Listing Proposal: Add RUNE ERC-20 (THORChain)

Summary :
Proposal by THORChain community member Oaksprout

RUNE has recently been growing its economic bandwidth on Ethereum. Myself and other community members have expressed a desire to be able to use the ERC-20 asset as collateral for lending. Aave is the premier credit facility in crypto, and so here is a listing proposal for the community’s review.

Overview of THORChain and $RUNE

THORChain is a decentralised network focused on bringing liquidity to cross-chain assets. It does this using a simple Uniswap-like automated market maker (AMM) design. Some have called it “Uniswap for the multichain world”.

THORChain has been live with mainnet assets since September 2020 and its flagship multichain network is scheduled to go to testnet imminently.

The project is built on tried-and-tested technical and economic primitives, including Tendermint BFT, Cosmos SDK, Gennaro and Goldfeder’s Threshold Signature Scheme (TSS) and a variant on Uniswap’s constant function market making formula.

Useful Links :

Audits:
Audits have been completed since April 2020 by:

  • CertiK – token model and application security
  • Gauntlet – economic security & mechanism design
  • Kudelski Security – cryptography review
  • IOActive – node infra

No major issues were reported. The team reports further audits are underway. See all reports.

Benefits for Aave:

  1. First-Mover: RUNE has only recently been made available as an ERC-20 asset, and Aave would be the first venue to make RUNE borrowing available.
  2. Community and New Users: The THORChain community is extremely strong, vocal and eager to support related projects. This listing would bring a strong influx of new users.
  3. Economic Bandwidth: the total economic value available in THORChain is approaching $1bn, up from ~$85m just 90 days ago.

Benefits for THORChain Community:

  1. Efficient Token Use: allow holders to loan RUNE to people more willing to put the tokens to work via LPing, running nodes or arbitrage.
  2. Extend RUNE’s Value Proposition: increasingly, a token’s value is tied to its maturity as an asset. Being able to access credit on RUNE is a major stepping stone towards full maturity.

Risk Mitigation:
THORChain has been extensively audited by top firms, including CertiK, Gauntlet and Kudelski. The initial single-chain chaosnet implementation has matured well and the multichain testnet has been running with Bitcoin and Binance, with chains including Ethereum, Cosmos etc following soon. The team has staged a pragmatic and disciplined guarded rollout with only minor issues to date. Having examined the Aave Risk Framework I expect RUNE to find itself around a B-/C+ rating.

Thank you for your consideration.

  • List RUNE
  • Don’t List RUNE

0 voters

6 Likes

seconded. would be a big fan of this

2 Likes

Super interesting proposal and we’re obviously big fans of THORChain at Delphi.

That said, would be great to get some more data on the on-chain liquidity for the ERC-20 THORChain.
Would also be interested in getting your thoughts on how this liquidity profile will change once cross-chain is live given you’d expect the majority of RUNE volume to move to THORChain itself?

2 Likes

UPDATE: the THORChain team has doubled the upper limits of the amount of RUNE which can be bridged to Ethereum, based on heavy demand. So the limit is now 20m. I haven’t changed the numbers below so please factor this in as you read.


Thanks for raising these points here too, José! This is an important point for the community to be aware of.

The THORChain team capped the maximum number of RUNE tokens to cross from Binance Chain to Ethereum at 10m. The current number of RUNE that have migrated is 8.8m (source CoinGecko). Assuming $4 RUNE and that the 10m cap is hit, we’ll soon have $40m dollars worth on Ethereum.

So we have a conservative assumption of $40m ERC-20 RUNE at launch. How much stays? Well, according to Delphi’s own tool it looks like 30% of RUNE is currently being put to work. I expect that to increase with multichain. With a margin of safety lets say 50% migrates, leaving 5m RUNE, or $20m dollars worth.

This number could be quibbled with, but the reality is it’s a chicken and egg situation. If there’s lending available on Aave then much more RUNE is likely to stay. That’s certainly how I feel, and the support for this proposal signals that the community feels similarly.

