THORChain approves conversion of $200M debt into equity tokens

• THORChain node operators have approved a restructuring plan allowing it to convert its $200M debt into equity tokens.
• The move is aimed at stabilizing THORChain’s operations by addressing its liabilities.
• THORChain (RUNE) price rose 13.7% after the news but remains down 72.7% over the past month.

THORChain node operators have approved a restructuring plan proposal that will see a decentralized liquidity network convert a $200 million debt into equity tokens.

The approval will allow THORChain to address its financial liabilities, stabilize operations, and restore confidence among its users.

The restructuring proposal, dubbed “Proposal6,” the plan, arose after THORChain decided to pause its lending and savers programs on January 23, following community discussions about the existential risks posed by its ThorFi feature.

At that time, the platform had accrued roughly $200 million in liabilities. The pause led to a contraction of the network, with 31 validators exiting, around $100 million in liquidity being shed, and a significant drop in the price of RUNE, THORChain’s native token. However, the network continued its core operations, demonstrating its resilience amidst the turmoil.

The approved restructuring plan

Proposed by Maya Protocol’s Aaluxx Myth, the restructuring plan was put to a vote by Node Operators and has now been officially ratified.

Under this proposal, THORChain will mint 200 million “TCY” tokens, each representing $1 of the platform’s debt. These tokens will be airdropped to those affected by the lending and savers programs’ suspension.

The TCY tokens are designed to receive 10% of THORChain’s network revenue in perpetuity, providing holders with a continuous revenue stream in RUNE tokens, similar to dividends.

To facilitate liquidity for these new tokens, THORChain’s treasury will seed a liquidity pool, allowing holders to convert their equity tokens into other assets at their discretion.

This setup aims to give creditors the flexibility to exit their positions as market demand for THORChain’s revenue becomes reflected in the token’s price.

Following the approval of the proposal, the implementation is now in the hands of THORChain’s development teams, which include groups from Nine Realms Capital, Maya Protocol, Rujira Network, and Strangelove Labs.

The development teams are tasked with ensuring a prompt yet meticulous rollout, with details on the exact timeline still being finalized.

Community members have, however, expressed mixed reactions. While some see this as a pathway back to stability and growth for THORChain, others are sceptical about the plan’s long-term viability, the complexity of the new token structure, and potential legal implications regarding the issuance of what might be considered unregistered securities.

THORChain (RUNE) reaction to the development

Following the announcement of the approved plan, the price of RUNE experienced a notable uptick. As of the latest trading data, RUNE was priced at $1.38, marking a 13.7% increase within the last 24 hours.

However, this positive movement comes after a period of significant decline, with RUNE down 37.8% over the last week, 58.2% over two weeks, and 72.7% over the last month, suggesting that while the restructuring news has been met with some optimism, broader market conditions or concerns about THORChain’s future stability might still be influencing investor sentiment.