THORChain Introduces 'Trade Assets' for Enhanced Onchain Trading
Zach Anderson Jun 10, 2024 04:24
THORChain unveils Trade Assets, enabling efficient, transparent, and secure onchain trading.
THORChain has launched a new feature called Trade Assets, designed to offer traders a centralized exchange-like experience while maintaining onchain transparency and security, according to Nine Realms.
Summary
Trade Assets are a new class of primitives on THORChain, boasting twice the capital efficiency of synthetic assets. This enhancement allows arbitrageurs to be twice as effective with the same amount of capital. Trade accounts settle at THORChain block speed and cost, enabling swaps to finalize in just six seconds without excessive Layer 1 (L1) blockchain fees. Additionally, Trade Assets can be redeemed for native assets anytime without slippage, making them ideal for high-frequency traders.
Advantages of Trade Assets
- Backed 1:1 by native assets secured by THORChain
- Mint or redeem Trade Assets with no slippage (only L1 gas fees)
- 2x capital efficiency of Synthetic Assets
- Traders only pay native THORChain fees ($0.2) when swapping — no L1 gas fees
- No outbound fee when swapping to a Trade Asset
- Finality with THORChain block speed (6 seconds)
- Not subject to outbound delays or confirmation counting
What are Trade Assets?
Trade Assets are native assets custodied by THORChain but held outside of the liquidity pools. Users receive a credit to their THORChain address. Unlike synthetic assets, Trade Assets are held by a protocol-controlled module, crediting users with their share of the assets in the module. Conceptually, Trade Assets are akin to having a deposit on a centralized exchange, but with the transparency of being onchain. Funds are held 1:1 as L1 assets by THORChain until users decide to withdraw back to self-custody.
Aligning with the THORChain Vision
Trade Assets enhance THORChain’s appeal to high-frequency traders by providing a centralized exchange experience without compromising transparency or security. With twice the capital efficiency of Synthetic Assets, arbitraging pools become more efficient, leading to tighter prices with other exchanges. The protocol holds Trade Assets, not individual wallets, so there is no outbound fee to pay when swapping to a Trade Asset. There is also no slippage fee to create or redeem a Trade Asset from its native counterpart.
Other features on THORChain will be built on top of the Trade Asset primitive, including Limit Orders. Open orders will be held as Trade Assets and execute automatically once the price limit is reached on THORChain.
How to Mint or Burn Trade Assets?
Minting or burning Trade Assets involves a unique memo syntax, denoted by the prefix `TRADE+` or `TRADE-`. There is no need to specify the asset name, as it is inferred from the asset received. No slippage fees apply when minting or burning Trade Assets, only L1 gas fees. Depositing 1 BTC.BTC will result in the crediting of 1 BTC~BTC. Redemption of 1 BTC~BTC to BTC.BTC will result in 1 BTC.BTC minus L1 BTC gas fees.
How Do Trade Assets Differ from Synthetic Assets?
Trade Assets can arbitrage pools faster and more capital-efficiently than Synthetic Assets. This is because Synthetic Assets adjust only one side of the pool depth, leading to slower price corrections. For example, a $100 RUNE → BTC swap requires $200 of Synthetic BTC to correct the price, while Trade Accounts require only $100 to achieve the same result. Trade Assets are backed 1:1 by the native asset and secured outside the pool by the network’s excess security budget, whereas Synths are backed by the liquidity in the pool (50:50 RUNE:ASSET).
Trade Assets and Economic Security
Trade Assets are the first to be held outside of THORChain’s liquidity pools. This means not all native assets in the TSS Vaults are paired with RUNE in a 1:1 ratio. To maintain economic security, the Incentive Pendulum now uses the value of all assets in the vaults, rather than just the pools, to determine reward splits between Nodes and LPs. This ensures that the vault value does not surpass the economic security of the validators. If the vault value grows beyond the validators’ staked value, Trade Accounts will incur a negative interest rate until the ratio of vault to bond value is below 1.
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