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The REN Network and Cryptocurrency: A Decentralized way to Wrapp Bitcoin

By 2sats | 2sats | 10 Aug 2021

*obligatory not financial advice*

What is REN?

Right now there are millions of BTC, ZEC and many other coins that are just sitting in a wallet and being HODLed without gaining interest. That is because you cannot directly use Bitcoin on Ethereums DeFi protocols because they are 2 different blockchains. To use BTC on DeFi you would have to first convert it into Wrapped BTC. The problem here is that WBTC is being handled by BitGo, a centralized entity that has control over the private keys of the deposited crypto. Also, what if they don't have enough BTC to back up all their tokens? If you depend on such a third party then there is no point in even using decentralized finance applications. REN offers a solution to this problem by providing a decentralized way to wrapp Bitcoin and other cryptocurrencies.

The different cryptocurrencies and smart contract platforms that are supported by Ren.

How does it work?

On the bridge tool on the REN website users can send 1 of currently 7 different cryptocurrencies to a special wallet that is owned by a smart contract, and receive the same amount of it in "ren"-tokens that can be used on 6 different smart contract platforms, including Ethereum. As example, if you send 2 BTC that you want to use on Ethereum, then you will get 2 renBTC (minus a fee) that you can use like any other token on Ethereum.

All renBTC is always completely backed by Bitcoin held by the smart contract and the network is not in control of one single entity making it possible move cryptocurrencies to a different blockchain in a trust less manner.

The REN network is run by so called Darknodes. This nodes contribute their computer power to process transactions such as the swapping of one cryptocurrency to the "ren"-token of it. Darknodes share their resources because they earn rewards for it, each time a cryptocurrencies is wrapped and unwrapped there are fees that are paid in the coin you are using. If you turn BTC into renBTC, then you have to pay the fee in BTC.

The REN Cryptocurrency

To run a Darknode you need to hold at least 100,000 REN as collateral, which is the main purpose of the coin. This is done to prevent malicious behaviour because anyone running a node would have a lot of capital invested in REN and would want the best for the network. There is a max supply of 1,000,000,000 tokens and there will never be more than that.

The value of the token depends on how many people use the network to bridge different blockchains. If more people use it to transfer their coins, then there will be more fees that Darknodes can earn, and with more money that the Darknodes earn there will be more demand for REN tokens.

The DeFi sector is continuing to grow, so there will be more and more demand to use Bitcoin in DeFi protocols, and people are further losing faith centralized solutions for cryptocurrencies, as we can see with stablecoins like Tether, so there could soon be a lot of demand for decentralized solutions to move Bitcoins to Ethereum. It could soon become very profitable for people and institutions to run a node and since there is a limited supply the value would rise.

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