THORChain proposes burning $300m in RUNE to ‘scale lending’

Developers of THORChain have unveiled a community proposal to burn around $300 million worth of RUNE tokens to boost lending activity.

In a community proposal published on Jan. 30, the THORChain developers suggested burning 60 million RUNE tokens (worth around $300 million as of press time) from the Standby Reserve fund, representing a 12% of the max supply of RUNE. The move, according to the initiative’s description, is set to make room for more loans on THORChain.

“By burning ~$300 million in RUNE from standby, it means THORChain can onboard another $100 million in Collateral (33% Lending Lever), which is a $50 million in market-buy on RUNE (200% collateralization ratio).”

THORChain

A THORChain developer under alias @Pluto9r said in an X post that with the proposal, the project has a “real shot at being the world’s deepest BTC pool,” urging the community to support the proposal.

I see it as doubling down on our moat, which is providing $BTC holders decentralized access to the rest of the Defi ecosystem. If you look at the majority of volume on the network, it’s to/from $BTC. Thorchain is the rails between Defi (EVM, SOL, etc.) and money ($BTC). We have…

— Pluto (9R) ⚡️ (@Pluto9r) January 30, 2024

Despite the optimistic outlook, the THORChain community has shown some confusion about the potential consequences of the proposal. While some members expressed concerns about how burning nearly $300 million worth of RUNE would enhance lending capacity, others conveyed hesitancy to support a lending design that “relies upon an assumption.”

I cannot support a lending design that relies upon an assumption. The idea Rune will outperform BTC/Eth in way that makes lending workable is a breach of first principles. This is not at all a safe assumption. If Rune can wildly outperform BTC it can also wildly underperform.

— patriotsounds (@patriotsounds) January 30, 2024

In response, THORChain justified the burning of 60 million tokens, asserting that it would make “all outstanding RUNE notionally more valuable.” As of press time, the proposal still sparks ongoing discussions within the THORChain community as participants weigh the potential benefits and risks associated with the suggested token burning.

Read more: THORChain becomes second-largest DEX in daily trading volume

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