Core concepts

Therm has a small vocabulary. Each term below maps to something concrete in the contracts, and the rest of the documentation uses these words precisely.

The therm#

A therm is a unit of gas: 1 therm = 100,000 gas. It is not a unit of money. Whatever the base fee does, one therm always pays for 100,000 gas through the Therm paymaster.

The unit is deliberately coarse. Raw gas numbers are unreadable at human scale; a single swap is hundreds of thousands of gas. In therms, a stock-token swap is about 3.2, a USDG transfer about 1.3, and a token approval about 1. Balances are held with 18 decimals, so fractional burns are exact.

Because a therm is a quantity of gas, holding therms means you are long gas at a fixed price. If the base fee doubles, each of your therms pays for the same 100,000 gas, which now costs the pool twice as much ETH.

The locked rate#

The locked rate is what you paid for your therms, expressed in gwei per therm. A rate of 15,000 gwei/therm means each therm cost 0.000015 ETH, equivalent to paying 0.15 gwei per unit of gas.

The rate is fixed at purchase. It is recorded in your pass and is never re-priced: not when the base fee spikes, not when the pool's coverage falls, not when governance changes parameters. If you buy several passes at different rates, your balance has a weighted-average rate, which the app shows so you can compare it with the live base fee.

The pass#

A pass is a single purchase. It records the USDG you paid, the premium taken, the therms minted and the locked rate, and it emits a PassPurchased event you can index. Therms from every pass are fungible once minted; the pass is the receipt, the therms are the goods.

Every pass pays a 3% premium on top of the locked rate. The premium is how the protocol is funded: half buys and burns $THRM, 30% goes to stakers and 20% to the treasury. See Fees & token.

Coverage ratio#

Coverage ratio is the pool's health metric:

coverage = pool ETH ÷ (therms outstanding × 100,000 gas × current base fee)

It answers a blunt question: if every outstanding therm were burned right now, at the current base fee, how many times over could the pool pay? A coverage of 3.0× means three times over. A coverage of 1.0× means exactly once.

The metric is deliberately pessimistic. In practice therms are burned over weeks, not at once, and the hourly cap limits how fast any one address can burn. But it moves the right way at the right time: it falls when the pool sells more therms than its reserves support, and it falls sharply when the base fee spikes. Both are moments when the pool should charge more for new risk, which is exactly what the quote curve does.

First-loss capital#

The pool can lose money. It happens when the base fee the paymaster pays is higher than the rate users locked, for long enough to exhaust the reserve surplus. The protocol needs a clear answer to who pays when that happens.

The answer is stakers of $THRM. Staked THRM is first-loss capital: when the pool's losses exceed its reserve surplus, staked THRM is sold for ETH to cover the shortfall, pro rata across all stakers, before any therm holder is affected. In exchange, stakers earn the spread between locked rates and realised base fees, plus 30% of every premium.

The waterfall, in order:

1. Reserve surplus. ETH in the pool beyond what outstanding therms were sold for.
2. The backstop. Staked THRM, liquidated pro rata.
3. Therm holders. If both are exhausted, sponsorship pauses until the pool is recapitalised. Therms remain valid but cannot be spent in the meantime.

Glossary#