After the FTX collapse, we saw a series of bank runs from centralized exchanges. Although none of these have collapsed (yet), the FTX damage is still firmly entrenched in the public consciousness. Fortunately, there are already solutions to meet the need.
ThorChain and the Maya Protocol go hand-in-hand to offer the rightfully suspicious traders a self-perpetuating, permissionless, and decentralized exchange. But first, what is the relationship between ThorChain and Maya?
ThorChain explained
After four years of development, the ambitious ThorChain project finally launched its mainnet in June 2022. Powered by RUNE tokens, ThorChain is a cross-chain liquidity network that operates Thor nodes on the top 8 blockchain networks: Bitcoin, Ethereum, Binance Chain, Avalanche , Cosmos Hub, Dogecoin, Litecoin and Bitcoin Cash.
By working together between these chains, Thor nodes create a permissionless network for cryptocurrency exchanges. On a centralized exchange (CEX) like the now-bankrupt FTX, clients rely on the honesty of counterparties when exchanging assets. And when this honesty turns out to be an illusion, the customers’ custodian banks (stock exchange accounts) are lost.
In stark contrast to such dangers, ThorChain uses a cross-chain technology called Continuous Liquidity Pools (CLPs). Without relying on counterparties, each asset in a CLP is represented by its own pool of liquidity. These pools, in turn, are continually rebalanced by arbitrageurs and liquidity providers.
The total volume of ThorChain in the liquidity pools since the network was launched. Source: thorchain.org
As a result, the exchange rate between two assets is preserved, allowing users to access them with their self-custody wallets.
The role of RUNE tokens is to both facilitate cross-chain transactions and pay network fees. Although ThorChain is not a proof-of-stake blockchain in the traditional sense, its Tendermint consensus engine uses validators’ staked RUNE capital to confirm transactions and maintain the security of the network.
Interestingly, the popular Trust wallet uses ThorChain’s innovative technology to enable the revolutionary cross-chain swaps.
What role does Maya play in the ThorChain ecosystem?
Just like ThorChain itself, Maya uses the Cosmos SDK infrastructure as a modular framework for building decentralized applications (dApps). As such, Maya is a decentralized liquidity protocol for asset exchanges over the aforementioned blockchain networks.
Unlike vampiric forks that siphon off the value of the original network, MayaChain is a friendly fork that complements ThorChain. After two years of hard work, Maya developers have finally set a date for the protocol to launch on March 7, 2023.
To get a taste of Maya’s capabilities, it is possible to trade cryptocurrencies before this date. For example, if you want to trade native Bitcoin for native Ether, head over to Maya Stagenet, a beta precursor to the mainnet launch. However, in this sandbox environment, the likelihood of slippage is high.
Previously, one had to first convert Bitcoin to an ERC-20 token like Wrapped Bitcoin and only then convert it to ETH.
Why is Maya needed when ThorChain is already there?
As a friendly ThorChain fork that inherits the security of the chain, Maya will have a public and transparent “fair launch” rollout. This means that unlike typical token drops, Maya’s CACAO drop will not have early whales/investors or core teams that benefit from early pricing.
In addition, Maya’s capital efficiency is doubled compared to ThorChain. Capital efficiency is the hallmark of liquidity pools as the liquidity pool is able to maximize available assets to generate income via swap fees.
For example, a liquidity pool with high capital efficiency can generate more revenue with less capital, benefiting both traders and the protocol. Typically, liquidity pools have higher capital efficiency than traditional order book exchanges, as the latter’s capital is tied up until a matching trade is executed.
Consequently, capital remains unused, ie it does not generate any income. As an evolution of order-book based exchanges, assets in liquidity pools are always available for trading and continually generate revenue through fees.
So, the goal of capital efficiency in liquidity pools is to strike a balance between sufficient liquidity for token swaps and minimizing idle capital. The Maya Protocol has optimized this balance so that node operators can provide liquidity with their invested capital.
