- THORChain has initiated a debt-to-equity conversion by issuing a new token, Thorchain Yield (TCY), to address approximately $200 million in defaulted debt
- Each dollar of debt will be converted into one TCY token, effectively turning creditors into equity holders within the THORChain ecosystem
- Holders of TCY tokens will receive 10% of THORChain’s revenue indefinitely as part of the restructuring plan
In response to a significant financial crisis, THORChain has announced a strategic plan to convert nearly $200 million of unserviceable debt into equity through the issuance of a new token. The new token, Thorchain Yield (TCY), will represent the defaulted debt and will see affected parties become equity holders. This move aims to stabilize the platform’s finances by transforming creditors into equity stakeholders and providing them with a share of future revenues.
THORChain Team Attempts to Salvage Project
THORChain has been struggling with its $200 million in unserviceable debt, leading to heavy criticism of the way the project has been handled. The token’s price has plummeted from $7.60 in December to just $1.40 today as a result of concerns surrounding its management, leading to the team seeking restructuring options.
The newly introduced TCY token has a fixed supply of 200 million tokens. According to the restructuring plan, each dollar of defaulted debt will be exchanged for one TCY token, effectively converting lenders and savers into equity holders within the THORChain ecosystem. This approach seeks to align the interests of creditors with the long-term success of the platform.
Revenue Sharing and Liquidity Measures
To incentivize participation and provide a recovery mechanism for affected users, TCY holders will receive 10% of THORChain’s revenue in perpetuity. Additionally, THORChain plans to establish a RUNE/TCY liquidity pool with an initial $500,000 in liquidity, pricing TCY at $0.10 per token. This initiative is supported by a $5 million allocation from the treasury, aiming to ensure price stability and market accessibility for token holders.
The decision to issue TCY tokens follows the suspension of THORFi services on January 23 due to mounting financial uncertainties. The platform faced significant debt linked to excessive leverage and risk exposure within its lending structure, leading to a liquidity deficit that made it challenging to honor user withdrawals. By converting debt into equity, THORChain aims to stabilize its financial position while offering affected users a stake in its future success.
While this restructuring plan provides a potential path to recovery, the timeline for full financial stabilization remains uncertain. The success of this initiative will depend on THORChain’s ability to generate sufficient revenue and restore confidence among its user base. The platform’s cross-chain swap services continue to operate unaffected, and the community remains engaged in efforts to navigate this challenging period.