Ren is Just Weeks Away From Bringing Bitcoin to DeFi, Says Loong Wang, the Project's CTO

Hello Defiers! This week’s interview is with the CTO of Ren Project, one of the teams at the forefront in the effort to bridge different blockchains, and bring Bitcoin to decentralized finance in a trustless way. Loong Wang says RenVm is only a few weeks away from going live, and once it does, it will strengthen DeFi by adding different types of collateral and boosting liquidity. It will also open up a new investment option, as anyone will be able to run a node on the network and collect fees.

Ethereum creator Vitalik Buterin just yesterday tweeted, “it's embarrassing that we still can't easily move between the two largest crypto ecosystems trustlessly.” Ren is one of the teams trying to fix that.

Key things we talked about:

• How RenVM started and what it actually is
• What will blockchain interoperability look like for users, and what will devs have to do to get it on their dapps
• Requirements and incentives to run a node on the Ren network
• Main known risks of RenVM
• Plans to transition to more decentralized governance
• Funding and monetization
• Competitors and whether blockchain bridges is a winner take-all market

This interview has been edited for brevity and I’ve bolded my favorite quotes.

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Loong Wang: I'm a computer scientist by trade and education. I had been working in a startup with Tai, the CEO of Ren, I think since 2014, 2015. We got along really well and decided to branch off and do our own thing. We started a development studio and we worked together for a long time on that. And then we took a little break. I went to go teach at the university and finished my thesis. What I was studying at the time was distributed systems and I was focusing on the academics behind distributed systems and how computers work when they're trying to communicate with each other in a global network, specifically in the context of things like supercomputers, which are actually just distributed systems.

This obviously relates to blockchain, but at the time I wasn't particularly interested in it. One of my mates was, and he was big on Ethereum and telling me to buy it way back when. But then Tai got into it and he co-founded Virtual Capital. And then he approached me and wanted to do some work in the space and he'd found sort of a niche in the dark pool space within crypto. And it was a perfect alignment of a good business opportunity and my technical expertise so we kicked it off and we got into it like that. For me it was quite serendipitous that the industry took off because it was a perfect place for me to apply my academic knowledge.

Loong Wang. Image source: Twitter

Dark Pool Beginnings

CR: Tell me about how Ren protocols started. What was the original idea behind it?

LW: So originally, in 2017, we sought out to build a decentralized dark pool. A dark pool is basically just an exchange where the order book is hidden. And so we spent a year building that and we got into production. But the thing that really became apparent when we released it was that the reason you want to use a dark pool is for large liquidity movements and a lot of the liquidity was in chains that weren't actually on Ethereum. So ETH had a lot of liquidity, but it was predominantly Bitcoin and USDT. So we would had to leverage things like atomic swaps, and they're just too painful, they're too clunky, they have too many problems. And so we kind of turned around to say, well, we need to solve this interoperability problem before large liquidity is actually truly accessible in this space.

CR: Did you think of just building a dark pool on Bitcoin?

LW: If we started building a dark pool on just Bitcoin, then we only have the Bitcoin assets, and there's nothing to trade against. You're always going to need some form of interoperability when Bitcoin is involved because Bitcoin doesn't have any programmability.

Interoperability Definition

CR: Can you give me your definition of interoperability? I get what it is on a basic level, but I want to understand what exactly you mean when you say that word.

LW: Sure. I guess the way that I like to think about it is at the user level, so forgetting about the low level technical information because the problem you're really trying to solve is the user's problems. For me interoperability is can a user interact with my system without compromising on all the good stuff about blockchain. So it's still trustless, it's still decentralized, it's still permissionless, it's secure, all these kinds of good things about blockchain. Can they interact with my system and use any chain they want to use? Even more importantly, can they not even know what chain they're necessarily using? Can they just come to my application and say, I want to trade Bitcoin, I want to Zcash, I want to trade ETH, I don't even care what blockchain is being used. It's not even noticeable because the user doesn't really care. If you can achieve that, it means you have achieved quite a high standard of technical interoperability to make that possible.

CR: How has that main goal progressed until today? How close are you to reaching that level of usability?

LW: I would say we've achieved it, which is really quite an amazing accomplishment by the team. We're a few weeks away from mainnet at most. And at this stage, the functionality that RenVM is able to achieve is pretty much what I just described there. We actually have example applications where you can go to Uniswap and you can buy ETH for Bitcoin on Uniswap. You can do that with just one Bitcoin transaction. You don't even need to make an ETH transaction. You don't even need to have a MetaMask. You don't need an ETH wallet. You just have to have an address that you want to get your ETH at and then you make a single Bitcoin transaction. And there it is. There's no middlemen in that process whatsoever, which embodies this idea of the user being able to interact with any chain, with any application without actually necessarily caring about what's happening under the hood.

