Bridge by Bridge
What's under the hood?
WHAT IS REN?
RenVM enables the permissionless exchange of value between blockchains – bringing interoperability to DeFi. This directly enhances DeFi’s utility by adding more liquid assets to the Ethereum ecosystem. Regardless of the DeFi app, RenVM can provide a native cross-chain user experience allowing seamless and decentralized interoperability for the first time ever.
So we have Ren Protocol, which is the underlying technology that facilitates cross-chain interoperability. We have RenVM, a product narrowly focused on applying this cross-chain technology in the DeFi space. And we also have the REN token ($REN), a cryptocurrency whose sole utility is as the means to register and operate a darknode on the RenVM network, as we will explore below.
Ren Protocol is a permissionless and trustless protocol that allows users to transfer tokens across different blockchains.
Ren’s core product, RenVM is focused on building an interoperability solution for Decentralized Finance (DeFi).
The Ren token ($REN) is Ren Protocol’s native token and is used as a bond to run a darknode, which powers RenVM.
RenVM is a decentralized virtual machine. This virtual machine is replicated over thousands of machines that work together to power it, contributing their network bandwidth, their computational power, and their storage capacity. These machines are known as Darknodes. At the heart of RenVM’s economic security model is the REN bond. This is a 100K REN bond that must be submitted by every Darknode. It is a commitment to good behaviour, timely responses, and honest participation in governance. Without submitting a 100K REN bond, a machine is just a machine, and is not considered a Darknode by other participants in RenVM.
Operating a darknode is a great way to earn passive Bitcoin-denominated income on a monthly basis. Anytime someone uses Ren to convert assets between blockchains, fees are collected on behalf of all darknode operators. In the 28-day epoch spanning December 2020 and January 2021, these fees added up to:
- 26.189 BTC
- 17.052 ZEC
- 66.117 FIL
All divided between that epoch’s 1,523 darknode operators.
You’ve heard of Bitcoin mining? Well, darknode income is Bitcoin reclining! As in: sit back, relax, and let the network do the heavy lifting.
The built-in reward mechanism for darknodes is receiving the fees generated by transactions performed on the RenVM network.
The Ren Virtual Machine consists of Ren nodes, called darknodes, that run software to reach consensus and keep the network secure. Similar to Bitcoin mining, darknodes get rewarded for this service. However, Ren Protocol does not use the extremely energy consuming Proof-of-Work consensus as Bitcoin and Ethereum do. Ren Protocol uses a Proof-of-Stake consensus mechanism, as Ethereum 2.0 is transitioning into. Instead of buying expensive hashing equipment and using large amounts of electricity to secure the network, Ren darknode operators buy and stake 100,000 REN tokens and run a light piece of software. Note that in the Ren ecosystem, we in fact do not “stake” the tokens, we “bond” them.
The built-in reward mechanism for darknodes is to receive the fees generated by the transactions performed on the RenVM network. When a user runs a Bitcoin through the RenVM to receive a renBTC, a fee of 0.25% is charged for the minting of the renBTC. Similarly, when a user runs any of the other implemented tokens, such as Doge coin and Z-cash, the user pays a 0.25% fee. Additionally, when a user runs the renBTC through the RenVM to receive his original BTC back, a fee of 0.1% is charged for the burning of the renBTC. The amount of the fees is determined through voting by the Ren Governance. For example, for most of 2020, fees were at 0.1% for both minting and burning. The minting fee was later aligned closer to the standard 0.3% at Automated Market Makers like Uniswap and the standard 0.35% at Centralized Exchanges like Gemini.
An important choice made by the Ren Protocol team was to not use REN as the currency to pay the fees. On the downside, this makes the REN token less useful as a medium of exchange. It reduces the number of REN tokens that can be burned while the RenVM is being used. And it renounces a classic mechanism to pumping one’s token. This is in fact a core feature of ETH in the Ethereum ecosystem, where ETH is the currency of the system and users need to burn ETH as the gas for transactions.
Instead in the Ren ecosystem, the fees are paid in the token that the transaction is made in. In practice, more than 98% of the value going through RenVM today is in Bitcoin to renBTC minting and renBTC to Bitcoin burning. So essentially the fees are paid in BTC. On the positive side, this is convenient for the users of RenVM as they do not need to purchase and have REN tokens to use RenVM. They simply get a 0.25% cut in the token they are transacting in. This is a very valuable feature in this phase of market adoption of the concept that BTC can now be minted into an ERC20 token that can then be used as collateral to generate a yield in the various Decentralized Finance protocols that are running on the Ethereum blockchain. The users can now use their ERC20 renBTC token in Maker, Compound, Aave, Sushiswap, and all other exciting Defi applications.
This ease of use is particularly important as Ren Protocol is strongly pushing for integration of the RenVM by other Defi players such as 1inch and UMA. It is important for these partners to be able to integrate RenVM into their own processes in a seamless fashion.
Another positive is that it can be attractive to darknode operators to be rewarded in the well-established BTC token rather than in the possibly less-known REN token. Certainly, this is a good feature in the initial stages of the project where one important target is to attract individuals and teams that will buy REN, bond REN and run a darknode.
Ren HODLers and darknode operators are a friendly bunch! The Ren communities on Telegram, Twitter, etc. are genuinely welcoming and informative, with veterans eager to help newcomers in any way they can.
Ren on Telegram
Ren Accounts to Follow on Twitter
@renprotocol | Official Ren Protocol account
@bzlwang | CTO Ren Protocol
@m__burgess | Ren Protocol Operations
@MaxRoszko | Academic, Ren Protocol ecosystem advocate
@DeFiFrog | Ren Protocol community ambassador, DeFi luminary (hat tip for creating EXCELLENT Ren content for the Ren community, including the Ren explainer video in header above, a Jamlog collaboration!)
@CptRektbeard | RenVM ambassador (hat tip for creating EXCELLENT Ren content for the Ren community!)
@BlockchainBard | Ren maximalist, altcoin aficionado (hat tip for creating EXCELLENT Ren content for the Ren community!)
@Darksidetradez | Ren maximalist, altcoin aficionado
Ren OGs routinely pay it forward by ensuring that new Ren community members have access to the kinds of resources they wish they’d had!
Official Ren Resources
https://renproject.io/ | Ren Project website
https://github.com/renproject/ren/wiki | RenVM wiki
https://bridge.renproject.io/ | RenBridge website
https://mainnet.renproject.io | Ren mainnet
https://mainnet.renproject.io/darknodes | Ren darknode information/data
https://medium.com/renproject | Ren Project posts on Medium.com
https://darknodes.online/ | Excellent darknode and epoch fees data, operated by Jamlog
https://cryptofees.info/ | Track fees generated by various crypto networks; helpful data for darknode operators