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THORChain’s node operators approved a plan to convert $200 million in debt into equity tokens, but community members are raising concerns over its long-term viability.
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Decentralized liquidity protocol THORChain’s node operators approved a proposal to solve its liquidity issues by converting the platform’s defaulted debt into equity.
On Jan. 23, THORChain suspended its lending and savers programs for Bitcoin (BTC) and Ether (ETH) to prevent an insolvency crisis and restructure the protocol’s debt. The platform paused ThorFi redemptions for 90 days to allow the community to develop a plan to stabilize its operations.
Following the pause, the THORChain community proposed different restructuring plans to ensure the network’s continued operation while compensating affected users.
On Feb. 2, the platform’s node operators approved a proposal that involves converting its defaulted debt into tokens representing equity in the platform.
Source: THORChain
Converting $200 million in debt into equity
The approved plan involves minting 200 million “TCY” tokens and airdropping them to affected users. Each token will represent $1 of the platform’s debt, allowing users to claim one TCY per dollar owed.
According to the plan, the new token will receive 10% of the network’s revenue in perpetuity. Maya Protocol’s Aaluxx Myth, the pseudonymous author of the proposal, described the plan as follows:
“TCY gets 10% of fees in perpetuity paid out in RUNE every 24 hours pro-rate to TCY holdings, like $MAYA, uncapping upside potential for new liquidity bailing out users. Risk-averse users can sell the RUNE to any asset of their choosing every day.”
Furthermore, the THORChain treasury would create a liquidity pool allowing tokenholders to sell their claims at their own discretion. The platform said the plan allows creditors to exit on their own terms as market demand for THORChain’s revenue “materializes in the token’s price.”
While the protocol has set up its plan, it is still finalizing the timeline and specifics.
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Community members disagree with the restructuring plan
While the restructuring plan aims to repay investors, some community members have raised concerns.
One community member wrote on X that the restructuring plan is complicated and would require additional investment and trust in THORChain, which has “a history of mismanaging money and trust.” The user said that with the plan, new capital entering is “permanently taxed.”
Source: Rowdy Node
Meanwhile, the issuance of a new token that grants holders 10% of the platform’s revenue has raised concerns about whether it qualifies as an unregistered security. Another X user speculated that, as a result, THORChain could face legal action.
Another community member seemed unconvinced about the tokens receiving revenue in perpetuity. The X user said it would only be until the platform changes its mind.
Cointelegraph reached out to THORChain for comment but had not heard back by the time of publishing.
This article first appeared at Cointelegraph.com News
