THORChain has not had an easy year. After three exploits in the space of a month over the summer, the protocol’s native token (RUNE) took a beating, falling from all-time highs of more than $ 20 in May to a low of around $ 3.50 in late July.
The protocol, which was advertised as a way to exchange crypto assets between different blockchains without intermediaries, completely disabled exchanges in order to harden the network against attacks. However, with the relaunch of Ethereum swaps at the end of October, THORChain’s rally was almost complete, and RUNE’s price was back within $ 20.
And then there was the public sale of THORSwap.
THORSwap, a decentralized exchange powered by THORChain, had a successful initial cap sale that was oversubscribed by 198% as community members contributed a maximum of $ 300. However, a second no-limit sale went awry as the bots got ahead of Dex’s Initial Offering (IDO) and THORChain’s own treasury seized the tokens before the public could access the app.
However, just a day later, the RUNE price drop appears to be reversing, and previously affected community members on Twitter are singing the praises of the THOR team. So how has THORChain succeeded where countless other DeFi projects have failed to recover after hacks or exploits?
Why, after the three exploits, are some portfolio holders donated Ether (ETH) to THORChain protocol to help cover losses? And why, after a failed IDO, does THORSwap’s Twitter account receive comments like “This is real @THORChain. They know how to be with the community. They know how the community should be treated.”
The answer, according to some community members, lies not only in the fact that there is a deep commitment among the participants to the decentralized ethos of the project; or even that the mostly anonymous developers and managers behind the THOR ecosystem are just as diligent in community development as they are in technical implementation.
It is a virtuous circle of incentives aligned between developers, managers, moderators and the community that creates a genuinely anti-fragile economic system.
Following the IDO, THORSwap and THORChain were quick to address community outrage over mistakes that prevented many fans from participating in the sale.
In a post mortem the THORSwap team said that “The launch of the $ THOR token on THORChain was, frankly, a bad experience for everyone involved. We have built trust over the years, and we understand that it can be easily broken by a event like this. Many lessons were learned and we hope to regain your confidence. ”
But rather than just apologizing, the THOR team went significantly further, with THORChain’s Treasure at the beginning. promising donating 10% of its tokens back to the liquidity pool, and later reallocating its entire $ 11.25 million position from THOR to be distributed among those liquidity providers that were unable to secure tokens.
11m $ donated to $ thor LPs.@THORChain made everything right.
I wish I didn’t stay on the sideline: P
Thanks to the team !!! pic.twitter.com/im4MCsQszc
– THORchain.BULL (@THORmaximalist) November 4, 2021
$ 11 million donated to $ thor LPs. THORChain did everything right.
I would like not to be left out: P
Thanks to the team !!!
THORSwap Admin, an anonymous contributor to the protocol, told Cointelegraph that “THORSwap, the products, the ideas, and the contributors, was literally born out of the community. So we take it personally when the launch didn’t meet the community’s expectations. feverishly to offer a solution that fits as many people as possible. “
Additionally, the THORSwap team has announced plans for an additional release to show that “we love the THORSwap and THORChain community and are absolutely committed to you.”
But even apologies and “free money” have their limits. That’s why THORSwap has been building a passionate community for almost a year. “We have over 18,000 members on our Discord channel,” explains pseudonymous representative CrowdPleasr, “and we continue to provide one-on-one assistance 24 hours a day whenever a community member has a question. Our response time is, on average, , less than 30 minutes. And I don’t think any other DeFi project has worked so hard to serve its fans. “
Moderation of Discord channels is a challenge that has stumped many cryptocurrency projects, often turning into cesspools of spam and phishing expeditions, but THORSwap’s lead moderator and chief product officer ‘The Alcista’, explains that the overwhelmingly positive vibe of his channel has been fostered by transparency and ongoing communication from the team. “We’ve always been the first to make announcements about hacks,” they explain, “and we’ve announced each phase of the recovery … so the community feels comfortable talking to a team member.”
The THORSwap team has been deeply involved in moderation, actively recruiting and paying experienced mods from the community rather than relying on volunteers to keep the peace.