Additionally, Maya’s native liquidity token, CACAO, can be transferred (exported) to secure other sidechains on the protocol. This could be future NFT marketplaces and other EVM compatible smart contract platforms. Maya also brings reliability and redundancy to the space, like MasterCard or Visa.
What does the Maya rollout include?
To fill its cash box, Maya will perform a CACAO fair drop from the mainnet launch on March 7, 2023. For example, if you deposit $10,000 worth of BTC, you will receive $10,000 worth of CACAO tokens while still keeping all the BTC.
This “Liquidity Auction” (LA) lasts 21 days and allows you to participate with a wide range of assets: BTC, ETH, USDT, USDC and RUNE.
MAYA tokens will also be distributed during this time. Nonetheless, MAYA tokens only serve as the protocol’s revenue-collecting token, similar to RUNE, rather than being paired with other tokens for swaps or used to pay network fees.
To be eligible to receive MAYA tokens, one must own either RUNE tokens or Mayan Mask NFTs available on OpenSea, or participate in the market launch with liquidity using the Tier 1 option.
As you may have noticed, CACAO/MAYA’s dual tokenomics system is designed to facilitate a fair start. Finally, selling pressure for MAYA tokens will be reduced due to their limited rollout.
Maya, after the rollout
After launch, Maya will offer token swaps for the following cryptocurrencies: Bitcoin, Ether and ThorChain. BTC and ETH were intentionally included as pseudo-stablecoin carriers in these uncertain macro conditions given their high market cap status, which is less volatile than other altcoins.
However, when the Liquidity Auction (LA) is completed after 21 days, Maya will support Dash and Kujira, followed by Osmosis and BSC.
After the four cryptocurrencies are integrated, Maya will likely also support Cardano, which has yet to be determined.
In the event that Mayas LA is discontinued, all assets will be refunded (refunded) minus the network fee. On the other hand, if the LA is successfully completed but the liquidity pools are insufficient, there will be a Ragnarok event.
The Ragnarok event occurs when the minimum viability of the protocol, which is set at $3 million to $5 million, has not been met, resulting in refunds. Below this minimum and when the LA is complete, Stages 2 and 3 of the protocol are trimmed by 25% and 15%, respectively, while Stage 1 remains whole. These are the 3 levels available.
So, based on users’ liquidity contributions during Maya’s Liquidity Auction (LA), they will receive different withdrawal limits and rewards.
When yield farming, BTC, ETH, and RUNE will have similar real returns as ThorChain’s asymmetric staking. For example, if a liquidity provider stakes a token for one side of the token pair pool and exits the pool to settle on behalf of the LP, the LP will be left with fewer RUNE tokens than when it started.
In the immediate post-launch Maya roadmap, users can also expect to see Saver Vaults. They will serve as BTC, ETH, and RUNE repositories without users becoming Liquidity Providers (LPs). This upcoming feature is a popular carryover from ThorChain’s own Saver Vaults.
How do I start early with Maya’s CACAO Fair Drop?
Given its ThorChain heritage, the best way to participate in the liquidity auction is through the ThorWallet, a state-of-the-art decentralized finance (DeFi) self-custody wallet. The ThorWallet is available in both the Apple and Google stores.
The Maya protocol itself was audited by Halborn Security, founded in 2019 by ethical hacker Steven Walbroehl. Since then, Halborn Security’s team has grown to over 100 security specialists working to minimize exploits on the Web3/DeFi boundary.
Note: This explainer was sponsored by Maya Protocol
Disclaimer for the series:
This series article is for general guidance and information only for beginners participating in cryptocurrencies and DeFi. Nothing in this article should be construed as legal, business, investment or tax advice. Consult your advisors for all legal, business, investment and tax implications and advice. The Defiant is not liable for lost funds. Please use your best judgment and exercise due diligence before interacting with Smart Contracts.
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