Cryp2Gem community had some brainstorming about the THORChain in general and especially its governance and leadership model, regulations compliance and consequences of the integration of privacy tokens. We learned a lot and got some nice insights and updates from Kai Ansaari. Below is the unaltered conversation that took place in the Cryp2Gem Telegram community chat.
We shall respect the privacy of our community members and will post their questions with an anonymous tag marked with C as for the initial letter of the word Community followed by the initial letter of the username involved.
C_A: “THORChain just reached 81c. Quite a run lately. But I’m curious what will happen once THORChain adds Monero to BepSwap. A non-custodial, non-KYC DEX with Monero would be like a game-changer for the IRS. There could be some pressure towards exchanges to delist or ban THORChain’s RUNE. What do you think?”
C2G: “Yes that could be an issue. Privacy tokens are always gonna be a problem and something the SEC won’t digest and overlook.
Could adding a privacy coin like Monero to BepSwap and Asgard be a problem? As for the IRS and SEC.
C_A: “I think that’s why THORChain team is mostly anonymous and at some point maybe they can introduce a treasury governed by the community and attract Monero and Bitcoin developers to help to push updates.
So even if they get delisted everywhere then the DEX itself would still be a problem for the IRS and governments.”
C_T: “If THORChain gets delisted that doesn’t matter. Swap on-chain to ETH or BTC, send to exchange and sell. The DEX means that you cannot touch it as long the nodes are online. The only thing is that the team needs to work on making sure nodes will be run but that’s covered by the fact that nodes are heavily incentivised.
You can bet that THORChain will be forked by other teams once it rises above the fold. Disclaimer. I have everything that is not in pools, in rune pools. So I’m based.”
Kai Ansaari: “XMR priority is high and will add privacy eg. Swap BTC > XMR > ETH to break linkability.
Wait some arbitrary period of time plus a few XMR TXs for extra entropy and don’t swap back same value. Again probabilities. Swap in 1 BTC, swap out 1 BTC becomes obvious.”
C_T: “Don’t you think that could paint a bull’s eye on the back of THORChain?
Kai Ansaari: “THORChain is a regulators dream. Every transaction signals intent on the blockchain, and every outbound tx references the incoming transaction hash. Moreover, the MIDGARD API can easily be consumed & analysed by anyone.
The only systems that are closed-door block boxes are centralised. Decentralised exchanges need to be open, auditable and verifiable. Sure their technologies we can use eg. zksnarks, shnorr, etc., to cryptographically prove properties; but layer 1 bitcoin/eth etc. are open & transparent.
Instead of trying to solve all the problems, THORChain does one thing extremely well and leaves privacy up to the individual. If you want privacy, swap to XMR & back again; use tornado cash & wasabi. The more entropy the better.
In terms of legality, THORChain is fine because there are no management or administration of customers, customer funds etc. and no subjective decisions and no ability to censor/block transactions.
“FinCEN has offered clear guidance explaining that persons who don’t have “independent control” over customer funds will not be subject to the registration and surveillance requirements of the BSA.”
C2G: “Thx for your answer. So based on the statement from FinCEN all activity on THORChain and Asgard is actually working withing regulations as thor team is building a leaderless and self-sovereign model?”
Kai Ansaari: “Yep. If you’re going after THORChain you better go after ethereum nodes for facilitating erc20 swaps. THORChain is just an application-specific blockchain capable of observation consensus. 99.999% of the codebase has nothing to do with swaps. The code to handle swaps is just a few lines.
In any case, the team don’t operate the network. It’s completely permissionless, trustless and non-custodial.
It’s an uncensorable network. Assets are unable to be blocked or confiscated.
The entire vault churns daily, avoiding capture and preventing the network from becoming stale.
No other network does this. Eg. Ren, keep and it’s significant. What is the point of auditable and verifiable solvency if you cannot spend the utxos?
Think OKEx. Sure they might have the funds in a cold wallet. But can they sign txs?
What good is $1b of BTC on REN if they can’t sign? Using REN as an example. No hate. It’s currently centralised so of course, they can sign.”
C_T: “Is the conceptual design and idea behind Thorchain from one person or was it a collaboration between multiple persons?”
C2G: Thx Kai. I follow (and used to own tokens since recently) THORChain since its IEO on Binance DEX. We also hosted you guys for AMA quite some time ago.
But nonetheless, I learned something new from your posts. I had no idea that swaps have almost nothing to do with coding and it’s easy to integrate.”
Kai Ansaari: “Thanks, mate. THORChain makes observations via witness transactions > reach consensus & update state.
The chain can also sign outbound transactions from the primary vault (via TSS) or secondary vaults (via individual nodes).
So if the chain can observe inTx, and make outTx; it can swap. The swap itself is just a few lines to tell the state chain I’m swapping x for y, and the deterministic CLP model (xXY)/(x+X)² is what spits out y on the other side.
