THORChain, the decentralized liquidity protocol, is taking bold steps to address its liquidity crisis by converting defaulted debt into equity. On February 2, the platform’s node operators approved a plan to mint 200 million “TCY” tokens, with each representing $1 of the platform’s debt. These tokens will entitle holders to 10% of THORChain’s revenue indefinitely, paid daily in the native token, RUNE.
The move follows THORChain’s suspension of its Bitcoin (BTC) and Ether (ETH) lending programs on January 23 to avoid insolvency. The protocol halted ThorFi redemptions for 90 days, giving the community time to devise a stabilization plan. The TCY tokens aim to allow affected users to claim their debt and benefit from the platform’s future revenue.
However, the proposal has sparked concerns within the community. Some members worry about the plan’s complexity and its reliance on new capital entering the platform. There’s also skepticism about the long-term sustainability of the 10% revenue payout and whether the TCY token might be classified as an unregistered security, raising potential legal risks.
Despite these challenges, THORChain believes this strategy will provide an exit for creditors and offer liquidity to stabilize the protocol. The platform is still finalizing the implementation timeline. As it seeks to regain trust and liquidity, the success of this restructuring remains uncertain, with many watching the protocol’s next moves closely.
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