RenVM is a decentralized finance (DeFi) interoperability protocol that allows anyone, anywhere to move digital assets between blockchains.
What problem does RenVM solve?
RenVM provides interoperability with DeFi, allowing assets like BTC, ZEC and others to be leveraged across the Ethereum (DeFi) ecosystem and other smart contract platforms.
The easiest way to imagine RenVM is to first think of it as the repository of your digital assets as they move between blockchains.
You provide BTC RenVM; it holds that BTC and then mints that BTC as ERC-20 (also known as renBTC) on Ethereum at a 1: 1 ratio to ensure that the same amount of BTC is always backed by your renBTC. This approach is applicable to almost any digital asset and smart contract platform. For example, RenVM can store its own Dogecoin and mint it on the Polkadot blockchain.
RenVM provides interoperability because it serves as a “universal translator” or some kind of adapter. It takes its own blockchain format and converts it to the format required for its target chain (for example, RenVM takes BTC in its original form and converts it to ERC-20, the Ethereum token standard).
The REN token is the native token of the REN protocols and is used as a link to launch the node that powers the RenVM.
While anyone can start a node to prevent identity spoofing, 100,000 REN tokens are required to register and start a node. This balance also prevents attackers from launching an unlimited number of nodes and overloading the network with malfunctioning nodes.
Every time RenVM moves an asset from one blockchain to another, a small fee is required. Nodes (and those who run them) receive these rewards (in BTC, ETH, ZEC, etc.) for helping RenVM run.
renBTC Is an Ethereum ERC-20 to Bitcoin peg created by the Ren protocol.
RenBTC tokens are generated through RenVM, and renBTC is a 1: 1 peg to bitcoin (BTC), which means users can exchange their renBTC for BTC at any time through RenBridge.
renZEC Is an ERC-20 to ZCash binding created by the Ren Protocol.
RenZEC tokens are generated via RenVM, while renZEC is a 1: 1 peg to ZCash (ZEC), which means users can exchange their renZEC for ZEC via RenBridge at any time.
Ok, I understand what RenVM is, but how do these cross-chain transactions work?
Any asset created by RenVM on Ethereum is backed 1: 1 ERC-20. This means that if you have 1 renBTC (ERC-20), you can always exchange it for 1 BTC. This is a direct offer binding. renBTC is not synthetic, it does not rely on a liquidation mechanism, and it is not the price of Bitcoin on Ethereum. It is an unambiguous representation of Bitcoin on Ethereum that can be exchanged for BTC at any time and in any amount.
Minting BTC on Ethereum
To mint renBTC, you just need to send BTC to a bitcoin address:
1) Bob wants to use his BTC in DeFi, so he finds an app that has RenVM integrated, and when prompted, the app will generate a unique bitcoin address (this is the bitcoin script address that can only be used by one of RenVM’s secret ECDSA private keys).
2) Bob sends 1 bitcoin to the specified address and waits for 6 confirmations on the bitcoin network. After 6 confirmations have passed, RenVM immediately creates a minting signature using one of his ECDSA secret private keys, and Bob takes that signature and uses it to min 1 renBTC (minus RenVM fees) into Bob’s designated web3 wallet (e.g. MetaMask ). *Note: These steps are usually performed automatically by the user interface and do not require any explicit action from Bob.
3) Now Bob can take this renBTC and use it in any DeFi app he likes. He can borrow money, trade on Uniswap, margin trading, provide Dai and receive interest on his BTC. It is noteworthy that this renBTC is completely interchangeable and can be split into any number and is indistinguishable from renBTCs created by others.
Redemption of BTC from Ethereum
Redemption is as easy as mint and X renBTC can always be exchanged for X BTC.
When Bob is ready to switch to BTC again, he burns his renBTC to buy back the same amount of real BTC:
1) Bob wants his real BTC back, so he finds an app that has RenVM integrated, and when the UI asks for it, Bob provides his Bitcoin address (the destination of the redeemed BTC). Once submitted, it sends it as part of a transaction to Ethereum.
2) Bob pays a small amount for a transaction in Ethereum, waits a short time for Ethereum to confirm. RenVM then sees that renBTC is burned and issues the corresponding amount of BTC to its specified Bitcoin address (minus RenVM fees).
3) Now Bob has real bitcoins in his wallet, and he can do whatever he wants with them.
In the coming quarters, RenVM will expand the number of supported blockchains and increase the level of decentralization to ensure maximum network reliability. More information for developers on the project website
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