Thorchain lending design is indeed unique but it is a place for buying options rather than a lending market

On TC, borrowers are in fact perpetual call options buyers. If the loan is not repaid, then TC keeps the premium (difference between CDR and collateral value) as pure profit.

If borrowers are the call options buyers then TC is the call option seller. Selling options can be a consistent way to generate excess income for TC, but writing naked options can be extremely risky if the market moves against them.

This is what is happening right now. TC had no risks if the $rune goes up and/or call option buyers (borrowers) are not exercising the option (repaying the loan and withdrawing the collateral).

But the $rune price hugely underperformed against collateral assets and if borrowers start repaying, TC has to realize losses by minting and selling more $rune.

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