The Republic Protocol is a decentralized and open-source dark pool designed for atomic trading across different chains, starting with ethereum and bitcoin blockchains. The system has the objective of allowing private transactions in any volume size using ETH, BTC and ERC-20 tokens. Its main target market comprises large institutional traders who by virtue of their size and reach transact in bigger volumes, which at the moment are not supported by most blockchain models.
- 1 Technical Details
- 2 Distinct Features of the Republic Protocol
- 3 The Republic Protocol Token (REN)
- 4 The Team
- 5 Opportunities for the Republic Protocol
- 6 Weaknesses
- 7 Conclusion
- 8 Links:
The protocol that runs the Republic network has the basic responsibility of matching orders without having any knowledge about them. In order to achieve this, it uses what is referred to as Shamir Secret Sharing Scheme. This scheme breaks down individual orders into constituent fragments. The fragments are then distributed across various nodes on the network.
The broken down orders are almost impossible to reconstruct. The only way would be to try and recombine a big percentage of the fragments. But the system is equipped to stop this from happening using the Registrar, an Ethereum smart contract. The Registrar organizes the network’s nodes into structures which make it impracticable to gather enough fragments of any order to recombine and reconstruct the original.
Traders on the platform have to respect the structure that governs their orders as stated by the Registrar. Failure to do this could expose them to the risk of having their orders revealed.
In addition to this, the system also uses a Zero Knowledge Proof to verify computational integrity without the possibility of revealing any pertinent information. This arises from the fact that nodes can use fragments from two distinct orders to cooperate with other network nodes to carry out computations to determine whether orders match. The smart contract allowing this operation is referred to as the Judge.
The Judge and the Registrar are the two primary smart contract protocols that define the system. After the matching operation, a process referred to as atomic swap is then carried out between two traders over the Republic network. It uses regular encryption procedures to ensure that the atomic swap details are safe.
The project’s developers at the moment have a prototype that is undergoing tests internally. They have also released a number of GitHub updates including some crucial component parts of the soon-to-launch network. There are updates on the cross-chain or atomic swap trading model, the node distribution on the network as well as the peer-to-peer trading structure.
Distinct Features of the Republic Protocol
This refers to the process using which nodes on the network will carry out the function of matching orders, one against another, without having the capacity to observe pertinent details. This will require that they break down the order by separating sensitive data. Every node performs computations on the fragments it accesses from different orders. It then combines results with those from other nodes. The result is a combination, not of the underlying orders but of the results from all computations carried out on the separate nodes.
The beauty of this system is that only half of the fragments comprising any order are required for reconstruction of the original order. But nodes are incentivized in order to avoid acting on this possibility so as to ensure privacy for the network’s users.
But at the same time, this feature means that if half of the nodes carrying out computations get compromised or for some reason leave the network, the remaining ones can still complete the computation. This makes the system highly resilient to attacks and failures.
Winners and Losers
Nodes on this network compete to discover order matches. When a node discovers a match, they must register it so that everyone is aware of closed deals. Traders on the network also get notifications to this effect and any registered match cannot be involved in other matches in future.
On the ETH network, this task is carried out under Assumption. This means that any orders that do not match are used in subsequent matching games. When an order expires before being matched, then the fee paid for this has to be refunded.
The system also includes a protocol for Atomic Swapping that is executed between traders whose orders have been matched. This makes it possible to pass messages and even to set up a direct peer-to-peer connection between them to complete the order. They do not have to execute the order but due to the bonds they have placed to operate nodes, they have the incentive they need to carry out their role.
The nodes are at no point in a position to reveal the details of an order. If a hacker manages to carry out a 51% attack, the fragment distribution will only allow for reconstruction of 50% of the fragments. This level of control would greatly limit their probability of a successful acquisition of other order fragments.
The Republic Protocol Token (REN)
The Republic protocol will use the REN token for two main functions on the network:
Miners on the Republic network will get the token as an incentive for their role in running network nodes. The traders who operate on the network will be required to stake tokens in order to have access to use the protocol. The concept here is similar to the one on the ethereum protocol whereby there is no specific fee required for this purpose. But the higher the fee a user proposes, the higher the priority given to his trade.
Additionally, those running nodes on the network as well as its traders will be required to put up a bond for regulation purposes so as to limit bad behavior. This will work in two main ways. First, creating an identity on the network will require a bod that is refundable when one wishes to leave the community. This bond will be lost if ever the user in question engages in wrongful conduct within the network.
