THORChain Affiliate Fees Investigation

7 min readJul 31, 2022

# Intro

THORChain is a decentralized cross-chain liquidity protocol that allows users to swap assets between between 7 chains including Bitcoin, Ethereum, Binance Chain, Dogecoin, Litecoin, and Bitcoin Cash. Anyone can use THORChain to swap native assets between any supported chains or deposit their assets to earn yield from swaps. The key selling point of THORChain is that it allows swapping between native assets without relying on wrapped or pegged assets.

With the recent bridge-hacks exceeding $1B in 2022, bridges are now seen as a weak link in DeFi on any chain. This is where THORChain provides clear differentiated value.

# Affiliate Fees

Recently, two popular THORChain interfaces — THORSwap and THORWallet tweeted about affiliate fees and how these will benefit the respective token holders. But first, we need to understand what are affiliate fees.

What are affiliate fees?

Affiliate fees are a way for incentivising a wave of competitive interfaces and decentralising the frontend to THORChain. Affiliate fees are a mechanism to incentivize wallet, exchange and custodial service provider to integrate THORChain. A THORChain interface can charge about 0–10% affiliate fee by just adding the required information to the MEMO.

You can read the complete details in this article.

## Fee Types

Affiliates can charge a fee for two actions:

Swaps
Add Liquidity

Swaps

A memo in the following format is specified by the swapping interface. The fee is swapped into RUNE and sent to the affiliates address. The affiliate address is required to be a thorchain address or THORName.

SWAP:CHAIN.ASSET:DESTINATION:LIMIT:AFFILIATE:FEE

EG:

SWAP:THOR.RUNE:tthor1zpa4c6zpa4cyz9s93xuje2pwkswsqzn2zpa4c:3141441780:tthor1ql2tcqyrqsgnql2tcqyj2n8kfdmt9lh0yzql2tcqy:10

Add Liquidity

Similarly, a memo of the following format can be specified while adding liquidity to a pool.

ADD:CHAIN.ASSET:ADDRESS:AFFILIATE:FEE

EG:

ADD:THOR.RUNE:tbc1zpa4c6zpa4cyz9s93xuje2pwkswsqzn2zpa4c:tthor1ql2tcqyrqsgnql2tcqyj2n8kfdmt9lh0yzql2tcqy:10

Here’s a real world example of how the memo looks like on a real transaction:

https://v2.viewblock.io/thorchain/tx/1A2798CBE4C704B210BD3CB1C5350B3967E24D21FAC4B3CDED8CCF97A6FE4957

# Analysis

In this article, I’m exploring how these two interfaces and any other affiliates that have been earning these fees from THORChain interactions.

## Key Findings

THORSwap is the most popular interface and has collected nearly ~$700K in fees in the first 3 months since starting collection.
Based on $700K collected in 3-months, THORSwap’s annualized revenue amounts to ~$2.8M!
Almost 50% of these fees were collected in the first 3 weeks of turning on the fees. The weekly collected fees have been massively impacted by the crash of Terra and 3AC crypto contagion.
THORWallet is another popular interface which collects fee on both Swap and Add Liquidity actions is in #2 place. It has collected around ~$250K in fees even though it has been live for 7-months.

## Overall Numbers

Overall, we see that:

The most popular interface — THORSwap — has collected around $684K in fees since turning on fees 3 months ago. That’s an annualized revenue of about $2.8M!
The lesser known THORWallet has also earned around $234K.
DefiSpot which only turned on affiliate fees for about 2 months in beta, earned around $16K.

There is another wallet thor1m5g...vw2z which has earned the most in fees (around ~$1M) but as we’ll see later, I believe this is someone testing rather than being an actual popular interface.
THORSwap accounts for ~33% of the fees collected while THORWallet accounts for ~11.3%.

## Fees collected over time

The first thing to notice about the following chart is that the top wallet thor1m5g...vw2z has only collected fees for a few weeks in October 2021 and then a major amount of fees in a 1 month period between March 14th and April 14th 2021. Therefore, it’s likely this is someone testing the system.
We can see that THORWallet’s affiliate fees have been active since January 2022 while THORSwap turned on the fees in April 2022.
Most of the weeks THORSwap dominates almost 90% of the collected fees.

Using a 100% stacked area chart to see the share of weekly fees collected, we can see that for the longest time, THORWallet was the only game in town and dominated nearly 100% of the weekly fees. Since THORSwap turned on their fee collection in April, they now dominate 90% of the weekly fee collection.

Looking at the cumulative collected fees chart, we can see that THORSwap overtook THORWallet, with a ~5-month head start, in the first week for total fees collected! 😅

## Affiliate fees over time

Next, we look at how the fees have been changing over time. Specifically, we’re looking at the daily average fee taking into account all the daily transactions.

One thing to note is the THORChain feature called Dynamic Fees — Interfaces can elect to set between 0 and 1000 basis points (10%) of the transaction, which means they can use dynamic fees, such as 1–10 BP for large amounts ($10k+), and up to 1000 (10%) for really small amounts ($100). It’s up to them to set their own thresholds.

Here we find that THORWallet’s fee has been averaging between 0.3% to 0.9%. More on this below.
THORSwap’s fee has been static around 0.3%.
DefiSpot in their testing set the fees around 0.4%.

THORWallet Fee Tiers

THORWallet’s average daily fees have been fluctuating because of the community tier model. Based on how many TGT tokens have been staked by the users, a user can be charged between 0.1–1% fees.

## Fees collected by action type

As we discussed before, interfaces are collected for two actions types — Swap and Add Liquidity.

We can see that for most of the weeks, the Swap action has collected most fees. The “Add Liquidity” action shows significant collection in the March-April time-frame but as we saw before, this is from one wallet thor1m5g...vw2z which is likely to be testing.

Even though the “Add Liquidity” action seems to be tested in March-April by a single wallet, THORWallet does charge fees for “Add Liquidity” action while “THORSwap” does not.

Overall, we can see that the “Add Liquidity” action has collected around $1.2M while “Swap” has collected around $900K.

## THORSwap

Now, we focus our gaze on the two most popular interfaces — THORSwap and THORWallet.

Looking at the weekly collection, we can see THORSwap start with a bang and collecting over $100K+ in the first 3 weeks!

Unfortunately, 3 weeks after turning on fees is when Terra crashed the week of May 9th and we can see an immediate drop in the fees collected. The 3AC crash in the week of June 19th didn’t help either as we see another leg down.

Looking at the fees collected per action type, we can see that THORSwap so far is only collecting fees on “Swap” actions. So, there is a potential revenue lever that they can still pull.

## THORWallet

Compared to THORSwap, THORWallet is collecting fees on “Add Liquidity” action. We can see that most of the weeks, the Swap actions turns most of the fees but we do see some weeks with massive fees collected in the “Add Liquidity” actions.

Overall, the Swap action has collected about ~$150K while “Add Liquidity” actions has collected about $75K.

## DefiSpot

DefiSpot only collected affiliate fees in their beta test and have since turned these off so I didn’t include them in the detailed analysis.

## DecentralFi

DecentralFi was another interface that I found testing collecting affiliate fees. However, they haven’t started collecting fees yet as seen by the 0 basis point in the below transactions. This affiliate is using the following wallet address `thor198d7hmxx9xptw8w3vswys30ss074selch3jw2p` or THORName ‘decentralfi’ for collecting fees.