REN: Why I invested in the Decentralized Custodian
Introduction
Ren, formerly known as Republic Protocol, is a decentralized, trusless and permissionless custodian. The team focus on the interoperability of blockchains via their flagship product: RenVM. It aims to bring and connect Bitcoin and any other cryptocurrencies to the Ethereum and DeFi world. I will explain how does it work and why I have invested in Ren, plain and simple
A Custodian?
First of all, what is a custodian in traditional finance?
A custodian is a “financial institution that holds customers’ securities for safekeeping in order to minimize the risk of their theft or loss”. Custodians holds all kind of securities such as equities or bonds and are big well known banking institutions such as Bank of New York Mellon (BONY) or JP Morgan.
Like it or not, these banks are well established and trusted by everybody in the traditional finance world. On top of that, they are regulated and have to respect binding rules, which restrict some of their banking activities.
A Centralized Custodian?
Now tell me, would you trust any centralized entity to hold your cryptocurrencies on your behalf? I don’t think so. They are too many hacks, too many loss of private keys. So what is the solution?
The Solution: a Decentralized Custodian
Ren is a decentralized custodian which holds your Bitcoin or other cryptocurrencies on your behalf without the counterparty risk. It makes sure to exchange your Bitcoin with an ERC20 token (renBTC) which is worth exactly 1 BTC. Of course, you can then redeem your renBTC after you are done experiencing with DeFi for an actual Bitcoin without any slippage at any time. With your renBTC, you can access the world of DeFi and put your Bitcoin to work to make money instead of let it stand by in your wallet.
Below I describe what can be done with ETH in DeFi today but soon you will be able to do the same with your renBTC. For example, you can:
- Take a synthetic long position on Gold or a synthetic short position on XRP via Synthetix.
- Borrow some Dai on MakerDAO, keep your renBTC and pay your daily groceries.
- Lend it to people in demand and earn interest in Compound.
- Take a leverage position on ETH via DyDx.
- Become a liquidity provider on Uniswap.
- …
By bringing your BTC to RenVM, you discover a whole new world in crypto. RenVM works effortlessly and is built on the Ethereum network so the transactions go pretty fast, all in a decentralized way, without any centralized entity. To learn more about RenVM, I recommend you to read this article: How RenVM actually works?
To secure the network, Darknodes are used and that’s why I have invested in Ren.
What is a Darknode?
Darknodes are “the physical machines that power RenVM, where every machine contributes CPU time for compute power and its disk space for storage”. By doing that they receive the fees generated by RenVM.
To build a Darknode, you are required to hold 100,000 REN, which is currently worth around $4,000 or 0.47 BTC.
Ren as an Investment
Ren has a defined use case which solves a still unanswered blockchain issue: interoperability of cryptocurrencies. Without interoperability you cannot bring Bitcoin to Ethereum and so forth. But why does it make it Ren interesting as an investment?
- Ren holders have an actual utility to the system: Darknodes holders back the Ren network and receives fees for transactions. This is not staking rewards (inflation rewards to back the network, which has zero economic value). I’m talking here about actual dividends resulting from profit. You have to hold 100,000 REN to run a Darknode.
- Ren supply is limited to 1 billion tokens, no more, no less. No staking rewards which diluted current token holders, are distributed.
- Major crypto funds have invested in the ICO, such as Polychain, BlockVC or FBG Capital.
- Valuation is attractive at $32M market cap, when you factor the fact that any cryptocurrencies could be added to RenVM and used in DeFi. Ren has already experienced two bull markets at market cap north of $100M. With the SubZero Mainnet coming in Q1 2020 I expect it to catch up to previous highs.
Conclusion
DeFi is growing fast inside the Ethereum community but is in my humble opinion still lacking a key piece: Bitcoin. It is still 9x bigger than Ethereum in terms of market cap and I do believe this is something to not underestimate as it has always retained the leading place in the crypto world.
As Bitcoin can be used as collateral, by bringing it onboard, DeFi ecosystem and community will be stronger and more united. On one hand, there will be a big capital inflow into the DeFi system and on the other hand, instead of relaying solely on one source of collateral (i.e. ETH), projects will be able to diversify and better manage their collateralization and diversification risks. By investing in Ren, you can take active part of the future success of DeFi.
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Thanks for reading.
Secret Salsa
Contact
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Disclaimer
I have a long position in REN, ETH and SNX.
I have not been compensated to write this article.
The above does not constitute investment advice.
