Facing $200 million in debt, THORChain is turning to token issuance to convert liabilities into equity.
THORChain, a leading protocol in the decentralized finance (DeFi) sector, has decided to issue a new token to address the liquidity crisis generated by Lending and Savers, its lending and savings services.
As reported by this media, THORChain announced the suspension of these services and a restructuring plan to settle an accumulated debt that reaches $ 200 million dollarsIn response to this financial crisis, the protocol governance has made drastic decisions, including the issuance of TCY tokens.
THORChain paused the aforementioned services on January 24, a measure that was implemented to address increasing instability and associated risks. Now, the THORChain community has approved a governance proposal, dubbed “Convert defaulted debt to $TCY equity with no private raise (V1)”, which involves the issuance of the new token TCY (ThorChain Yield).
This token, according to the proposal, is specifically designed to convert unpaid debt into equity, allowing creditors to receive 1 TCY for every dollar debt, rather than repayments in traditional cryptocurrencies like Bitcoin or Ethereum.
With a full supply of 200 billion tokensThis new token seeks to stabilize the protocol, settle debts and regain the trust of users and investors.
TCY: From creditors to active partners of THORChain
According to the governance proposal, one of the key features of the new TCY token is that it grants its holders significant rights within the THORChain ecosystem. TCY will receive 10% of the income generated by the protocol in perpetuity, as explained in the document.
Furthermore, the model incentivizes creditors to hold their tokens and aligns their interests with the future growth and success of the protocol. The innovative approach seeks to transform creditors into active partners within the ecosystem, fostering a sense of community and collaboration.
“TCY receives 10% of the fees in perpetuity in the form of RUNE every 24 hours, in proportion to TCY stakes”, the proposal states.
The decision to award a percentage of revenue is a bold step towards creating a more inclusive and participatory financial model. As THORChain seeks to stabilize its financial situation, TCY holders become direct beneficiaries of the protocol’s success, potentially resulting in increased loyalty and support from the community.
The implications for the DeFi ecosystem
THORChain’s current crisis and its innovative response through the launch of the TCY token may have significant repercussions within the DeFi ecosystem. This case could serve as a model for other platforms facing similar challenges, proving that it is possible to restructure finances without resorting to drastic measures such as liquidations or bankruptcies.
The protocol’s ability to convert its debt into equity could inspire confidence among users and attract new investors interested in participating in a more sustainable financial model. So far, the proposal has garnered support from the crypto community, which has highlighted it as a “very reasonable” solution that “doesn’t pick winners or losers” and puts everyone “in the same boat.”
User @OMacho1 said that “large and small investors in the loan program should receive fair compensation based on the amount invested,” so it was a fairly acceptable solution.
THORChain innovates amid its biggest financial challenge
Although the liquidity crisis of Lending and Savers has not affected the rest of the THORChain ecosystem, the developers are looking to restore the trust of their community and investors, so they have focused on ensuring transparency in the implementation of their plan. In addition, they have committed to stronger financial management and a reduction in operational risk, to ensure that the protocol can recover and remain competitive in the market.
Ultimately, THORChain’s experience offers valuable lessons for the entire DeFi sector. The need to prioritize financial sustainability, implement effective governance mechanisms, and design more resilient models is becoming increasingly evident in an environment where platforms face constant pressures.
While the road to recovery will be challenging, the platform has the opportunity to overcome this crisis and become an example of how innovation can transform challenges into opportunities within the digital financial world.
