Republic Protocol: Why You Should Pay Attention to REN in 2019
Although the cryptocurrency markets are supposed to be private, order flow is anything but.
When you place a large order on an exchange’s books, this is open to the public. Everyone can see that you are trying to buy / sell blocks of crypto.
Indeed, there are a number of websites and address trackers that are able to monitor large movements of coins as well as the resulting orders that they put through. These are often shared with the market which can impact on sentiment. In some cases, the order books are even used to manipulate the market.
There needs to be a solution that will make cryptocurrency trading as private as possible. A solution that allows these transactions to take place in a completely trust-less and secure environment.
This is where a crypto “dark pool” protocol could really make an impact.
Quick Primer on OTC Trading
You may have heard of the concept of an OTC (Over-The-Counter) trading desks.
These are basically market makers who will try and match up a buyer / seller of a block of cryptocurrency assets. They will then take the fee and the two parties will exchange the assets in question.
They have become really popular in the cryptocurrency markets recently as institutions have started entering the market and looking for the best execution on their large block orders.
Given that an OTC trade takes place at an individual level, they do not hit the order books of large exchanges and they are not open to larger scrutiny by those who monitor them.
Of course, this still means that the OTC dealer has insight into the orders that are coming his way. Similarly, if there is a large movement of crypto from one address to another then those who monitor these movements can spot it and share it with the public.
So, while OTC desks are a great solution for some whales and institutions, they are not ideal for all.
Enter The Dark Pools
Dark pools are a relatively new concept in crypto that have been around in the equities markets for a number of years.
These are essentially large OTC pools where buyers and sellers in the equities markets can place their order intentions and then get these orders executed by the the pool operator. The pool operator will keep the identity private so to hide their order intentions.
In traditional equity markets, these pool operators are large investment banks and market makers. These pools are advantageous for the individual placing them as them to clear a large block order without the market ever knowing about it.
Currently, the only dark pool operator that is offering their services in the cryptocurrency markets is that of the Kraken dark pool. This is being run by their OTC desks and they will take the orders from their institutional clients and try and match them with other traders.
However, this still relies on Kraken to operate the pool for you. You have to place all of your trust into their OTC desk in order to keep your intentions quite from the rest of the market.
We need a protocol level dark pool solution…
For those who have not heard of the Republic Protocol, this is a cryptocurrency dark pool protocol.
In other words, they have developed a blockchain solution whereby traders can place their orders in completely secure and private manner without having to rely on a central market maker or OTC dealer.
On the republic protocol, traders will place their orders and these will then be split up into order shards or fragments. The shards will then be encrypted and routed through the network.
The network is made up of a large collection of order nodes. These will recompile the order fragments and then try and find a matching order for the buy / sell. The order recompilation and matching is done in such a way that nodes cannot decipher the underlying order.
Once the orders have been matched on the network then the assets are exchanged through the use of atomic swaps. This means that cross chain assets can be exchanged without the need for any prior conversion on an exchange.
So, with the Republic Protocol, you can place an order on the network that no one else can see. This order can never be deciphered and you can be sure that the counter party to your trade will exchange the asset in question. This is all done in a decentralised way and is completely secure.
Of course, there is much more to the technology behind the Republic Protocol. This is fully covered in this review piece on the Republic Protocol (REN).
The REN Token
The utility token that powers the Republic Protocol is the REN token. This will be used in the protocol to pay for the orders by the traders. The node operators will be rewarded for matching the orders with the REN token.
Part of the reason that the Republic Protocol may not be that well known is because they raised most of their funds through a private sale ICO. Now that the REN tokens are on exchanges, they are available for public purchase.
The price of the token has followed the rest of the market but they could be at attractive levels in the current environment. At current prices, REN is at 50% of the level that they raised at in their private sale.
It is also important to note that some of the biggest names in crypto fund space invested in the private sale. Firms such as Polychain capital, Huobi Capital and Binary Financial to name a few.
Moreover, there has been a lot of work that has been done by the Republic Protocol team that could renew interest in the project. For example, they have just released their first dark pool in September of 2018.
The RenEx Mainnet is currently in Beta and is being tested on an ongoing basis. In January of 2019, they will be opening up their Darknodes on RenEx to the community. This means that users can apply to run a Darknode and provide order matching capability to the network.
While the crypto OTC market has evolved to give traders the benefit of effective large block execution, they are not perfect.
You still have to rely on a central broker or dealer who will have to telegraph your interest to a subset of other counterparties. Even if you do use an exchange operated dark pool, you have to rely on the exchange.
As we know, crypto credence states: Don’t trust, verify.
The Republic Protocol is developing an ecosystem that will allow users to place trades in a trust-less environment that are completely private and secure.
It is a project that you may want to keep your eyes on over the next few months.
Featured Image via Fotolia & Republic Protocol
Disclaimer: These are my opinions and should not be considered investment advice. I do not hold REN in any capacity. Do Your Own Research