The Rujira alliance: Thorchain and Kujira build the future of DeFi?

Background and Context

What is Kujira?

Kujira is a decentralized finance (DeFi) project that emerged in 2020, initially built on the Terra blockchain. The main product developed by Kujira is Orca, one of the first protocols allowing users to participate in "Liquidation Bidding," a financial activity previously reserved for institutional players.

In simple terms, Orca allowed users to bid on defaulted loans held by other investors at discounted prices. This innovation quickly attracted a large community during a time when DeFi was experiencing tremendous growth.

However, 2022 marked a significant turning point in Kujira's history with the dramatic collapse of the Terra ecosystem. Within just two months, Kujira executed a bold pivot by developing its own layer-1 blockchain based on Cosmos and migrating its entire protocol and liquidity.

Kujira became one of the few projects to successfully shield its users from the fallout of this crisis. This transition also marked its evolution from a simple liquidation tool to a complete suite of DeFi products, including an on-chain order book, lending tools, and more.

What is Thorchain?

Thorchain is a blockchain developed in 2018 with the ambition of creating a cross-chain decentralized exchange (DEX), enabling users to exchange assets from one network to another without requiring wrapped tokens or intermediaries.

From a technical perspective, Thorchain is a blockchain using a Proof of Stake mechanism, built with Cosmos tools, specifically the Cosmos SDK and Tendermint BFT. It supports a unique protocol called Bifröst, designed to facilitate secure, direct transfers of assets across compatible blockchains such as Bitcoin, Ethereum, BNB Chain, and others.

Thorchain operates through continuous liquidity pools, where the native token, RUNE, serves as the cornerstone. As the pivot of every trading pair, RUNE ensures transaction stability and network security. Today, Thorchain is recognized as a key player in the DeFi ecosystem, with approximately $300 million in Total Value Locked (TVL) and annualized revenues exceeding $50 million.

---

The Kujira x Thorchain Alliance

Context for Kujira: Overcoming Challenges

Since its inception, Kujira has faced turbulent times. The collapse of the Terra ecosystem in 2022 tested its resilience and adaptability, but it was in 2024 that the situation became even more critical. Recently revealed vulnerabilities, particularly in treasury management, have jeopardized the project's future.

To summarize, Kujira's operational team wallets held loan positions collateralized with part of the treasury in KUJI tokens. This allowed them to borrow stablecoins to provide liquidity for the ecosystem (a practice that was not publicly disclosed).

However, the price of KUJI plummeted sharply in August 2024, dropping from $0.85 to $0.60 within days. Kujira's wallet positions underwent a series of major liquidations, triggering another drop in KUJI's price. Total losses are estimated at $2.7 million, or about 30% of the reserve.

The problem extended further. As Kujira's borrowing positions represented significant amounts for the protocol involved, they posed a systemic risk. Consequently, Kujira lacked the funds to repay the debts, leaving users who had deposited their crypto in loans unable to retrieve them.

Faced with this crisis, Kujira's team acknowledged the need for strategic and operational reinforcement to ensure the project's long-term viability. It was in this context that the alliance with Thorchain emerged as a necessity to revive the project, restore user trust, and address structural challenges.

Synergy with Thorchain: A Strategic Alliance

Kujira's recovery plan involved raising funds by selling part of the KUJI tokens held in the team's operational wallets. The goal was to accumulate sufficient capital to repay the debt linked to the liquidated positions and allow lenders to recover their funds.

In this context, Thorchain's founder, JPThor, proposed covering Kujira's entire debt using his personal funds. In return, an agreement was reached to integrate Kujira's suite of tools and development teams into the Thorchain ecosystem.

This alliance has materialized in the creation of Rujira, a new layer designed on the Thorchain network, integrating all products from the Kujira ecosystem. In essence, it represents Kujira's migration from its own layer-1 blockchain to a parallel network on Thorchain.