What Actually is RenVM

CR: That's amazing. So can you backtrack a little bit and explain exactly what you built? When you say RenVM or Ren Protocol, what actually is it?

LW: RenVM is a network of thousands of machines and anyone can run one of these machines and these machines collectively and collaboratively watch what other chains are doing and can exert actions on those chains as well. And that's basically at the core and it's designed in such a way that they can't exert actions on other chains unless the whole network is in consensus that that's what it should be doing. For all intents and purposes, it's kind of locked up there and then RenVM says, now we're going to exert an action on Ethereum which reflects whatever action it was that you wanted to take. You can trust this interoperability bridge will work and will work correctly as long as the threshold of adversaries that's trying to attack RenVM is below the standard one-third threshold that most blockchains exhibit.

CR: And this network of computers executing these actions for users, is this its own blockchain?

LW: So you can think of it as its own blockchain. It doesn't have a lot of the features that normal blockchains have because it doesn't need them. It uses the same underlying technology that blockchain uses to get the network to come to consensus and to do it in such a way that you can resist adversaries who are trying to behave maliciously.

Dark Nodes Incentives

CR: What kind of incentives do the nodes or I don't know how you call them, the computers of this network, have to make sure that these actions are executed correctly?

LW: We call them dark nodes because they're nodes but they're in the dark about the whole thing. They can't actually see what's going on. But the incentives for them are that they get a small percentage of the liquidity that moves through. So when you move one Bitcoin from Bitcoin to Ethereum and back again to do a trade, the dark nodes get a little cut of that.

CR: Got it. And so who are these dark nodes? Can anyone join and get some of these liquidity fees?

LW: Yup, that's exactly right. Anyone can spin up a dark node. The only restriction is that you have to have a bond. And this is where the REN token comes in. To run a dark node you have to have a 100,000 REN bond. And that's to prevent an adversary coming in and just turning on a thousand machines, 10,000 machines or what have you. But it also sort of bonds the nodes to behave well. If they misbehave and they try to attack the system, then they lose that bond. So there's this strong economic disincentive to misbehave.

CR: That's interesting. So it's kind of like a staking model.

LW: It's similar to a staking model except that the machines, they have to actively work. So it's not quite staking because you don't just passively stake REN and earn rewards. The REN bond is more like a right to work. And then once you've bonded that you have the right to work, but you still have to turn on a machine that will actually actively participate in the network and do work.

Ren Risks

CR: What are the risks? Or at least known risks. For example, recently we've seen all these oracle attacks and I assume that for the system to work correctly, you need to know at what prices to buy tokens. So are faulty prices a risk, for example?

LW: So there's actually no need for an oracle in RenVM. It's oracle-less in that sense. We don't actually have to worry about that. To resist things like, you know, the flash loans attacks that we saw recently against platforms like bZx, it takes several months to register and de-registered in the system. So you can't just sort of quickly borrow some REN, sign up a dark node and try and attack and then give it right back in one one transaction. It takes up to a month to register a node. So you have to bond the node and then wait to be led into the network. And then when you want to leave the network, you have to wait two to three months.

The big risk that users are exposed to is, I like to think about it as compounding risk. So when you're on the Bitcoin blockchain and you're holding BTC, you're exposed to Bitcoin risk, you know that someone might 51% attack the network and that will devalue the network. When you're in Ethereum you're exposed to the same risk. When you've got Bitcoin on Ethereum, you're actually exposed to both risks. And RenVM has its own risks of collusion and attacks to the network, just like any blockchain does. So when you're holding your Bitcoin on Ethereum, you're exposed to Bitcoin risk and you're exposed to RenVM risk and you're exposed to ETH risk. Now in practice, these risks are very low. I don't think we've ever seen 51% attack on Ethereum, for example, or on Bitcoin. The likelihood that something happening is still very low, but still the safest place to keep your Bitcoin is always going to be on Bitcoin. So we don't encourage people to keep the Bitcoin there and just sort of like have it on Ethereum to have it handy.

CR: Have you had an audit?

LW: Yeah, so we are currently underway with our audit. That's basically the only thing that's standing between us and going to main net is getting our audit results back in a few weeks. So it's very hard to give precise estimates because the kind of stuff that we've built has never really been built before. So it's very difficult to know how long an audit will take and what might be found in that audit and therefore how long it will take to fix those bugs. Our priority is safety and security and making sure that this network has no critical issues that can cause a loss of funds or an actual breakage of the network.

Getting Bitcoin on Dapps

CR: For Dapps to integrate to this network, what do they need to do? And what would it look like for the end user?

