Today's guide is going to be about Ren (REN), a project that's working on interoperability solutions, a highly researched space. If you're interested in reading my other guides, you can check them on my page. I've written on projects like WAX (WAXP), Golem Network Token (GNT) and Tezos (XTZ).
It’s been 10 years since the blockchain and cryptocurrency market was born, but it’s still anything but mature. Only now has it gotten the attention of incumbents in existing industries and gained a legitimacy that shows that it is here to stay - after much mockery and resistance, I might add.
The earliness of the technology shows, with there being several critical obstacles to full-scale global adoption. In addition to UI/UX challenges, these obstacles are (for the most part) what are preventing everyday citizens and global institutions from unquestioningly accepting digital currencies as the de facto way we exchange value.
As exciting as being able to transfer money from one part of the world to the other practically instantaneously is, we all know that the technology is about much more than that. It’s about fundamentally changing the way we interact with each other.
The current issue with reaching the full potential of decentralizing the exchange of value is that the technology is still quite straitjacketed. If I’ve got assets on one blockchain and you’ve got one on another, there is quite a lot of difficulty in getting these assets to work with each other.
Assume that I want to trade some Bitcoin for an equivalent amount of the Litecoin you have. Unfortunately, neither of us are on exchanges that support both tokens. We'd have to create additional accounts on exchanges and go through the slow, time consuming and expensive process of using centralized entities to eventually trade these tokens. Without interoperability protocols, there's no way that we could do this directly. But interoperability protocols are designed such that we could trade our currencies with none of this extra work by simply making the transaction - and the protocol would see to it that our different currencies are exchanged correctly.
This is the problem of interoperability: how can blockchains be made to interact with each other seamlessly?
Several projects are working on this problem and it has become a focal point of development in the space. With this problem solved, ideas and applications in the space would become unchained, allowing themselves to interact freely with other DApps and networks, thus fully realizing the potential of decentralized technology and removing artificial barriers between interaction.
This is the problem that the REN project tackling, and then some. The project and its team have a grand vision for how the Decentralized Finance (DeFi) space can benefit from interoperability and privacy.
I’ll go over the history of the project, the strong backing it has received from major funds, the general purpose of the project, its technical components, as well as the partnerships it has formed and the competition it faces.
The History of Ren (REN)
The Ren (REN) project, originally the Republic Protocol, was formed in 2017 by Taiyang Zhang and Loong Wang, who serve as the Chief Executive Officer (CEO) and Chief Technology Officer (CTO) respectively. According to Wang, Ren began as a “a secret exchange where traders could open orders without anyone knowing what their order was.” The project conducted its ICO in early 2018, raising just over $34 million.
The motivation for the project, and “DarkPools” (explained below), stemmed from the two founders’ desire to bring trustless and privacy-preserving elements to the DeFi space, which they felt were lacking in the market. Of course, it’s relatively easy to trade Bitcoin for any ERC-20 token, but not as easy to do so in a private and decentralized manner. One must still go through centralized exchanges (though decentralized exchanges are improving) to facilitate this, and this comes with several shortcomings.
In the early stages, Ren controlled the one single DarkPool which would facilitate these decentralized and private trades, and this project launched network, RenEx, was launched in late 2018. Soon, however, the protocol expanded to allow for anyone to create their own DarkPool with customizable rules.
The team noticed that more features had to be added and that it was technically possible to do so. They understood that cross-chain interoperability and end-to-end privacy was required if they were to fully achieve privacy and decentralization. This led to the creation of the Ren Virtual Machine, or RenVM.
The team released its mainnet in late 2018, following which they began to tackle interoperability. The keen interest in privacy is underscored by a particular focus to bring both bitcoin (BTC) and Zcash (ZEC) to the Ethereum ecosystem.
The development history for this project, which has done remarkably well in development progress, has been documented well and there are several interesting tidbits of information for the more technically minded.
I’m going to cover Ren’s financial backers before talking about the technology and architecture that supports its vision of interoperability and privacy.
Who has Backed Ren?
Ren has seen backing from some global entities who hold significant clout in the market. There are at least 8 investors, including PolyChain Capital, Huobi Capital, Signum Capital, Aenigma Capital, Synapse Capital, BlockVC, FBG Capital and ZhenFund.
To give you some sense of the significance of these investors, just take a look at their other investments.
PolyChain Capital is one of the well known hedge funds in the cryptocurrency space. It has invested in over 40 other ventures, including Dfinity, MakerDAO, Orchid Labs, Founders bank and Kik.
Huobi Capital, an investment venture of Huob, which runs the popular Huobi exchange, has also invested in Ren. Other investments by Huobi Capital include Nervos Network, Buxx and Thundercore.
Signum Capital is another big name in the space which deals exclusively with blockchain companies. Investments by Signum include OmiseGO (OMG), Ziliqa (ZIL), Aelf (ELF), Kyber Network (KNC) and several more. Signum has invested in a good deal of projects in the space and spread these investments across various niches. Signum Capital’s partner John Ng Pangilinan and Kyber Network’s CEO Loi Luu are also advisers to Ren.
Synapse Capital is a San Francisco based crypto hedge fund that has invested in several notable projects and platforms in the DeFi space, including MakerDAO, Synthetix, 0x, Cosmos and FutureSwap.
BlockVC is a Chinese blockchain investment firm that has invested in a mix of projects and DeFi platforms, including VeChain, Ontology, Fantom, Trust Platform and the Origin Protocol.
