An introduction to THORChain

THORChain is a decentralised cross-chain liquidity protocol based on Tendermint and Cosmos-SDK and utilizing Threshold Signature Scheme (TSS). It does not peg or wrap assets; it simply determines how to move them in response to user-actions. THORChain observes incoming user deposits to vaults, executes business logic (swap, add/remove liquidity), and processes outbound transactions. THORChain is primarily a leaderless vault manager, ensuring that every stage of the process is byzantine-fault-tolerant. THORChain's key objective is to be resistant to centralization and capture whilst facilitating cross-chain liquidity. THORChain only secures the assets in its vaults, and has economic guarantees that those assets are safe.

Aims of this study

As stated in the bounty, we have aimed to study the relation between distributed rewards and swap fees. It is asked to find the total amount of distributed rewards for pools of THORChain and monitor the ratio of reward to fee over time. As a results, we employed “thorchain.swaps” to find swap fees amount and “thorchain.total_block_rewards” table to extract the data associated to rewards.

Findings and Discussion

As the first step, the total amount of distributed rewards and generated swap fees by all pools were found. The results are shown in following table. Also, the reward to fee ratio was calculated as 0.78. This means that, 78% of generated fees are distributed among delegators.

For the second step, distributed rewards and generated swap fees were evaluated separately for each pool. The results are depicted in following figure. Also, the reward to fee ratio was calculated and added to the figure. No clear trend can be found when data are processed in this manner.

As the last step, the total amount of distributed rewards, generated swap fees and reward to fee ratio for all pools were calculated and presented in figure 2 on a daily basis. between April 11, 2021 and October 21, 2021 an almost increasing trend in reward to fee ratio can be detected. So, it can be claimed that pools performance was getting better in this period. The reason behind this claim is that when reward to fee ratio increases it can be attributed to increase in reward and decrease to fee. From October 21, 2021 onward, we see a significant decrease in reward to fee ratio and then, the trend remains nearly constant.

Conclusion

A comprehensive study was conducted on distributed rewards and swap fees of THORChain’s pools. The ratio of total reward to total fee was found as 0.78 which means that 78% of generated fees are distributed between delegators as reward. Also, the monitoring of reward to fee ratio against time, reveals that this ratio was increasing to October 21, 2022 and then remains almost constant.