THORChain Governance Proposal

THORChain’s governance body approved a significant proposal to restructure and address its debt crisis by converting defaulted debt into equity tokens.

Proposal Details

A majority of THORChain’s validators passed Governance Proposal 6, reflecting community consensus on handling the protocol’s nearly $200 million debt crisis.

On January 23, THORChain suspended its THORFi services, including “Savers and Lending” programs, due to ongoing financial uncertainties. A 90-day restructuring plan began to address accumulated unserviceable debt in these services.

The approved community plan involves converting this debt into equity through a new token—TCY (Thorchain Yield)—with a total supply of 200 million tokens.

Debt Conversion Process

Instead of repaying loans in Bitcoin or Ether, lenders and savers will receive TCY tokens, effectively transforming their debt claims into equity within the THORChain ecosystem.

Holders of TCY will be entitled to 10% of THORChain’s revenue indefinitely. As the THORChain team stated, “THORChain will convert ~$200M of debt into equity through a new token that will receive 10% of network revenue in perpetuity.”

Minting and Liquidity Plan

The proposal includes minting 200 million TCY tokens, distributed at a ratio of 1 TCY per dollar of defaulted debt. The core team plans to create a RUNE/TCY liquidity pool with $500,000 in liquidity at a rate of $0.1 per TCY, funded with $5 million from the treasury.

This transition means individuals with funds in the network’s lending and savings programs (ThorFi) will have their holdings converted to TCY instead of receiving repayments in the original asset.

Market Impact

Despite the restructuring announcement and proposal 6, RUNE has seen a significant price drop of 35% in the past week amid a wider altcoin sell-off, decreasing from $2 to $1.3. The token has lost over 70% of its value in the past 30 days.

Despite these challenges, THORChain has maintained its swap volume, processing $270 million in the last 24 hours.