Where does the money in the THORChain 'reserve pool' come from?
The money in the reserve pool (used to offset any difference in value between synthetic assets and their underlying assets, preventing impermanent loss for liquidity providers), is sourced from a percentage of transaction fees charged by the THORChain network.
These fees are collected and added to the reserve pool, which is then used to provide liquidity for THORChain's synthetic assets and pay out rewards to liquidity providers/node operators.
Can the THORChain 'reserve pool' run out of money?
Technically the answer is yes, you're right that reserves like this always have their limits.
All I can find is this really old 2021 Twitter thread addressing the issue:
But in 2023 it sounds like there's now over $1 BILLION in the reserve.
What would happen if one token in an LP goes down to zero?
I think that in this scenario, you's have bigger problems than simple 'impermanent loss' lol.
But the reserve pool isn't there to act as an insurance backstop for dodgy assets that are destined to go to zero (remember THORChain doesn't list scam coins like say BSC does).
It's more of a good faith type of thing to ensure the little guy doesn't get screwed by IL.
If they don't get screwed, then THORChain pools end up with more liquidity and everyone wins.
Posted Using LeoFinance Beta
