THORChain Converts $200 Million of Debt into Equity with TCY Token
On February 3, THORChain's decentralized autonomous community (DAO) approved a proposal to convert approximately $200 million of defaulted debt into equity by issuing a new token, TCY (Thorchain Yield). The initiative, known as Proposal 6, received strong support from the community and validators.
Key Details about TCY Token
- Fixed supply of 200 million TCY tokens.
- TCY holders will receive 10% of THORChain’s revenue indefinitely.
- Creditors will receive 1 TCY for every dollar of defaulted debt, converting them into equity stakeholders.
- A RUNE/TCY liquidity pool will be launched with an initial $500,000 in liquidity, pricing TCY at $0.10 per token.
- $5 million allocated from the treasury to ensure price stability and accessibility.
- Previous users of THORFi’s Savers and Lending programs will have their holdings converted to TCY tokens.
Background on Financial Crisis
THORChain's decision to issue TCY follows a financial crisis that led to the suspension of THORFi services on January 23 due to excessive leverage and risk exposure in its lending structure. This resulted in a liquidity deficit, hindering the ability to honor withdrawals. To stabilize the balance sheet, THORChain opted for a debt-to-equity conversion.
THORChain is among several blockchain projects facing liquidity challenges; notable examples include FTX, which filed for bankruptcy in November 2022, and other platforms like Celsius Network and BlockFi that experienced similar issues in 2022.