and prevent asset liquidation. After the node operators voted favorably, the team implemented the plan.
The decision has paused withdrawals for Lending and Savers and frozen all remaining debts and collateral positions. The community will come together to determine a solution to address the frozen debts and collateral, which total around $200 million.
THORChain’s Previous Hurdles
THORChain suffered three significant attacks in 2021, resulting in losses totaling over $16 million. The first attack exploited a logical flaw in THORChain’s code, allowing an attacker to deposit fake ETH tokens exchanged for other tokens, resulting in a loss of nearly $350,000.
The second attack also exploited a fake deposit vulnerability, but this time, a value error resulted in a nearly $8 million loss. The final attack exploited a refund logic vulnerability, allowing an attacker to construct arbitrary assets and amounts. This triggered a refund, resulting in a loss of about $8 million.
Meanwhile, the price of THORChain (RUNE) is $2.42, and its 24-hour trading volume is $905 million.