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Notes

It wouldn’t be prudent for this community to speculate on the price of RUNE, but the fact is that the asset’s meteoric price increase comes off the back of the network’s imminent flagship network launch.

The THORChain team will make it possible to move from ERC-20 to native RUNE on the network’s own chain. They have said it is unlikely that there will be a reverse bridge. However, they support RUNE being used to forge relationships on Ethereum.

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Beyond the topic of liquidity I hope this proposal can be seen as a bridge between communities and a small investment in the longer term relationship. What’s more I hope this proposal is workable because as the majority of RUNE will be on the native chain, other cross-chain credit protocols will have a natural technical advantage in attracting the burgeoning THORChain asset ecosystem, for the native asset and liquidity pool tokens and more.

1 Like

This proposal follows the ARC template for Asset Onboarding laid out in the Aave Governance documentation.


Sentence Rational

We propose to list THORChain’s token RUNE as an asset on Aave.

References

Paragraph Summary

RUNE has recently been growing its economic bandwidth on Ethereum. Myself and other community members have expressed a desire to be able to use the ERC-20 asset as collateral for lending. Aave is the premier credit facility in crypto, and so here is a listing proposal for the community’s review.

Motivation

Listing RUNE benefits the Aave community in the following ways:

  1. Unique Properties: RUNE has properties which makes it desirable as both a collateral and borrow asset (discussed in detail later).

  2. First-Mover: RUNE has only recently been made available as an ERC-20 asset, and Aave would be the first venue to make RUNE borrowing available.

  3. Community and New Users: The THORChain community is extremely strong, vocal and eager to support related projects. This listing would bring a strong influx of new users.

Specifications

NB: At this moment, the majority of RUNE is based on Binance Chain as a BEP2 asset. This will soon migrate to a token native to the THORChain. There is also a significant portion of RUNE bridged to Ethereum as an ERC-20. For the sake of providing adequate context, I will provide data about the BEP2 asset as well as the asset in question, ERC-20 RUNE.

What is the link between the author of the AIP and the Asset?

Oaksprout is a long-term community member of THORChain and holder of RUNE. He has also spent a lot of time in the Aave community and holds AAVE.

Provide a brief high-level overview of the project and the token

THORChain is a decentralised network focused on bringing liquidity to cross-chain assets. It does this using a simple Uniswap-like automated market maker (AMM) design. Some have called it “Uniswap for the multichain world”.

THORChain has been live with mainnet assets since September 2020 and its flagship multichain network is scheduled to go to testnet imminently.

The project is built on tried-and-tested technical and economic primitives, including Tendermint BFT, Cosmos SDK, Gennaro and Goldfeder’s Threshold Signature Scheme (TSS) and a variant on Uniswap’s constant function market making formula.

Explain positioning of token in the AAVE ecosystem. Why would it be a good borrow or collateral asset?

RUNE is a unique asset in that it is both a desirable collateral and borrow asset. This is due to 2 main elements of its novel design:

  1. strong value accrual design and deterministic price floor – desirable collateral asset

  2. RUNE price is tied to the deepest liquidity assets in crypto, and therefore market neutral – desirable borrow asset

Desirable Collateral Asset

THORChain provides competitive long-term yield for large cap assets, and efficiently converts that liquidity into RUNE market cap through a unique economic design. All this amounts to an asset with extremely high upside potential. This is desirable as collateral as it makes it easier and more efficient to manage collateral positions.

Additionally, THORChain’s economic model requires that $3 of RUNE is staked for every $1 of pooled asset, e.g. BTC. This means that with time, a deterministic price floor will emerge, i.e. collateral providers will always have a solid price floor to plan around.

Desirable Borrow Asset

RUNE is a desirable borrow asset because of its wide and deep market exposure. Given that RUNE is the settlement asset of the network, its price volatility is tied to the liquidity levels and prices of connected assets. THORChain optimises for sucking in liquidity from the largest cap assets. Given this, RUNE is likely to become market neutral to the entirety of the crypto market. For this reason, RUNE stands a good chance of becoming a desirable borrow asset given its relative stability to the rest of crypto, and to the assets on Aave.

