Liquidity is a crucial concept in today's blockchain ecosystem, and THORChain, as a decentralized liquidity protocol, provides an innovative solution to manage liquidity and its associated costs. In this article, we will delve into THORChain’s fee structure, liquidity value capture, access control and resource subsidy mechanism to help readers better understand the operating principle of RUNE tokens.
THORChain Fee Overview
THORChain's fees are mainly divided into two categories: fixed outbound fees and dynamic liquidity fees. These fees are not only a tool for value capture, but also a mechanism for resource allocation and access control. Through these fees, THORChain can ensure that liquidity providers receive reasonable returns while also controlling the demand for liquidity resources.
Value capture: In THORChain, the primary function of fees is to capture the value of access resources. These fees will be paid to liquidity providers, and the demand for liquidity is relative to transaction size and market depth. For example, in a deeper pool, small transactions will require relatively low liquidity requirements, whereas in a small pool, large transactions will significantly increase the demand for liquidity. Therefore, fees must be set taking these factors into account to ensure that liquidity providers receive reasonable returns.
Access Control: The second function of fees is access control. By setting fees, THORChain is able to regulate the demand for liquidity resources. When demand is too high, fees are increased to prevent overconsumption of resources. This mechanism ensures that the natural forces of the market can operate to maintain the stability of liquid markets.
Resource subsidy: Every transaction on THORChain consumes certain resources, including disk, CPU, network and memory. To subsidize these fixed costs, THORChain charges a flat fee per transaction. These fees cover not only the consumption of internal resources, but also the fees required for transactions on the connected chain, such as Bitcoin’s mining fees or Ethereum’s gas fees.
Other benefits of THORChain fees
In addition to the above features, THORChain’s fee structure also brings several other benefits:
Stable fee structure: After the initial issuance plan is reduced, fee income can provide a stable revenue source for the network.
User-friendly fees: Users can enjoy relatively stable fees when making transactions, rather than dynamic fees that change as external network fees fluctuate.
Fee processing process: THORChain keeps track of the gas price of each connected chain when processing fees. The network records the gas consumption of each outbound transaction and subsidizes the final gas fee back into various liquidity pools. The specific process is as follows:
Gas price monitoring: THORChain will continuously monitor the gas price of each link chain in order to select the appropriate gas fee during transactions.
Distribution of fees: The basic asset pool of each chain will pay corresponding gas fees. For example, the BTC pool will pay Bitcoin fees, and the ETH pool will pay Ethereum fees.
Subsidy of fees: After the network observes outbound transactions, it will record the gas fees consumed and subsidize these fees back to each pool in the form of RUNE.
A comprehensive overview of THORChain fees
Here is a comprehensive overview of THORChain fees:
| Slip-based fee | Fees related to liquidity, based on trade size and market depth | 100% allocated to network participants | Internal trading and liquidity pool participants |
| Inbound Fee | Inbound fee for trades, ensuring liquidity pool stability | Minimum $1.00 | Outbound for RUNE, synthetic assets and trading assets |
Summarize
Through its unique fee structure, THORChain not only achieves effective management of liquidity resources, but also creates a win-win situation for liquidity providers and users. The RUNE token plays a vital role in this ecosystem, ensuring the sustainability and stability of the network. As blockchain technology continues to develop, THORChain and its fee mechanism will continue to bring new opportunities and challenges to the field of decentralized finance (DeFi).
Through an in-depth analysis of THORChain’s fee mechanism, we can see its importance in liquidity management. Whether it is value capture, access control or resource subsidies, THORChain is constantly optimizing its system to improve user experience and network efficiency. In the future, RUNE tokens are expected to continue to play an important role in the wave of decentralized finance.