Question:

Swap/economics: How much swap volume does THORChain need to offset emissions? (maybe a tool?)

E.g if we 10x swap volume, the current block emissions can be offset by the additional fees generated from the swaps.

Overview of analysis:

This analysis contains the weekly parameters as below:

• The Swap volume
• The liquidity fee
• The block rewards
• Average swap volume per swap
• Ratio between block reward and liquidity fee

About block rewards on Thorchain

The core of the THORChain protocol consists of a network of nodes, which was built with the help of Tendermint and Cosmos software, and allows the use of combinable modules for the protocol.

Unlike other decentralized exchanges, all cryptocurrencies supported on THORChain are traded via RUNE tokens. Liquidity providers must deposit as many RUNE tokens into the liquidity pool as they wish to exchange.

> Fees are generated by traders every time they make a swap. The height of the fee paid depends on the volume of the swap relative to the depth of the pool. When the swap is bigger, the slippage is greater which is advantageous for liquidity providers. > > by Reference

==Block rewards come from Thorchain's own rewards emissions and are paid to every pool which has processed a swap in that block.==

The emission curve is designed to start at around 30% APR and target 2% after 10 years. At that point, the majority of the revenue will come from fees.

Methodology:

The data provided by Flipside has been utilized to handle this analysis.

• Used table for swaps:

  flipside_prod_db.thorchain.swaps

• Used table for Rewards:

  flipside_prod_db.thorchain.block_rewards

• Ratio calculation:

  reward_usd/total_fee as rate,

  volume*(rate-1) as Volume_required

• Time frame: BLOCK_TIMESTAMP>='2022-01-01'

Results:

Findings:

• The highest volume of swap on Thorchain happened on the first days of April.
• The largest amount of average swap volume per swap occurred on the last days of March.
• Over 218k swaps happened on June 13 with volume of 33.579 million USD.

Findings:

• The ==6.28x== swaps required in 2022 to offset the emissions.
• The block rewards and liquidity fee reveled that the highest difference between them happened on ==March 28 to May 4== and on that week the ratio between block rewards and fee was 5.69.
• The required swap volume in weekly basis shown the largest volume need on March 28 to May 4 with ==over 3 billion USD.
• Only on ==June 13 to 20==, the emission offset by swap fee as can be seen.
• The average swap volume required to offset the emissions in 2022 is about ==456k USD.

References and useful links:

• Block rewards on Thorchain
• Article about Block rewards

Author:

Credited by MZG

Discord handle: m.zamani#0361

Twitter handle: @GargariZamani