FBG Capital, a Chinese firm, has also invested in projects similar to the others on the list, which emphasizes the confidence for the DeFi space. Investments include Ziliqa, Kyber Network, Origin Protocol, Aelf, Celer Network, IOST (IOST) and BitMax.
What is Ren (REN)?
Even if the means by which Ren sets out to achieve it is dense, Ren’s purpose can be summed quite easily: bringing total decentralization and privacy to DeFi. Or as they put it, creating “an open protocol that enables the permissionless and private transfer of value between any blockchain.”
Such protocols in the blockchain space are plentiful, though the ones that matter, a group in which Ren can be included, are few and far between. These protocols are akin to the development of protocols in the early days of the internet, a time when standards were still being formed.
Ren’s goal with its protocol, as mentioned, is to bring cross-chain interoperability and privacy to the DeFi ecosystem. It does so through several technical features, explained in the section below. In simpler terms, the Republic Protocol would make for seamless exchange of tokens, or value, between blockchains with complete privacy.
Another key selling point, not to be overlooked, is the fact that this would make it possible for BTC and other tokens to be used within Ethereum ecosystems, or frankly, any supported blockchain network. However, there is a strong focus on financial applications and, as a result, most resources appear to be directed towards encouraging such applications.
Ren's Technical Components
How does Ren facilitate these hidden orders? It breaks down these orders into fragments which are then distributed across the network. I’ll give a brief explanation of each of the technical components that make the system work.
The dark pool is essentially the exchange itself, which Ren has now made such that anyone can create a dark pool with its own rules. Orders executed on a dark pool are hidden, via uses Shamir's Secret Sharing to prevent the order from being identified. This is the critical feature that provides privacy to the trader and, in a time where tracing trades is becoming easier, this is a much desired feature. The team claims that dark pools make up 20–30% of all equities traded in US. Dark pools in traditional markets refer to private exchanges or forums for trading securities, derivatives and other financial instruments. They are not illegal, even if it sounds like it, but rather they are opaque trading forums where costs are lower and the market impact is lower for large orders.
In the cryptocurrency market, dark pools are mostly aimed at traders who are looking to trade significant amounts of bitcoin to Ether and vice versa. RenEx is the dark pool that is supported by the team.
The Republic Terminal is the DApp where the orders happen. DarkNodes are what make the trades actually happen. Dark pools are chiefly what offer privacy, but RenVM is what chiefly offers interoperability. The RenVM is powered by Darknodes, which contribute computing power and storage space in exchange for fees.
The RenVM is what allows smart contracts on the Ethereum blockchain to accept tokens such as bitcoin and Zcash. The team stresses “RenVM is not a product or an application in and of itself but is a network (and an accompanying SDK) that allows developers to bring multi-chain functionality to their applications.”
Ren has partnered with some a fair few number of projects and financial service providers. The most notable of these partners are listed below.
The first partnership worth mentioning is that with the AZTEC protocol. The latter is a zero-knowledge privacy protocol and exchange settlement standard. The partnership will see the two projects facilitate private balances, transfers and trades. AZTEC’s on-chain privacy protocol will be integrated with REN, meaning any applications built on REN will be able to leverage AZTEC’s zero-knowledge features.
Ren has also partnered with Wyre, a blockchain FX company that operates a global payment infrastructure. Wyre is attempting to bridge the gap between traditional finance and decentralized finance and has multiple services to that end. The collaboration brings Wyre’s KYC service to Ren, assist in the onboarding of OTC traders to RenEx and provide liquidity to RenEx.
Lastly, Ren has partnered with TrueUSD, the stablecoin that puts a heavy emphasis on complying with regulation. The partnerships brings the regulation-compliant stablecoin to RenEX and is expected to raise institutional demand in the Ren ecosystem.
Interoperability is a hot topic in the space and rightfully so, given the implications. There are several highly recognized projects and foundations working on making inter-blockchain operability a possibility and most have a fairly unique approach to doing so.
Interoperability projects include Cosmos (ATOM), Polkadot (DOT), Aion (AION) and RootStock (RSK). I’ve written about these projects in detail before (see links), so I won’t make a full comparison here. It also has tangential similarities to Oracle focused projects, like ChainLink (LINK), but for the most part, it is working in the interoperability space, with heavy privacy elements.
So what does Ren possess outside its interoperability features that makes it stand out from the crowd? The key difference is that privacy. Like interoperability, privacy will become a main talking point as people begin to see the value in hiding sensitive transactions. Other projects in this niche do not compare to Ren in this regard, and it is certainly the runaway leader here.
The team stresses that for DeFi to reach its ultimate potential, the space must offer privacy to its investors. Ren offers demonstrable privacy from end-to-end and has a very strategic plan to bridge traditional finance with decentralized finance. This is where it shows itself as a strong platform that has a lot of potential.
The Republic Protocol, and the Ren project as a whole, offer some tantalizing looks into the future of DeFi. The project goes one step further than its competitors in offering privacy solutions. True, competitors like Cosmos and Polkadot have received more attention and are equally worthy competitors, but that does not seem to diminish the profit potential of Ren in any significant.
What speaks to the project’s strengths is also its reputation within the space, having gained the confidence of large funds that have backed other up-and-coming and successful ventures. This alone will not testify to the project’s potential as an interoperability platform, but the future looks good for the project.
As interoperability and privacy see increasing development as we head into the next decade, Ren will stand tall, and will no doubt make a bigger impact on people’s radars.