A very interesting design for L1 holders to put their assets in the THORChain network has been put forward - Single Side LP with deposit insurance.
A very interesting design for L1 holders to put their assets in the THORChain network has been put forward.
THORChain
As observed, the biggest inhibitor to attracting more L1 TVL is the exposure to RUNE's price risk .
A. L1 holder can enter a single-sided LP position and earn yield directly in L1. Their downside should be capped at 0% (never risk their principle), and yield should be moderate.
B. RUNE holders can "stake" in a vault and earn RUNE on RUNE yield. The RUNE is farmed out to (A) to make it work. RUNE stakers should wear some risk (provide insurance for L1 depositors), and in return earn higher yield than normal.
C. The RESERVE is used to backstop (A) when (B) is consumed in deposit insurance.
If singled-sided LP is popular, then there should be no shortage of RUNE and L1 to deposit. Thus Pooled RUNE will quickly go to a maximum of Bonded RUNE. At this point the Incentive Pendulum is paying ~100% to nodes, so demand for LP will meter out prior to reaching this. Nodes will buy up RUNE to access the real yields, causing positive price action on RUNE. This arbs out RUNE, causing Pooled RUNE to drop below Bonded RUNE, allowing more LPs to once again enter.
Also, an update shows RUNE-holders can be incentivised to deposit RUNE in a Yield Module, and the protocol farms this out to matched L1 depositors.
Updated Single-sided LP Design
— THORChain (@THORChain) May 24, 2022
RUNE-holders can be incentivised to deposit RUNE in a Yield Module, and the protocol farms this out to matched L1 depositors. This drives up demand for RUNE and keeps the RESERVE balance for block rewards + ILP. https://t.co/8cPt881JdQ https://t.co/Im0RVI01DR
The community is excited for this.
