The growth of the cryptocurrency market has been steady and fast, with the trading capital and the total market capitalization soaring higher every month. The cryptocurrency market is now experiencing an inflow of institutional capital too. This has created a pressing need for alternative crypto trading systems and advanced toolsets.
The Republic network protocol or the REN Protocol attempts to facilitate such investment by assisting complete freedom of movement of value between two different blockchains. This facilitates anonymous trade executions by the investors, ensuring that the tokens are transferred through Dark Pools, in zero-knowledge. Complete anonymity maintained by the REN protocol eliminates the potential risk of confiscations, thefts or interferences.
Thus, the REN network extends liquidity between blockchains for all dApps, empowering investors to transfer any kind of token between any blockchains. The REN network ultimately offers the following:
- A decentralized order book that is hidden from the participants
- A decentralized method of matching orders
- An infrastructure for atomic-swap of ETH, BTC and ERC20
- The incentivization token – REN
What Is The REN Token?
The REN token is a utility token that serves as a security provider to the REN network. The token is regarded as a bond that is required to enable the functioning of a dark node within the REN Network. If any malicious behavior is detected by the network, the bond gets slashed. This ensures that the network always remains secure. The REN token is also treated as a form of order fee, serving as the security and asset of the REN Network.
How Does The REN Protocol Work?
The fundamental goal of the Republic Protocol or REN Protocol is to build a decentralized network of dark nodes that can match orders without learning about the price or volume of the orders. This is achieved by employing cryptographic techniques wherein the orders are broken into a large number of fragments and distributing these fragments throughout the network. Following this, the nodes work to merge the scattered fragments without revealing any information. Then the reconstructed orders are matched with one another. When two orders match, an atomic-swap takes place in a peer-to-peer decentralized network between the two participating traders.
In this system followed, the identity of the traders remains private and secure. The network is capable of matching nodes even if the traders aren’t connected to the network during the matching process. The level of security offered by the protocol is very high as the order remains completely secure till matched. When matched, some basic information of the order is shared with the traders. One of the key features of the system is that no participant can estimate the total liquidity of the REN network.
What is a Dark Pool?
Now that it has been established that the REN network operates through Dark Pool and Dark Nodes, it is necessary to understand what these are exactly. A Dark Pool is a kind of alternative trading system where the investors can trade without exposing their intentions until the trade has been executed successfully. Simply put, a dark pool is a kind of trading system that offers a great deal of privacy.
Generally, purchase and sell orders on a cryptocurrency exchange are announced on a public ledger or an order book. Though this system is perfectly fine for retail traders, it does not suit the needs of the institutional investors who trade in huge volumes investing millions. If the investors broadcast their intention to buy or sell large amounts of an asset, it can cause a drastic shift in the market and result in the traders altering their prices. This necessitates the use of a dark pool where the orders are kept hidden and matched with other orders discreetly. To maintain anonymity, a third party has to be trusted to perform the matching.
The REN dark pool is one step ahead of where the trades aren’t observed by any party and also remain discreet to the REN protocol before the execution of the trade. Since no information is shared with any of the parties involved, the REN network facilitates large trades by maintaining complete anonymity. This prevents slippage and front-running.
As dark pools are prevalent in both, the cryptocurrency marketplace and the traditional financial markets, it seamlessly integrates both the marketplaces to serve as a key infrastructure for the institutional investment movement.
What Is The Utility Of The REN Token?
The REN utility token serves a key role in ensuring the security of the Republic Network Protocol. The token serves as an incentivization token for paying an operating fee. It is also used to pay a bond, earning participation in the Republic Protocol Dark Pool. Let us discuss both these functions in detail here:
- Incentive Payment – The utility token REN serves as a means of paying incentive. The traders are required to pay a small operating fee when they submit an order. This is needed to run a Darknode. All nodes that take part in the process of merging fragments or matching orders receive a share of this fee. This fee is paid by the traders in REN. In order to run a Darknode, 100,000 REN is required. This is the primary function of the REN.
While the payment of such incentive was earlier restricted to REN only, traders now have the flexibility to pay in Ethereum and other cryptocurrencies also.
- Payment of Bonds – The REN Network employs an Ethereum Smart Contract called the Registrar to organize the nodes in a network. In order to join a network, nodes and traders are required to submit a refundable bond to the registrar, gaining access to the network. This bond is also submitted in REN. The bond serves as a layer of security as it prevents malicious nodes and bad traders from participating in the network and placing fake orders.
Traders are no longer needed to submit the bond after the use of zkSNARKS. Although, they are still needed to pay a small fee in REN to open an order.
To sum up, the Republic Protocol aims to unchain liquidity by allowing traders to move value between blockchains. The decentralized dark pool allows easy access and transfer of tokens from any blockchain while allowing the traders to maintain complete anonymity.
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