LW: From the Dapps perspective when the Bitcoin arrives on Ethereum, it arrives as an ERC20. Almost every Dapp or DeFi protocol supports ERC20s. They don't typically have to do anything to support having Bitcoin on Ethereum because it is just an ERC20. But what you can do and what we've done with Uniswap —and this is the great thing about DeFi and permissionless networks is that you can build stuff on other people's protocols and no one could stop you–– is we have a little adapter that sits at the front of Uniswap and it sort of talks to RenVM in RenVM's language and then gets the Bitcoin as an ERC20 and then sends it off to Uniswap and then Uniswap sends it back to whatever the counterpart of the trade was, and then they adaptor can send that back to you. This adaptive contract in the middle, they worry about the translation between those two languages, if you want.

From the Dapp developers perspective, all they have to do is write this little adaptive contract. And these adaptive contracts are very thin. They're a couple of lines of code and then attach a little widget to their front end. And this will handle all of that translation between the different languages between different blockchains. And so a user can come up and just see a Bitcoin deposit address and they just send their Bitcoin to that address, like a normal Bitcoin transaction. And then that will initiate whatever action it was that they were trying to take. So it's very easy.

Adoption Efforts

CR: You mentioned RenVM provides tools for developers to build these integrations. What else are you currently working on to gain adoption?

LW: So we've built a bunch of developer tools and we're still building them an, constantly getting feedback and improving these dev tools. And these dev tools make it as easy as possible for Dapp developers to integrate their applications. So the Ren Alliance is the main way that we're tackling adoption. It's a consortium of, I think at the moment we've announced 38 projects and we've got a bunch of other ones that are going to be announced in the second round. These are all projects that are committed to helping secure network and helping to use the network and the liquidity that that is going to be accessible. So obviously you gain access to Bitcoin and there's a ton of liquidity there. With these projects we help them do co-marketing. We help with any development needs that they have to get integrated if they have any problems. And so that's how we're tackling it. We don't want to build our own dapps. We don't want to compete with any of these systems. We just want to be a tool to empower them to be better basically.

Plans for Decentralized Governance

CR: I wanted to ask you about governance. You have the REN token and so many projects in the space are launching their own token-based governance processes. Are you thinking about doing the same? And, and also what is the level of control that the team has over the project?

LW: Governance is a really interesting question. And it's actually the next major thing we're thinking about in terms of adding to the protocol. So when we launch, it's actually really important to us that we maintain a level of central control of the governance because if there are bugs or if there are things that need to be changed, it's very important that we can react and respond to that quickly and effectively. So while the network is in its very early days and it's sort of bootstrapping and getting out there, we will maintain a governance alongside members of the Ren Alliance, who will opt in to helping us with that governance.

But we haven't decided on a specific model yet. There are some particular features that I find interesting in governance that we're thinking about getting into our system. So there's things like inflation to incentivize participation. Things like quadratic voting to try and resist big whales coming in and owning the vote. Delayed voting or time-bonded voting so your bond gets more powerful the longer you're willing to bond your voting tokens for. And all of this is stuff that we're looking at and trying to understand how it's going to work in the context of RenVM. But at the end of the day, what we will do is make the governance of the system completely open to participation by REN holders. We don't want to maintain governance over the system for any longer than we absolutely have to and we want to get that out to the community as quickly as possible.

Funding and Monetization

CR: How big is the team right now?

LW: We're about a dozen, based in Singapore, but we have people all over. We have some people in the UK, in the US and in Australia as well.

CR: Have you raised VC money, or where does your funding come from?

LW: We did a crowdsale of REN back in 2018. We sold REN to the public and to VCs. But we haven't done any other raises since then. The amount of money that we raised was, compared to some of the projects at the time, quite reasonable. We raised between $30 and $35 million. And we've managed those assets fairly well and we have for the team to even expand and grow over the coming years. We have years and years of runway, so we don't see that we will need to do any kind of fundraising between now and getting this project to the stage where the Ren team doesn't even need to be involved in it anymore.

CR: How do you plan to make money with the network?

LW: So this was the only funding that we sought. And we don't want to be a for profit group that's trying to somehow slip a business into RenVM and extract profit from it. But obviously we have REN holdings and we will be running dark nodes. And so our incentives are directly aligned with that of the network. We really want RenVM to succeed and if it does, we'll be able to run dark nodes to help us to fund maybe community development or a small development team, a core development team, indefinitely over time to maintain and upgrade and continue to work on the protocol.

Impact to DeFi

CR: I want to hear more about the broader, bigger vision for this. Why is it important for Ethereum and DeFi to be able to connect with other chains? What do you think the actual impact can be?

LW: It's not just about Ethereum. RenVM is able to accommodate more than Ethereum and we're exploring other destination chains as well. So being able to bring ETH assets to non-ETH chains and bring Bitcoin to non-ETH chains. But in general, there's a couple of things at play. One is that interoperability has shown time and time again from a technology perspective to be the best path forward to adoption. Instead of building siloed, maximalist systems that hate everything else, building systems that can interact and talk to each other and leverage each other's progress is just the best way to build systems. And we've just seen that empirically over the decades.

CR: Would love to hear examples in technology where you've seen this.

LW: Well, one of the biggest ones to think about is IP, which is the internet protocol. The IP system is incredible. It's incredibly old. It was designed very well. And without it there wouldn't have been a way for all of our computers to talk to each other over over the internet. The internet is exactly an interoperability protocol. It's a way by which our devices can agree on how to communicate with each other. And that's a really low level detail, but it's actually really fundamental. But then this is also the case with even our current financial systems. Most places that you go to that support card, you can pretty much use any card you want these days, Visa, MasterCard, Amex or even cash, right? That's already an interoperability of money systems to an extent. And it's not great. But that's kind of what we're hoping to fix as a community.

But then there's also things like social media applications where I don't remember the last time I had to sign up for something with a new email address every single time. You can sign in with to applications using Facebook, using Google, whatever. So you have this one account to rule them all and just sign into everything with that account and that keeps all of your information synchronized across everything, which is super convenient for the end user. There are security concerns of course. But when focusing just on the interoperability side of things, that's where we see it in the real world right now. DeFi takes that to a whole new level with composability of applications.

CR: And going back to the original question, what’s the impact of interoperability in the space?

LW: I think concretely why interoperability is important for DeFi specifically, not to just blockchains in general, is that it gives us access to more interesting collateral types. So if we think about the situation with Maker right now [interview was done March 12] , you know ETH is crashing hard and it's causing problems for CDPs. Now this comes with a caveat that crypto is highly correlated, but in the future that's not going to continue to be the case. And by having Bitcoin on Ethereum, if we use Maker as an example, if you have your Dai backed by ether and bitcoin, you're exposed to less risk because if ETH crashes but BTC doesn't, then your system is having to handle less of the crash than if it was just based on ETH. And so you also get access to this huge liquidity pool too. Dai is only ever going to be 67% of its collateral, which is mostly ETH right now. But if you bring Bitcoin into that, suddenly the maximum supply of Dai is quite big.

Competitors

CR: There are other projects trying to do similar things to what you are. How do you differentiate between them?How do you compliment each other? Do you see them as competitors?

LW: I think there are a couple of competitors in this space. Certainly no one that's doing things exactly the way we're doing it. Part of the reason for that is the underlying mathematics that we use to solve this problem was actually researched and developed in-house by our own cryptography team over the last two years. And so that's very unique to us and we aimed to advance the state of the art for this type of cryptography to solve a lot of problems which hadn't been solved. So the competitors that are in this space are still using that older version of this technology, cryptography that has a lot of issues with it in terms of how do you manage a node going offline. And a lot of them use different underlying economics.

They all have some notion of a bond, but what that bond is, whether it's in its own token like with REN or whether it's in another collateral type, these kinds of things vary between the different protocols. Obviously I think the RenVM approaches is the best approach that there is. And when competitors come up with other ideas, there's nothing wrong with absorbing those ideas and taking what works from those ideas and improving our protocol. But I think it's really great that there are lots of different competitors here because it forces us to be the best that we can be. If you're the only one in the space, a) it's a bad sign that maybe you're in the wrong space or b) you have this monopolistic incentive and you don't have to make your protocol the best protocol for the race.

CR: Do you think that there's room for many similar networks in the future? Or to be successful in what you're trying to do, will one of you have to essentially win in the long term?

LW: That's a really interesting question. I'm not sure about the long, long term. In the short to medium term, I think there's plenty of space for multiple solutions. And the reason I think that is, this is also the case with stablecoins. There's are many stablecoins out there. There's USDC, there's USDT, there's Dai, and all of these have captured part of the market in their own way and they've been around for what I would say short to medium term in crypto time. Whether they stick around for many more years to come, I guess is yet to be seen. But my suspicion is that if we do see multiple interoperability solutions stick around long term, they'll all be geared towards fundamentally different parts of interoperability.

RenVM, really where it stands out, is this absolutely seamless interoperability experience that we talked about at the beginning where the user doesn't even know they're interacting with different cross-chain systems, they only ever use their native tokens on their native chains and they have no idea that interoperability is even happening under the hood and this super seamless user experience. Whereas other interoperability solutions might focus on longterm asset storage, so how do you keep Bitcoin on Ethereum, for years at a time? Those are two very different problems with different optimal solutions. And coming up with a solution that is good for both is obviously great and Ren is good for both of those solutions. But it's very possible that if we do see two solutions stick around for long term, that one of them might focus on one and one of them might focus on the other. I don't think we'll see lots of solutions sticking around that are more or less targeting the same feature set.

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The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money.

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.