Beyond its attempts to create a safe environment for users in online communities, THORSwap has introduced multiple product lines that specifically reward positive contributors to the project; a trend that has accelerated as non-fungible tokens (NFTs) become an increasingly popular (and let’s face it cheap) way to build loyalty.
THORChads DAO has its own website, described as “… a LAUNCH PLATFORM and … the premier destination for all THORChain creative projects”, where users who meet various criteria can “prove their Chadness” and take advantage of rewards such as avatars, NFTs, airdrops and higher allocations in the recently concluded public sale, and will also serve as a launch pad for developer grants to drive ecosystem development.
(Although the online etymology of “Chad” is related to the incel world and the characteristics of aggressive alpha males, it has been adopted by the cryptosphere to refer specifically to traders who are bold or intrepid. Not to mention that Chad Barraford is THORChain’s technical leader and one of its most visible advocates).
CrowdPleasr is particularly enthusiastic about the charity aspect of THORSwap, which he describes as “an opportunity for the community to decide what we should spend 5% of the proceeds on, because very few people are doing this and we believe it is important to take some of the proceeds out of this crypto bubble we live in. “
In total, about 75% of THORSwap’s revenue is expected to find its way back to the community, explains the THORSwap administrator. It describes that the success of the project is based on the theory that the alignment of incentives will lead to increased scalability and a “trading black hole” in which discounted trading fees lead to higher volume, leading to higher income, which leads to a greater accumulation of value for the community, which leads to more discounts on trade fees …
All of these aligned incentives have had a tangible result. The community’s support for the public sale led the project to attract more than 5,000 participants in the first round of the public sale, with 100% of the required funds committed in the first 17 minutes, which CrowdPleasr noted was conducted “at the same price as private investors “.
And despite the missteps in running the IDO, the community seems to be satisfied (for the most part) with the solution the team has come up with.
As just one component in the world of THORChain, THORSwap is a microcosm of the broader support that the protocol has enjoyed since its inception.
Erik Voorhees, a staunch advocate of community-derived power who founded the newly decentralized ShapeShift platform, describes THORChain as “… such a huge leap that most haven’t processed it yet. There’s nothing remotely like it available.”
And Terraform Labs founder Do Kwon has suggested that “THORChain is interesting because I think the future is going to be interchain and interconnected. What THORChain has the potential to bridge, is that it can bring Bitcoin, which is enormous”.
Still, it’s true that the best technology doesn’t always win. Betamax vs. VHS is the classic example of a walled garden with superior technology (Sony’s Betamax) that fell to a competitor whose ecosystem offered more attractive products to consumers, as when JVC’s VHS established stronger relationships with film companies.
We see the same phenomenon today: Bitcoin is not the most technologically advanced cryptocurrency and it has numerous drawbacks that would kill any new project instantly. But it has a community of developers, followers, and integrations that provide it with what has been, at least so far, an unassailable advantage. Community may be the main reason why Bitcoin Cash is not Bitcoin today.
Despite being technically advanced, THORChain and its ecosystem projects have identified that in the rapidly expanding cryptoverse, technology alone is not enough. Technology can be copied, improved, made obsolete … but communities and systems survive when interests are aligned.
As Barraford, one of the main developers of the protocol, pointed out in a brief video comparing the consequences of the THORChain exploits to the effects of the Mt. Gox hack on Bitcoin, those incentives go both ways. “This community is, I mean, obviously this community is absolutely amazing. They have diamond hands. I really appreciate that everyone stays and continues to support the project. That was crucial for me to keep putting all my energy … to get that support. of all of you. “
And that’s why THORChain is still here, while other smaller DeFi projects have fallen by the wayside when faced with exploits.
Incentives aligned They are one of the main innovations and promises of the cryptocurrency experiment. And when executed properly, as exemplified by the pragmatic builders of THOR’s decentralized ecosystem, they can create inexpensive, anti-fragile systems that recover quickly from black swan events like a hack or top-of-the-line IDO.
Which, after the financial crisis of 2008, should be a very desirable innovation.