Incentive Pendulum

THORChain's Incentive Pendulum keeps the network in a balanced state.

THORChain's Incentive Pendulum is an economic mechanism that automatically adjusts reward distribution between node operators and liquidity providers to maintain optimal network security and capital efficiency. The system monitors the balance between bonded RUNE (secured by node operators) and pooled assets, dynamically shifting incentives to correct imbalances. When the network has too much liquidity relative to bonded security, it becomes unsafe, so the pendulum increases node rewards. When there's too much bonded capital relative to liquidity, the network becomes inefficient, so it increases liquidity provider rewards. This creates a self-balancing system that maintains the target 2:1 bond-to-stake ratio essential for THORChain's security model.

Updated and detailed documentation on the Incentive Pendulum can be found in the developer docs.