THORChain (RUNE) Tokenomics

THORChain’s token, RUNE, is central to the protocol’s security, liquidity, and incentive mechanisms. Below is a comprehensive breakdown of its token economics, including issuance, allocation, usage, incentives, locking, and unlocking mechanisms, with tables and detailed explanations.

Issuance Mechanism

• Initial Supply: RUNE launched with a targeted total supply of 1 billion tokens.
• Current Supply: Due to token burns and an annual inflation rate (~4.25%), the total supply has been reduced to approximately 482.38 million as of February 2024. The current max supply is 500 million.
• Deflationary Mechanism: The V3 upgrade introduced a deflationary mechanism, further reducing supply over time.
• Mint/Burn Dynamics: RUNE is minted and burned in the context of lending and synthetic asset operations. For example, lending involved burning RUNE to create loans and minting RUNE upon loan closure, which could lead to inflationary pressure if RUNE’s value declined after loan issuance.

Allocation Mechanism

Initial Allocation (as per launch and early documentation):

• Top 10 Wallets: As of Feb 2024, the top 10 addresses hold ~70.69% of supply, with the largest being the Bond Module (~21.06%), Reserve Module (~16.49%), Standby Reserve (~12%), Binance Cold (~8.12%), and Pool Module (~6.19%).

Usage and Incentive Mechanisms

Core Functions of RUNE

• Liquidity: RUNE is paired 1:1 with all assets in liquidity pools, ensuring deep, cross-chain liquidity.
• Security: Node operators (THORNodes) must bond RUNE as collateral. Misconduct leads to bond slashing (up to 1.5x the value of compromised assets).
• Governance: RUNE is used for governance, including asset and chain listings/delistings, protocol upgrades, and parameter changes via node-mimir voting.
• Transaction Fees: All swap and network fees are paid in RUNE, distributed to liquidity providers, node operators, and the network reserve.
• Emission Rewards: RUNE is distributed as emission rewards to both bonders (nodes) and liquidity providers, calibrated by the Incentive Pendulum.

Incentive Pendulum

• Optimal State: 67% of RUNE bonded (nodes), 33% in pools (liquidity providers). Rewards are distributed accordingly to maintain this balance.

Multi-Tranche Liquidity Pools

• Synth Holders (Senior Tranche): Lower risk, lower yield (e.g., 10% APY).
• Liquidity Providers (Junior Tranche): Higher risk, higher yield (e.g., 25% APY).

Additional Incentives

• Impermanent Loss Protection: LPs are protected from impermanent loss after 100 days, with partial coverage before that.
• Bug Bounty: Up to 250,000 RUNE for responsible disclosure of vulnerabilities.

Locking and Unlocking Mechanisms

• Node Bonding: RUNE bonded by node operators is locked for the duration of their participation. If a node leaves or is slashed, the bond is released or penalized.
• Liquidity Provision: LPs can withdraw at any time, but impermanent loss protection is maximized after 100 days.
• Vesting: Early investor and team allocations had vesting schedules (e.g., 4 months post-mainnet for seed investors). As of Feb 2024, all major allocations are fully vested.
• No Current Lockups: There are no ongoing lockups for the circulating supply; all major vesting has concluded.

Unlocking Time

• Seed Investors: 4 months post-mainnet.
• IDO Investors: Fully vested.
• Team/Advisors: Fully vested as of Feb 2024.
• Other Allocations: No explicit ongoing vesting; all major allocations are now liquid.

Summary Table

Additional Notes

• Governance: Minimalistic, focused on operational parameters. Emergency controls exist (e.g., Ragnarök shutdown).
• Transparency: All major wallet addresses and allocations are trackable via block explorers.
• Ecosystem: RUNE is required for all protocol operations, ensuring deep integration and value accrual.

For further details, see the THORChain documentation and whitepapers.