All about the REN protocol and its crypto

When talking about decentralized finance (DeFi) one of the crypto assets and protocols that is mentioned often is REN, or rather RenVM, which allows interoperability between different blockchains.

What is RenVM?

RenVM is a BFT (Byzantine Fault Tolerance) network that facilitates interoperability between blockchains and uses the consensus protocol based on MPC (Multi-Party Computation) algorithms. This results in a decentralized, permissionless and trust-less custodian that is able to lock assets directly on-chain and mint them one by one, thus giving the user the ability to do a single operation without problems.

What is RenVM used for?

One aspect of decentralized finance is to be able to lock a token to benefit from it. The various lending platforms provide a fairly high and more convenient interest rate than they might have in a traditional system. 

Not only that: if a user is aiming for a deposit fund, he can still take advantage of his crypto and obtain an interest.

One of the assets that are considered as a store of value is definitely Bitcoin (BTC) and therefore people tend to accumulate it for a future price increase to liquidate it, however, as is known, due to its inflexibility traded for security, it does not allow to build particularly efficient tools and smart contracts and therefore using it becomes a problem in some way.

Well, as a solution to this problem, protocols were created that allow managing bitcoin on other blockchains, starting from Ethereum (ETH), which currently has become the main solution to transfer BTC faster than the original one.

This way we have:

• A smart contract that manages a bitcoin address to send funds to;
• A party that controls the transaction and creates or burns a token pegged to it, whose function is to emulate the bitcoin supply;
• A platform that allows managing these new tokens and using them in dedicated protocols.

How does RenVM work?

Each self-respecting protocol in this type of application has its own system of operation to decide how to achieve the various points mentioned above. To give an example, wBTC uses a consortium system that has the disadvantage of being too centralized and insufficiently quick for entering and exiting the protocol.

RenVM uses a system of thousands of independent machines, called Darknodes, and to be able to start such a machine it is necessary to lock at least 100 thousand REN tokens. 

Considering that at the moment 1 REN is worth about $0.16, this system allows deterring malicious or inefficient players, who in this way could be directly punished through Slashing, i.e. by withdrawing part of these funds placed as “collateral”.

Another level of security that has been implemented is that of the Shards, i.e. a grouping (at least 100) carried out periodically (every day) and randomly of these darknodes. Each shard uses the RZL MPC algorithm that generates an ECDSA private key that nobody knows and that is used to move the funds, but only with the consent of more than 1/3 of the darknodes.

Obviously, like any protocol of this kind, it requires a fee system to encourage darknodes to maintain the network, fees that are paid by users when they perform the transaction.

How to use RenVM?

Now that we understand how it works we can learn how to use it. To do so, we first have to go to the bridge address, which allows not only to bring BTC on Ethereum but also ZEC and BCH, then connect our Ethereum wallet and choose the type of asset, in this case BTC:

Clicking on “Next” allows to see both the amount we will have and the fees, and to confirm the transaction. The address of the asset we have chosen will appear, which is where the funds will be sent. A similar procedure must be followed when withdrawing the funds. Select “Release”, select the type of asset and enter the destination address, which can be ours or a different one, very convenient if we have to transfer BTC quickly.

Finally, we can see that this protocol can boast a fair use and the total of the blocked assets is indicated as follows:

• 878 BTC;
• 259 ZEC;
• 125 BCH.

For a total of just over $8 million, it shows that this protocol is very much used compared to the more famous ones like wBTC.