C2G: “By the way, THORChain is fully audited as I know:
*Certik performed code review
*Kudelski security review
*Gauntlet economic security
Maby there is only legal audit missing. If it is even necessary.”
Kai Ansaari: “Also:
*IOActive infra audit
+ CLP model “audit” which is in hand with the team.
Legal audit = no one really understands this stuff, and from the legal opinion available it’s fine. In any case, the network itself is unstoppable.”
C2G: “Kai, you are designated as a project lead in the public documentation. THORChain is a leaderless project right?”
Kai Ansaari: “I’m not really project lead. We’re all contributors to the project, I’m a PM by trade but also do a little engineering. There’s no real “lead”, “CEO”, “founder” etc.
THORChain was conceptualised at a hackathon in 2018, a whole team was involved. Some of those carried the project forward, the team has changed along the way to where we are now.”
C_T: “I knew there are no leads or CEO. I'm just so intrigued by the whole concept that I’d like to know more about how it was born. There are some novel concepts and I’m always very keen to learn about how they formed. Not just technical but also from an economic perspective.”
Kai Ansaari: “There are many contributors to the project, individuals and groups. Most choose to remain anon. Supporters also prefer to stay fairly anon, but they’re beginning to become more vocal — you might have sought Erik Voorhees posts recently.”
C_T: “Erik Voorhees has a very good understanding of the possibilities or THORChain.”
Kai Ansaari: “Indeed he does!
THORChain is built almost entirely of first principles of thinking. There’s no active governance (death by a thousand cuts) and all nodes need to worry about is which binary to run. The rest is economics & game theory. Incentives.
C_T: “Thanks. It’s just so frickin cool to see it coming together. Especially as I didn’t understand it really at first. But seeing it’s starting to suck liquidity just makes me giddy.”
Kai Ansaari: “Most of the recent “hacks” / “exploits” at least in my mind aren’t exploits at all. Code is the law, no security is guarding bitcoin, is it? No police are guarding smart contracts. If you write smart contracts & enable composability you better manage the part in between inputs & outputs ie. [what it can do].
That’s to say, they weren’t a result of poor engineering but the engineers didn’t think about how the product could be used, incentives, where actors can get capital from. It’s why THORChain doesn’t support delegation > because nodes get access to the capital they didn’t pay for.
Crypto is game theory, incentives, economics. That’s where the thinking should be first & foremost. At least in my mind, and I’m a tiny brain, the cryptographers, architects & engineers on THORChain are Giga brain. I struggle to keep up.”
C_T: “I can only hope the project stays true to those principles.”
Kai Ansaari: “Hell yeah. Have you played with the multichain testnet?
Swapping bitcoin for BEP2 assets is pretty cool.”
C_T: “Not yet. I just moved the biggest part into pools on ChaosCet last week after some initial testing. I am looking into the documentation on multichain. I think that it will “shook the world” in a few weeks.”
Kai Ansaari: “Totally. Path to multichain Chaosnet #MCCN is now available on Miro! The team have released a high-level plan for Chaosnet launch based on the sequence of key activities. The first milestone is multichain testnet #MCTN which the team hope to launch in early November.
- Chaosnet is the next milestone which will support Bitcoin & Binance Chain (before Xmas hopefully)
- Ethereum & ERC20 to fast follow
- Polkadot & Cosmos integration in progress
- Native RUNE underway (reduce reliance on binance chain)
- Flagship wallet (Asgard electron wallet) almost ready for beta
One interesting thing, the team are setting up an ERC20 bridge so RUNE will soon be on Uniswap.
The significance is, we start to absorb liquidity from Ethereum, finding aligned holders of RUNE who will eventually migrate the liquidity off Uniswap into THORChain. That way THORChain isn’t starting from the zero when Ethereum is integrated. There are millions in Ethereum liquidity ready to go.
The common misconception over the past 18 months has been that THORChain is built on Binance Chain, which is wrong. THORChain was built from the ground up to be blockchain agnostic. It’s just that Binance Chain was chosen as the first chain to observe, and RUNE was issued on that chain because it has instant finality & enables the rich state to be passed via the memo fields.
Now that users can play with the multichain testnet they finally get it, realising how powerful THORChain will be once Bitcoin & Ethereum is operational.
Most people don’t think about the real-time, cost and risk involved in swapping assets on a CEX.
Login > deposit > wait > trade > withdraw > wait. It’s a lengthy process filled with 2fa codes and email confirmations. If you don’t have KYC then you’re limited, and your withdrawals can be blocked arbitrarily for “verification”. It’s a dangerous game.
Swapping on THORChain is just one transaction from your wallet. Simple.”
Cryp2Gem team is always available for any further discussions in our social media. Looking forward to all the feedback.
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