THORChain hits $10B monthly volume as Bitcoin maxis debate safety

The decentralized liquidity protocol said March brought record monthly trading volume, while some Bitcoin maxis still have reservations about borrowing on the protocol.

The decentralized liquidity protocol THORChain has notched more than $10 billion in total monthly trading volume for the first time in history. However, Bitcoin (BTC) maximalists are divided on whether the platform offers enough safety to potential borrowers. 

In a March 27 post to X, the official social media account for THORChain announced the milestone, with Runscan data showing that the protocol has since notched $10.26 billion this month.

In a series of follow-up comments and posts, a debate between Bitcoin maximalists broke out over THORChain’s security and potential pitfalls for Bitcoiners looking to take out interest-free loans against their BTC using the platform.

In a March 27 post to X, mathematician and Bitcoin investor Fred Krueger said he was “willing to take the heat” for declaring THORChain to be “real” — which is essentially saying that BTC-backed loans on the protocol were a safe bet for Bitcoiners looking to gain more in the way of liquid funds.

However, Bitcoin analyst Dylan Le Clair pushed back on Krueger’s claims.

“A bitcoin collateralized loan that is dependent on the exchange rate of an altcoin to offer you a ‘“0% interest no liquidation risk” loan is simply transmuting the risk,” asserted Le Clair.

“You are shorting a tail that you don’t know how to quantify.”

THORChain is a decentralized liquidity protocol that facilitates native asset swaps across blockchains. The protocol offers interest-free loans against major crypto assets like Bitcoin and Ether (ETH) and doesn’t enforce liquidations or fixed expiry dates.

Related: THORChain becomes third-largest DEX as RUNE surges 50% in a week

As part of the protocol’s most recent Jan. 30 upgrade, collateral requirements for Bitcoin and Ether were slashed from 400% to 200%, allowing users to borrow half the total value of their provided assets.

On March 10, analyst Chris Blec described THORChain’s no-liquidation lending model as “interesting,” however he noted two major catches with the concept.

The first was that investors take the risk more obvious risk of lending their Bitcoin to a protocol that could otherwise collapse or fall victim to an exploit — which THORChain already did in 2021, although the funds were returned.

The second was that investors are relying upon a centralized provider not to change its terms and conditions at a later date, exposing their loans to risk.

Notably, THORChain was forced to halt its mainnet twice in 2023 amid reports of potential security vulnerabilities with the protocol.