THORChain, a decentralized liquidity protocol, has reached a significant milestone by surpassing $10 billion in total monthly trading volume for the first time ever. Concurrently, Bitcoin's price decline to $70,095 has sparked debates among its proponents about the safety of using THORChain for borrowing.

THORChain's Milestone and Bitcoin Maximalist Debate

On March 27, the official social media account for THORChain, known as X, proudly announced a historic achievement. Data from Runscan indicated that the decentralized liquidity protocol had exceeded $10.26 billion in trading volume for the month.

Following this announcement, Bitcoin maximalists engaged in a lively discussion regarding the security of THORChain and its suitability for Bitcoin holders looking for interest-free loans. Mathematician and Bitcoin investor Fred Krueger supported THORChain as a "real" platform, suggesting that BTC-backed loans on the protocol were a secure option for those in need of liquidity.

In contrast, Bitcoin analyst Dylan Le Clair raised doubts about the safety of Bitcoin collateralized loans on THORChain. Le Clair argued that relying on the exchange rate of an altcoin for a "0% interest, no liquidation risk" loan simply shifts the risk instead of eliminating it.

THORChain’s Evolving Lending Model

In its recent upgrade on January 30, THORChain made substantial changes to its collateral requirements for Bitcoin and Ether. These requirements were reduced from 400% to 200%, allowing users to borrow up to half of the total value of their provided assets.

On March 10, analyst Chris Blec commented on THORChain’s no-liquidation lending model, describing it as "interesting." However, he highlighted two main concerns associated with this concept.

Investors face the risk of lending their Bitcoin to a protocol that may collapse or become susceptible to exploitation. THORChain encountered such an incident in 2021, although the funds were eventually returned.

Additionally, investors rely on a centralized provider not altering its terms and conditions in the future, potentially exposing their loans to unforeseen risks.

It is important to note that THORChain faced challenges in 2023, leading to the protocol halting its mainnet twice due to reported security vulnerabilities. These incidents underscore the ongoing difficulties in maintaining the security and stability of decentralized platforms like THORChain.

Important: Please be aware that this article is purely informative and should not be construed as legal, tax, investment, financial, or any other type of advice.