THORChain Faces Debt Crisis: Team Proposes Converting 200 Million Magnesia Debt into Equity Token TCY

THORChain Faces Debt Crisis: Team Proposes Converting 200 Million Magnesia Debt into Equity Token TCY

THORChain Faces Debt Crisis: Team Proposes Converting 200 Million Magnesia Debt into Equity Token TCY

THORChain Debt Crisis
90-Day Restructuring Plan: Converting Debt to TCY Tokens
Distribution of TCY Tokens and Initial Liquidity
RUNE Price Decreases, but Network Trading Volume Remains Active

THORChain is currently facing a severe debt crisis, with accumulated debts nearing $200 million. These debts primarily stem from the “Savers” and “Lending” projects within its THORFi service. Due to design flaws in the protocol, particularly in the absence of a liquidation mechanism for loans, the debts have continuously accumulated, eventually surpassing the protocol’s ability to repay.

On January 23, THORChain suspended its THORFi service, including the “Savers” and “Lending” programs, in response to financial uncertainty. Currently, the protocol is implementing a “90-Day Restructuring Plan” to address the debts accumulated from these programs.

According to The Block, the approved proposal is to “convert the 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 THORFi’s loan and savings programs will be converted into TCY instead of being repaid in the original assets (such as BTC, ETH). However, the specific redemption period is still unclear. The proposal states that TCY holders will “permanently receive 10% of THORChain’s network revenue.” The THORChain team stated, “THORChain will convert approximately $200 million of debt into equity by issuing a new token that will permanently receive 10% of the network revenue.”

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 to 1 US dollar.

In addition, 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 token, funded by the remaining $5 million inventory. This means that the assets of users participating in THORFi’s loan and savings programs will be converted into TCY instead of being repaid in the original assets (such as BTC, ETH). However, the specific redemption period is still unclear.

Despite the announcement of the restructuring plan, RUNE has experienced a 35% drop in the past week, falling from $2 to around $1.3, with a cumulative decline of over 70% in the past 30 days. However, despite market pressure, THORChain’s network trading volume remains active, processing $270 million in transactions in the past 24 hours, indicating that its ecosystem still maintains a certain level of market liquidity.