THORChain Pauses Bitcoin, Ether Withdrawals Amid Financial Concerns

THORChain has paused bitcoin and ether withdrawals amid insolvency fears. This came after community concerns about debts possibly reaching $200 million. While the lending program is on hold, cross-chain swaps remain unaffected as validators work on a restructuring plan.

THORChain, the interblockchain settlement protocol, hit a rough patch as it paused bitcoin (BTC) and ether (ETH) withdrawals. This abrupt halt is a response to growing fears over potential insolvency within their lending and savers programs. On Friday, during the early hours in Asia, network node operators decided to implement a 90-day pause to figure out how to address outstanding debts, according to messages circulating in THORChain’s Telegram channels.

Right now, the lending program deals solely with BTC and ETH. However, its saver vaults are more diversified, supporting various other assets. A worry looms that an insolvency crisis might arise if a flood of loans and savers positions were closed simultaneously. Add in some negative market sentiment, and that could seriously tank the price of RUNE, which is THORChain’s native token. It’s a precarious balancing act.

To meet its lending obligations, THORChain mint RUNE and injects it into liquidity pools — a system that has faced scrutiny. Concerns had been brewing for quite a while, leading the community to halt new deposits about a year ago. Allegations are flying about liabilities nearing $200 million, and a troubling $107 million in liquidity pools could be quickly withdrawn by liquidity providers (LPs) or RUNE holders in a panic-driven sell-off.

A tweet from a community member reads ominously, “@THORChain is insolvent” — signaling the level of anxiety among investors. There is an overarching concern that if a significant amount of debt is redeemed or savers and synthetic assets are deleveraged, THORChain may find itself unable to satisfy its bitcoin and ether obligations. To mitigate potential fallout, validators are currently working out a restructuring plan.

Despite the turmoil, THORChain’s core service for cross-chain swaps remains operational. Users can still engage in swaps and utilize liquidity pools without interruptions, which is a small silver lining amidst the uncertainty. Community members will be watching closely in the coming weeks as the situation unfolds, hoping for a resolution that stabilizes the protocol.

In summary, THORChain faces a challenging situation after pausing BTC and ETH withdrawals, sparked by insolvency concerns that have the community on edge. While the lending program has been halted, the cross-chain swaps continue without disruption. With liabilities reportedly nearing $200 million, validators are in urgent discussions about a restructuring plan. The next few months will be crucial for THORChain as they navigate these financial troubles and attempt to reassure a wary community.

Original Source: www.coindesk.com