THORChain Plans to Convert $200 Million Debt into Equity

THORChain‘s node operators have approved a proposal to address the platform’s liquidity issues by converting its defaulted debt into equity tokens.

On January 23, THORChain suspended its Bitcoin and Ether lending and savings programs to prevent an insolvency crisis and begin restructuring its debt. The platform paused ThorFi redemptions for 90 days to give the community time to devise a plan to stabilize operations.

After the suspension, the THORChain community proposed several restructuring plans aimed at ensuring the network’s continued operation and compensating affected users.

On February 2, the platform’s node operators approved a plan to convert the defaulted debt into equity tokens, which will be distributed to affected users.

Converting $200 Million Debt into Equity Tokens

The approved plan involves minting 200 million “TCY” tokens and airdropping them to users affected by the debt. Each TCY token will represent $1 of the platform’s debt, allowing users to claim one token for every dollar owed.

According to the plan, the new token will receive 10% of the network’s revenue indefinitely. Aaluxx Myth of Maya Protocol, the pseudonymous author of the proposal, explained the details:

“TCY will receive 10% of the fees paid out in RUNE every 24 hours, pro-rated based on TCY holdings. This uncaps the upside potential for new liquidity that bails out users. Risk-averse users can sell their RUNE for any asset of their choice daily.”

Additionally, THORChain’s treasury will create a liquidity pool, allowing tokenholders to sell their claims as they wish. The platform stated that this plan will enable creditors to exit on their own terms, as market demand for THORChain‘s revenue “reflects in the token’s price.”

While the protocol has set out its plan, the timeline and specifics are still being finalized.

Community Concerns Over the Restructuring Plan

While the restructuring plan aims to repay investors, some community members have raised concerns.

One community member expressed that the plan is complicated and would require additional investment and trust in THORChain, noting the platform’s history of mismanaging funds and trust. The user also pointed out that new capital would be “permanently taxed” under the plan.

There are also concerns about whether the new token, which grants 10% of the platform’s revenue to holders, could be classified as an unregistered security. Another user speculated that this might lead to legal actions against THORChain.

Another community member seemed unconvinced that the perpetual revenue share promised by the tokens would last, suggesting it would only be valid until the platform changes its stance.

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