The second way requires that a user place a bond before running a node. If ever the node operator tries to falsify information concerning any trade, this bond will be lost. The bond also serves to discourage any single entity from registering multiple nodes on the network so as to have a measure of control. It is set at a high enough value to prevent such malicious activity while still being reasonable enough to allow honest nodes to meet the threshold.
The idea is that the more users there are on the Republic network, the higher the utility of the REN token. This in turn will mean a higher value and will ensure high demand for traders wishing to make use of the features on the platform. Subsequently, more traders on the network will mean a need for more nodes and higher profits for node operators. More nodes will translate to a high security network that will appeal to investors and traders.
The REN token will have a market capitalization of 1 billion with the protocol planning to raise 35,000 ETH for 60.2% of the total REN token. The remaining percentage will be shared with the team of advisors, founders and others getting 9.9%. And 10% will be allocated to community development programs and partnerships while the rest will go into the network’s reserve.
The network is currently running a private pre-sale for its strategic investors and the crowdfund is scheduled for February. Its precise date will be announced in due time.
Q1 2018 is basically assigned to get the core functions of the system in order. This will require setting up nodes and carrying out atomic swaps for the initial crypto assets that the system should support.
Q2 2018 will see the launch of trader terminals and the testnet so as to deploy the system on an actual blockchain.
During Q3, mainnet deployment will take place and node configurations will be availed.
Starting Q4 and into the future, the team wants to scale the project in order to support more crypto coins as well as alternative atomic swap methods. During this time also, there will be efforts to try and incorporate higher trading frequencies on the network.
The entire team comprises 12 members, with CEO Taiyang Zhang at the helm together with Loog Wang, the CTO. Zhang comes with a three-year experience as a director at Neucode and one year as Virgil Capital director. Wang has a Bachelor’s degree in Computer Science and has worked for two years as the Lead Software Developer at Neucode. He has also worked as a researcher for seven months at the Australian National University.
Most of the others have strong backgrounds in academia but limited experience in the real world. In spite of this, their efforts have attracted a number of renowned investment funds like Consensys, Blockchain Capital, Blockchain Global, Signum Capital, Panterra, Signal ventures, Saxo and CIMB among others.
Opportunities for the Republic Protocol
One of the foremost opportunities for the Republic protocol is the fact that at the moment, the crypto market is mostly comprised of individuals and small companies. There is a surge in interest from institutional investors but little in the way of industry frameworks to handle their level of investment.
The Republic protocol seeks to implement a model that will cater to all of the above groups of people, offering a highly scalable system. This means that even with an influx of huge institutional investors into the space, the system will be able to adapt with minimal price slippage. This is a major contrast to existing systems and thus offers a niche market for the product.
These large investors are at present unable to move their crypto assets without taking a toll on the crypto ecosystem. If such an investor today went to a regular exchange and tried to convert a massive amount of one cryptocurrency to another, this would significantly affect the value of these currencies on the platform in question. A dark pool is off the blockchain and it allows these big fish to transact directly without the need for an intermediary. They do not have to know each other on this trustless system. Rather, the automated mechanism ensures that both parties honor their side of the agreement to the exchange.
The crypto assets targeted by this protocol, ETH, BTC and ERC-20 tokens are worth more than $0.5 trillion at present. This would imply that capturing just 5% of the market would translate to $25 billion.
Dark Pool Services
There are quite a number of companies that offer dark pool services in the market at present. But none of them has been able to turn into a household name. Successfully operating this kind of trade requires a significant level of trust because it usually involves large amounts of funds. The Republic protocol offers a revolution in that it uses a trustless system and thus does not require third party intermediaries.
Scaling through Atomic Swaps
The use of cross-chain technology for atomic swaps is one of the most appealing innovations at the moment. It in fact makes one of the biggest blockchain themes for 2018. If the Republic protocol succeeds in executing this, the potential for its system will be remarkable.
- The Republic protocol project is still quite a long way from maturity. Its activity on GitHub only started out in December of last year. It is still basically a whitepaper project with the initial internal testnet for the first crypto assets yet to be launched. This is scheduled for the beginning of Q2 2018.
- It is still uncertain whether the team will be able to carry out all of the requirements of the system. There are challenges in the atomic swap, the hidden orders and verification processes for the computation.
- Most of the team members, particularly the developers have limited experience.
The Republic protocol is a worthwhile product which targets a niche crypto market. It is designed to allow private transactions between big investors using trustless mechanisms and atomic swaps.
The token supporting the network, REN, has high utility and offers a reasonable growth potential. Even though the project is still mostly on paper, its scheduled testnets over the next few months will confirm its viability or lack thereof and potential for success and growth.