THORChain Debt Crisis: 90-Day Restructuring Plan to Convert Debt into TCY Tokens
THORChain is currently facing a severe debt crisis, with accumulated debts nearing $200 million. These debts mainly stem from the “Savers” and “Lending” programs in its THORFi service. Due to flaws in the protocol design, particularly in the absence of a liquidation mechanism for borrowing, the debts have been accumulating, eventually surpassing the protocol’s ability to meet its obligations.
On January 23rd, THORChain suspended its THORFi service, including the “Savers” and “Lending” programs, to address the financial uncertainty. Currently, the protocol is executing a “90-Day Restructuring Plan” to resolve the debts accumulated from these programs.
According to The Block, the approved proposal is to “convert debt into equity” by creating a new token called TCY (Thorchain Yield), with a total supply of 200 million tokens. This means that the assets of users participating in the THORFi lending and savings programs will be converted into TCY instead of being repaid in the original assets (such as BTC or ETH). However, the specific redemption period is still unclear. The proposal states that TCY holders will “permanently receive 10% of THORChain’s network income.” The THORChain team stated, “THORChain will convert approximately $200 million in debt into equity by issuing a new token that will permanently receive 10% of the network income.”
According to the proposal, THORChain will mint 200 million TCY tokens and distribute them in proportion to the default debt at a rate of 1 TCY per $1.
Additionally, the THORChain core team will establish a RUNE/TCY liquidity pool, initially injecting $500,000 in liquidity, with a pricing of $0.1 per TCY, funded from the remaining $5 million treasury. This means that the assets of users participating in the THORFi lending and savings programs will be converted into TCY instead of being repaid in the original assets (such as BTC or ETH). However, the specific redemption period is still unclear.
Despite the announcement of the restructuring plan, RUNE has plummeted 35% in the past week, dropping from $2 to approximately $1.3, with a cumulative decline of over 70% in the past 30 days. However, despite facing market pressure, THORChain’s network transactions remain active, processing $270 million in transactions in the past 24 hours, demonstrating that its ecosystem still maintains a certain level of market liquidity.