Thorchain Users to “Chill” and Wait for a Restructuring Plan

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  • Thorchain founder has asked users to “chill” as it prepares a restructuring plan
  • The DeFi platform’s activities will remain paused for 90 days
  • Some crypto users consider the move a “bankruptcy freeze”

Thorchain has paused its DeFi wing, ThorFi, and asked “everyone [to] chill” as it works on a restructuring plan within the next 90 days. The pause prevents DeFi users from withdrawing their assets from the platform as the network moves to mitigate the risks of a $200 million debt. Thorchain founder JP Thorbjornsen said that the “protocol itself still works fine” adding that it will be able to “service the debt” after the restructuring, something that may cripple the DeFi protocol if the restructuring plan doesn’t yield the anticipated results.

ThorFi Users to Wait or Take “a Haircut”

According to Thorbjornsen, the network will use its system income to repay depositors, which he anticipates will take roughly five years. The executive clarified that the restructuring plan proposes randomly picking a “borrower/saver/pooler every day” and refunding their deposit in full.

ThorFi users wishing to manually close their position instead of following the randomized queue may have to take “a haircut,” which will reduce the amount of money they get back. The network will start repaying small borrowers and savers who make up 80% of its user base.

Thorbjornsen’s explanation raised questions with some arguing that a 5-year repayment plan is too optimistic and said the process may take over 20 years. 

Freezing Assets Attracts Lawsuits?

Others said that freezing assets and introducing haircuts invites lawsuits since the platform had promised savers “no exposure to RUNE.” RUNE is the network’s base token and its value has depreciated from over $20 to roughly $2 in less than five years. 

The network’s current predicament stems from backing its loans with BTC and ETH but involving RUNE tokens in the repayment process, which increased ThorFi’s liabilities as the base token’s price plummeted.

With Thorchain working promising to make users whole, it’s to be seen whether ThorFi users will prefer waiting or taking a haircut.

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