34 [THOR] Season of Swapping
Continuous Liquidity Pools
Swaps on THORChain are made possible by liquidity pools. These are pools of assets deposited by Liquidity providers, where each pool consists of 1 connected asset, for example Bitcoin, and THORChain's own asset, RUNE. They're called Continuous Liquidity Pools because RUNE, being in each pool, links all pools together in a single, continuous liquidity network.
When a user swaps 2 connected assets on THORChain, they swap between two pools:
- Swap to RUNE in the first pool,
- Move that RUNE into the second pool,
- Swap to the desired asset in the second pool with the RUNE from (2)
The THORChain state machine handles this swap in one go, so the user is never handles RUNE.
Costs
The cost of a swap is made up of two parts:
- Outbound Fee
- Price Slippage
All swaps are charged a network fee. The network fee is dynamic – it's calculated by averaging a set of recent gas prices.
Note that users who force their swaps through quickly cause large slips and pay larger fees to liquidity providers.