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SamYap
@samyap
How does @THORChain works? 1- It's a cross-chain AMM, LP style. In simple terms, think about a pool with native BTC + native ETH (without being constrained by both assets needing to be on the same chain).
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SamYap
@samyap
So user can swap between those assets, or deposit both assets as a LP provider. (Actually, all pools in TC are paired with RUNE, but we will get back to this later).
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SamYap
@samyap
2- Unlike e.g. Uniswap (where it's just smart contracts on an EVM), how would you manage a LP with native BTC + native ETH? Well, those native BTC have to be in a BTC address on the BTC blockchain; and the native ETH in an Ethereum address on the Ethereum blockchain.
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SamYap
@samyap
Here is where the magic of MPC TSS comes in. This allows a group of decentralized nodes to manage BTC/ETH addresses, but in a trust-minimized way, without the private keys ever being exposed, even between those nodes themselves.
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SamYap
@samyap
3- Great! But how do those nodes agree to the accounting of the BTC/ETH LP? Here is where the magic of Cosmos SDK based app-chain comes in. Let's build an independant blockchain to act as the "state machine". Where LP accounting can be tracked via blockchain consensus mechanisms
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SamYap
@samyap
4- Now, how do we ensure the nodes don't just collude and steal the BTC/ETH away? 4a- First, let's make sure all the nodes bond/stake something of value (the $RUNE coin), and the bond value must always be higher than the external assets (BTC/ETH) managed by these nodes.
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