Ren Announces Dai for Incentivizing its Network
Why Ren chose to adopt Dai for payments in our protocol
We are happy to announce that we will be integrating Dai into the Ren fee model. For RenVM to be a practical solution that can serve as the foundation for private and interoperable liquidity, Ren will be adopting Dai as a stable payment mechanism for a portion of its fees. In this blog post we will walk through the relevance of Dai and why we decided to integrate it into the Ren fee model. For a summary of the fee model itself, please read our companion blog A New Fee Model for Ren.
Why A Stablecoin?
In most current cases, RenVM accepts fees by taking a share of the tokens that it moves between blockchains. However, given the diversity of applications that can be built on RenVM, this is not always possible; NFT tokens cannot be split and RenVM can also be used for general private computation where no tokens are being moved. In these scenarios, an alternative token is needed for paying fees and this is where Dai comes in.
The primary driver for this decision is that operating costs are measured in USD, so it makes sense for services that utilize RenVM to pay fees in something pegged to the USD. Simply said, users need consistent units of payment to accurately assess future costs and inform decision making.
Presently, the majority of cryptocurrencies, including some of the most widely adopted like ETH are highly volatile. Monthly volatilities are often in the range of 3–5% or more, making it challenging to use for payments compared to the stable fiat-price pegged coins. Service providers building on platforms must price in the additional risks that are carried with transacting in a volatile currency, resulting in sub-optimal outcomes and pricing for all parties. Therefore, the ability to accurately gauge operating costs and extrapolate said costs is paramount.
Why Dai is the Ideal Decentralized Stablecoin
While other stablecoins may currently have greater circulating supply and exchange liquidity, these stablecoins are centralized in nature. For a resilient and effective decentralized protocol, it is fundamental that the design is as decentralized as possible at every level. By utilizing Dai, we can eliminate a majority of the regulatory operational risk that comes with a stablecoin directly tied to the operations of a single entity.
Further, MakerDAO is leading the charge within the decentralized finance (DeFi) ecosystem with Dai being an instrumental tool and ever more widely used component of DeFi. For Ren, we see Dai as a growing standard that will continue to increase in adoption and usability, in particular with the wide number of DeFi services that support it. So by extension, we see our decision to integrate Dai into the Ren ecosystem as a way of fostering this adoption and a vote of confidence in its future.
The culmination of all the above advantages is why we chose to integrate Dai into our network as a payment token. This not only perpetuates DeFi moving forward by creating an uncensorable virtual machine that is self-sustaining but also accrues the most value possible, which is why we firmly believe this is in the best long term interest of Ren ecosystem participants.
Onwards and upwards,
— Taiyang Zhang, CEO, Ren
Ren is a private and interoperable liquidity layer for decentralized finance. Freely move value between blockchains and transfer tokens in zero-knowledge while maintaining complete privacy.