For these reasons I believe RUNE represents unique benefits to the Aave ecosystem.

Provide a brief history of the project and how it overcame stressed conditions

THORChain was founded in 2018 by an anonymous group of developers. Note that anonymity is important design choice in securing the network.

THORChain’s single chain chaosnet, using mainnet assets, was released in late August, 2020. There were minor issues with this release, but the team responded quickly and decisively. What’s more, this release was a part of a “guarded launch” which intentionally aims to progressively increase capital at stake to battle test in a real-world environment.

The team recently released multichain testnet, again using the same pragmatic “guarded launch” approach.

How is the asset currently used?

ERC-20 RUNE is predominantly used as a source of liquidity on Sushiswap. There, RUNE is pooled with ~a dozen major DeFi assets including AAVE.

Recently 10m RUNE was bridged over to Ethereum by the THORChain team to meet demand. That is mostly still sitting in the deployer contract, waiting to be used on Ethereum.

See the breakdown below. Note that several of the largest uses of RUNE are on Sushiswap, but a significant part remains ununused.

BEP2 RUNE is roughly 30% deployed, on Binance Chain. See the breakdown below:

Source: Delphi Digital THORChain Dashboard

Emission schedule

Current circulating supply of RUNE is 238,275,761. Total circulating supply will be 500 million.

Current circulating supply of RUNE in ERC-20 form is 10,075,916. Current maximum supply on Ethereum is 20 million. This number was recently doubled from 10 million.

Figures sourced from CoinGecko data on BEP2 RUNE and ERC-20 RUNE. See further details on THORChain’s ERC-20 version of RUNE.

THORChain rewards early behaviour by giving out RUNE to active participants. It gives out 1/6 of its reserve each year. THORChain aims to reach 2% annual inflation after 10 years.

Token permissions and upgradability

RUNE is a standard ERC-20 token.

Market data

ERC-20 RUNE

  • Market Cap: $39,024,796
  • 24h Volume:$4,574,264
  • Exchanges: Sushiswap, Uniswap

BEP-2 RUNE

  • Market Cap: $901,001,962
  • 24h Volume: $50,452,370
  • Exchanges: Binance, FTX, BitMax, Hotbit

More info on the relationship between ERC-20 and BEP-2 RUNE.

Social channels data (Size of communities, activity on Github)

Contracts date of deployments, number of transactions, number of holders for tokens

  • Token contract deployed Jan-13-2021 04:17:27 AM +UTC – Transaction
  • Total transactions at 15 Feb 10:26 UTC – 21,067
  • Token Holders at 15 Feb 10:26 UTC – 1,955

Technical Specifications & Security Considerations

The RUNE token doesn’t have any specific behaviour (eg. rebasing, balance increasing) and doesn’t offer meta governance functionality. Therefore, the standard AToken contract and corresponding debt tokens, already used for the majority of assets listed in Aave, can be also used for RUNE. No auditing of the code is required.

2 Likes

Can we wait for Rune to launch first? This is premature

1 Like

Multichain testnet is live and chaosnet is imminent. There’s 20m RUNE on Ethereum and strong demand for a credit line on it. Why wait?

As an aave staker, Im not comfortable to take on the risk of including collateral that has no full product behind it, and impose a potential reputational risk for Aave of accepting collatetal that may fail. Rune has to have a fully operational, fully functional product. Plus this is non-ethereum product, it has a peculiar risk profile.
Aave is here for long-term and the community can wait for Rune to get ready. No need to rush with such decisions

1 Like

Fair enough! There is time sensitivity given there’s a brief opportunity to establish a home for ERC-20 RUNE on Ethereum. When chaosnet launches there’s every reason to expect a lot of RUNE to migrate to the main chain. If there’s a viable credit option on Ethereum, that value could be captured and remain on Aave.

More specifically, these are the incidents that I was able to find online, self-reported by THORChain team: