The decentralized liquidity protocol THORChain reported accelerated activity in March to realize a historic record in its monthly trading volume, significantly bolstered by the utilization of an artificial intelligence crypto trading robot. The protocol reported that over $10 billion in trading was executed in the month despite the reservations portrayed by some Bitcoin maximalists regarding the protocol’s safety to borrowers. This notable increase in trading volume highlights the growing interest and confidence in THORChain’s capabilities, including its innovative use of AI technology to optimize trading strategies and enhance user experience.

Bitcoin Maximalists Debate THORChain’s Safety the Bitcoin maximalists appear divided on the THORChain’s capacity to offer adequate safety to the potential borrowers. The protocol seems upbeat to shake off the concerns when a Wednesday, March 27 post on the official X account revealed THORChain realized the $10 billion trading volume milestone. A scrutiny of the Runscan data showed that by Wednesday, THORChain’s trading volume had already notched $10.26 billion in March, with days still to spare.

THORChain considers that the historic $10 billion is a critical win for the decentralized exchanges (DEX), and it aspires to flip the volume realized by the centralized exchanges. The revelation of a $10 billion trading volume triggered a series of debates among the Bitcoin maximalists who questioned THORChain’s security. Some alleged the protocol harbours potential pitfalls for the Bitcoiners that seek interest-free loans against their Bitcoin units.

Bitcoin investor Fred Krueger illustrated in a March 27 post that THORChain is real. The declaration by the mathematician affirms that executing Bitcoin-backed loans on the DEX protocol was a safe bet to realize liquid funds.

THORChain Labeled as Transmuting Risk

The declaration prompted Bitcoin lead analyst Dylan Le Clair to dispute Krueger’s claims, illustrating that the Bitcoin collateralized loan is subject to the altcoin exchange rate. He added that offering zero-interest loans under no liquidation risk terms is a typical transmuting risk.

THORChain runs as a decentralized liquidity protocol that is involved in the facilitative swapping of native assets across the blockchains. Since its unveiling, the protocol has offered interest-free loans against top-ranked crypto assets, including Ether and Bitcoin, though it does not enforce fixed expiration dates and liquidations. 

THORChain revealed in its January 30 upgrade that it was slashing the collateral requirements from 400% to 200% for Bitcoin and Ether. The adjustment was to help users borrow half of the total value of the assets they provide.

Vulnerability of THORChain’s No-Liquidation Model

Analyst Chris Blec reflected on THORChain’s model of no-liquidation lending in a March 10 assessment. Although interesting, the analyst observed that it harbours two major catches. 

Blec observed that lending to the protocol subjected the investors to the risk of collapse. Also, the protocol is a target for exploitation, as witnessed in 2021, though funds were returned.

The investors rely on the centralized provider, hoping THORChain would not adjust terms and conditions, thereby exposing such loans to risk. Such fears manifested in 2023 when THORChain froze the mainnet twice amid concerns about security vulnerabilities with the protocol.

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