What is the Republic Protocol and REN?
The Ocean will be listing REN! Read this week’s Token Codex to learn more about the world’s first decentralized dark pool.
With institutional capital set to inundate cryptocurrency, the demand for alternative trading systems and sophisticated toolsets is rapidly growing. In today’s digital asset market, a majority of exchanges fail to meet the performance standards and compliance guidelines that investors and funds require. Before traditional finance and cryptocurrency can collide, the underlying infrastructure of digital asset marketplaces must change.
The Republic Protocol solves this dilemma by merging blockchain technology with Wall Street infrastructure. In late September, their team officially launched RenEx, the world’s first decentralized dark pool exchange for cross-chain trading (BTC, ETH, and ERC20), to mainnet.
What is a dark pool?
On most cryptocurrency exchanges, buy and sell orders are broadcasted on a public ledger, also known as an order book. While this structure works for most retail traders, institutional investors and funds manage portfolios worth millions and trade large amounts of volume daily. Publicizing the intention to buy large amounts of an illiquid asset can shift the market drastically and result in slippage, when a market order fills at a different price than originally expected.
- Consuming the order book at different prices ($1.04, $1.05, etc.) to fulfil a buy order can be expensive. E.g. A trader intends to buy 5000 REN at a price of $1.00 each, adding up to $5000. However, the order fills at $1.03 due to execution delays, resulting in a true total of $5150. A slippage of just 3 cents results in an additional $150 of unexpected costs to the trader.
- Even worse, front-runners can move their ask price down to buy up REN ahead of large trades and populate the order book at a wildly higher price.
To counteract this, dark pools are private exchanges where financial assets are traded and matched by an engine running on a hidden order book, often in large-block transactions. On RenEx, this means that trades cannot be observed by any party–including Republic Protocol itself–prior to execution. Anonymity and large trade sizes work hand-in-hand to mitigate market impact, preventing front-running and combating slippage. In the traditional financial world, dark pools move approximately 10–15% (~$27.2B USD) of U.S. stock trades monthly, making this underlying infrastructure a key part of institutional capital movement.
How the Republic Protocol works
Fundamentally, the Republic Protocol provides an open-source protocol for building a decentralized network of nodes to match orders, without knowing anything about the orders. This is done by breaking orders into cryptographic fragments (separating sensitive data about the order) that are then distributed across the network. Without revealing market intent, nodes work to combine fragments and then match reconstructed orders together. Once an order match is found, an atomic swap is initiated between two traders in a peer-to-peer manner.
In summary, the protocol lays the foundation for:
- Decentralized hidden order book
- Decentralized order matching
- Atomic swap infrastructure for BTC, ETH, and ERC20 cross-chain trading
- Protocol token, REN
As mentioned earlier, this is the blockchain ecosystem’s first decentralized dark pool, making for a unique blend of innovation, financial architecture, security, and compliance. Along with other key players in the space, the Republic Protocol might just be an igniting force in bridging the gap between institutional investors and cryptocurrency.
“RenEx is our first step in providing a suite of tools for institutional investors and funds to trade the digital asset market in a more secure, compliant, and equitable manner. We are offering a service that simply does not exist in the market today and already have the strong support of major funds, strategic investors, trading desks, and many other market participants.”
What is REN?
According to the Republic Protocol’s whitepaper, the REN token has two functions. It 1) incentivizes node operators to match orders and 2) is used to pay bonds to the Registrar, allowing traders and nodes to participate in the Republic Dark Pool.
- Fees: Traders pay fees in REN when submitting an order. Any node that participates in fragment or order matching receives a percentage of the order fee.
- Bonds: The Registrar is the name of the Republic Protocol’s Ethereum smart contract which organizes network nodes. In order to join the network, traders and nodes must submit a bond in REN for access. This prevents bad actors from joining the network and submitting fake orders.
Token Sale: Started and ended February 3rd
ICO Token Price: 1 REN = 0.0571 USD
Raised: $34,299,022
Circulating Supply: 595,254,643 REN
Total Supply: 1,000,000,000 REN
__________________________
REN will be arriving at The Ocean next week. Sign up for our platform for institution-level performance and execution.
Follow us on Twitter at @TheOceanTrade or subscribe to our newsletter to stay in the loop.
The information contained in this document is not (and should not be construed as) investment advice or a solicitation. The information is not necessarily verified nor is it provided under any sort of warranty, including as to completeness or accuracy. The information is subject to change without notice. The Ocean is not a licensed financial advisor. Trading virtual currencies or digital assets is volatile and risky: recipients of this information should do their own due diligence, considering their specific financial circumstances, investment objectives, capabilities, and risk tolerance, before taking any action. Pursuant to The Ocean’s internal policies, individuals who contribute to this information may have positions in digital assets, including those discussed herein. Any comments or statements made in this communication do not necessarily reflect the views of The Ocean or its affiliates. This information does not constitute an offer to buy or sell any of the assets referenced herein.