From a technical standpoint, the tokens from various protocols (KUJI, FUZN, NSTK, etc.) will be replaced with a single token, RUJI. Financially, revenues generated by Kujira will now be shared 50% with Thorchain validators. Operationally, JPThor will take on the role of Project Lead for Kujira.

Key takeaways from the Thorchain and Kujira alliance:

• For Kujira: Debt repayment and restoration of user trust, along with long-term financial stability through access to Thorchain's liquidity and user base.
• For Thorchain: A further step in a broader plan to acquire other projects, enabling ecosystem expansion, increased product offerings, and user base growth. This also creates new revenue opportunities through the implementation of revenue-sharing models with Kujira.

---

The Rujira Plan

What is Rujira?

The result of the Kujira and Thorchain alliance has a name: Rujira. This represents more than a simple merger; it marks a new chapter in the strategy of both projects. Rujira is the first consumer chain on Thorchain, offering a complete suite of DeFi tools and applications.

These tools, inherited from Kujira’s products, will be deployed on Thorchain’s enhanced technological infrastructure. They include FIN (on-chain order book), BOW (liquidity pools), GHOST (lending and borrowing), ORCA (liquidation mechanism), and PILOT (launchpad). These protocols will undergo re-audits and gain access to a broader user base and liquidity.

Rujira will revolve around RUJI, a central token within this unified ecosystem. RUJI will consolidate all existing tokens from Kujira and affiliated projects through a progressive conversion mechanism over 12 months. This pivot will harmonize governance and economic incentives while simplifying the user experience.

Rujira’s Features

Rujira will offer an extensive range of DeFi tools, designed to meet the needs of users, whether they are retail investors or institutions. Each product is crafted to provide advanced functionality while seamlessly integrating into the Thorchain ecosystem.

• Ruji Trade: A successor to the Fin Exchange protocol, Ruji Trade will be a decentralized exchange featuring a fully on-chain order book. It will leverage Rujira’s AMM and Thorchain’s liquidity pools while also offering OTC trading functionality.
• Ruji Pools: Building on the BOW protocol, Ruji Pools is designed to deliver Automated Market Maker (AMM) strategies and strengthen liquidity available on the Ruji Trade exchange.
• Ruji Perps: Based on the Levana protocol, Ruji Perps is a decentralized platform for perpetual futures trading. It incorporates liquidity provisioning mechanisms to ensure solvency even during periods of high volatility and provides standard tools for traders.
• Ruji Lending: Inherited from the GHOST protocol, Ruji Lending will offer decentralized lending and borrowing services based on an over-collateralization model. These services will be executed cross-chain and without the need for wrapped tokens, leveraging Thorchain’s intrinsic design.
• Ruji Liquidation: A continuation of the ORCA protocol, Ruji Liquidation will function as a marketplace where users can bid on near-liquidation positions and purchase liquidated assets through auctions, complete with bot protection mechanisms.
• Ruji Ventures and Options: These modules will allow users to participate in fundraising campaigns and access more complex financial products, which are typically reserved for institutional investors.

---

Thorchain’s Vision for the Future

The alliance with Kujira is one step in Thorchain’s broader strategy to become a critical infrastructure player in DeFi. Thorchain aims to integrate complementary projects to expand its ecosystem, pool resources, and attract new users through technological and economic synergies.

Thorchain takes a proactive approach to acquisitions and integrations, seeking strategic projects that enhance its technical capabilities and service offerings. Rujira symbolizes this vision, particularly embodied by Thorchain’s founder, JPThor.

As an application layer built on Thorchain, Rujira provides an environment where developers can design tailor-made applications with interoperability across major networks and native liquidity. Above all, it diversifies Thorchain’s products and services, offering users a better experience.

Looking at similar examples, adding CosmWasm and IBC (Inter-Blockchain Communication) compatibility to Thorchain by the end of 2024 paves the way for deeper integration with the Cosmos ecosystem and improved cross-chain communication. Similarly, signing a multi-year agreement with HypernativeLabs enhances the security of the entire ecosystem.

In a future article, we will delve deeper into Thorchain’s strategy and the vision of its founder, JPThor.