First, Chris Coney explained liquidity pools, and how they work. Then last week, he broke down receipt tokens and their many uses.
But there is one drawback to these pools — you're usually limited to deposit assets that are native to the network the pools are on.
For example, if you want to deposit Solana (SOL, Tech/Adoption Grade "D") in a liquidity pool, you'll only be able to do that on a platform built on the Solana network.
This division between networks causes hiccups beyond just liquidity providing. Swapping assets, for example, can only be done with two assets on the same network. So far, there are three ways traders have gotten around this hurdle:
1. One asset is actually a "wrapped" version, designed to operate on a non-native network. With wrapped tokens, the value is the same, but you likely won't be able to utilize it to the extent you could with a native token.
2. You could swap asset A for a wrapped version of asset B, then bridge wrapped B over to its native blockchain to change it into its native version. This method has several transactions, all of which generate gas fees which can easily add up.
3. You could swap assets 1-for-1 on a centralized exchange. The drawback there is that, because you're not using decentralized finance, you're temporarily relinquishing ownership of your assets.
Enter THORChain (RUNE, Tech/Adoption Grade "C+"). This platform's primary goal is to enhance interchain operability — i.e., allowing blockchains to interact with one another without the need for wrapped assets or bridging.
As Chris Coney describes it, THORChain is the "interstate system" that connects other networks.
In a previous Sunday Special, Weiss Crypto Portfolio editor Juan Villaverde said that interchain operability will be the future of DeFi. THORChain will help bring that future closer.
Watch our latest Weiss Crypto Sunday Special now for the full story.
Best,
Beth Canova
Managing Editor
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