Republic Protocol (REN) Whitepaper Translation

Republic Protocol (REN) is a protocol for large-volume trading of crypto assets between BTC/ETH, BTC/ERC20, and ETH/ERC20 on a distributed dark pool. It is the only known blockchain enterprise with such distributed dark pool trading technology for crypto assets. In traditional US and European stock markets, dark pool trading accounts for approximately 10-30% of all industry trading volume. Major financial institutions like JPMorgan Chase, Goldman Sachs, Fidelity, Deutsche Bank, and Morgan Stanley are among the few brokers that offer dark pool trading.

"Dark pool" trading is one of the most important forms of "alternative trading systems." Typically, in exchange trading, all buy and sell orders are made public. However, in a "dark pool," institutional investors execute trades through high-frequency operations conducted by traders. Dark pool trading conveys the "intention" to buy or sell stocks to specific investors. The original purpose of conveying these "intentions" was to test whether orders could be matched among a small group of investors. In reality, a large portion of these "executable" "intentions" are ultimately traded without public knowledge.

The main advantage of dark pool trading is that institutional investors conducting large transactions can remain anonymous when seeking buyers and sellers. This prevents impacting the entire market and avoids devaluation.

The Republic Protocol system relies on a carefully designed incentive system to ensure that players abide by the rules. RenEx "Dark Nodes" run matching engines to ensure the operation of the dark pool. The existence of multiple dark pools mitigates counterparty risk. To prevent malicious attacks, network nodes (Darknodes) are required to stake 100,000 REN, the native token of the Republic Protocol.

I. Project Introduction

The main technical objective of Republic Protocol is to ensure the operation of network nodes so that trades on the exchange are processed and executed without disclosing information about themselves. Republic Protocol utilizes Shamir's Secret Sharing Scheme to divide orders into multiple fragments distributed across the network. The original order cannot be reconstructed without collecting a majority of these fragments. To prevent malicious behavior with these fragmented orders, Republic Protocol employs smart contracts called "Registrars" that represent the network topology of the nodes.

Project Features

1. Trader anonymity: Traders' identities are secure within the Republic Protocol. However, the underlying cryptocurrencies being traded may offer different levels of privacy.

2. Offline order matching: Traders do not need to stay connected to the network while their orders are being matched. Once an order is placed, nodes will run matching calculations until a match is found or the order expires (either manually or via a trader-specified deadline).

3. Order security: Orders are secure until matched. Once matched, some details of the order are revealed to the matching party. Both parties need to be aware of the potential for competition, although the disclosed information will not give either party an informational advantage.

II. Republic Protocol's Total Liquidity Cannot Be Reasonably Estimated by Any Participant

Application Scenarios

The Republic Protocol decentralized dark pool ecosystem is supported by the following functions:

• RenEx Dark Pool: A decentralized dark pool exchange.

• Hidden Order Book: Keeps the details of large token orders confidential until trade execution.

• Cross-chain Asset Trading: Trades digital assets across different blockchains.

• Large Order Dedicated Facility: Places large orders while minimizing price slippage and market impact.

• Dark Nodes: Matches order fragments and collects order matching and settlement fees.

Technical Overview

Decentralized Order Matching:

• Trading parties first divide their orders into fragments using Shamir's Secret Sharing Scheme. These fragments contain only partial sensitive data of the order without exposing the order value. The order can only be reconstructed by collecting more than half of the order fragments.

• Nodes act as matchmakers, performing Secure Multi-Party Computation on the fragments of different orders, and mixing the results with the results of other nodes (different fragment calculations). The resulting fragments do not reveal the original order, but only represent the result of the order matching.

• Due to the special design of order fragments, order matching operations can be performed with any function applied to polynomials, as well as matching two or more orders. Therefore, the order matching operation enjoys high flexibility. Nodes can match orders at exact prices, partially match orders, or match multiple trading pairs (e.g., if a direct REN/BTC trading pair cannot be found, it can be achieved indirectly through BTC/ETH, ETH/REN and REN/BTC), which helps to improve liquidity.

Trade Execution:

• Nodes compete with each other to find matching orders. The matched orders must be registered for other nodes to be aware of the order status, and the relevant trading parties will also be notified. Any paired orders will no longer participate in the matching. This process takes place on the Ethereum network. Only unmatched orders can participate in the matching; trading parties can set a 24-hour validity period or manually cancel unmatched orders. After the order expires or is cancelled, the relevant prepayment will be refunded.

• Republic Protocol also incorporates an atomic swap protocol, initiated by the trading parties of the matched order group. Nodes are responsible for passing information for executing orders; when possible, establishing a direct P2P connection between trading parties. Due to the limited communication between blockchains, trading parties are not obligated to execute orders. The project believes that an access bond paid in REN tokens can effectively incentivize trading parties to execute orders.

Order Fees:

• When submitting an order, the trading party must pay a fee in REN tokens. If the order is not matched before expiry, the fee will be refunded to the trading party. Nodes participating in the decentralized computation can receive fee sharing (equally distributed to all participating nodes) by matching orders. The value of fees varies; higher fees will receive priority processing from nodes. Upon successful trade completion, the nodes will receive fees from both the buyer and seller. The only order information accessible to nodes is the transaction fee earned from a successful match.

• The RenEx Beta Mainnet currently adopts a single fee model, charging a unified fee of 0.2% to both buyer and seller of each trade. Therefore, each trade generates a 0.4% fee. 80% is shared among the nodes; the remaining 20% is held by RenEx for liquidity incentive programs (rebates to market makers and liquidity providers to stimulate platform liquidity growth). The RenEx fees are temporarily set by the Republic Protocol team to maintain the competitiveness of RenEx.

Bonds:

• Orders are divided into several fragments and distributed in the network to ensure order information security. To prevent Sybil attacks and simplify the identity authentication mechanism, both trading parties and nodes must purchase bonds with REN tokens to gain access to the network. The only identity associated with the bond is registered in the smart contract of the protocol, and anyone can query the registration status. When a trading party or node exits the network, the bond will be returned in full. If the network detects malicious behavior, the corresponding bond will be confiscated, and the reward mechanism will maintain network security.

• Trading parties can freely submit bond amounts; the bond amount is proportional to the number of orders placed at a time. The setting of the bond threshold is flexible and expensive, requiring participants to make a sufficiently high financial commitment. Both the trading party and the node must submit a bond amount above the threshold to be eligible to participate in network activities.

• The mechanism for setting the bond threshold is still under development. The project plans to set the threshold for Dark Nodes at 100,000 REN, which means that the maximum number of Dark Nodes is 10,000, given the total token supply of 1,000,000,000 REN. The bond amount can be changed by the contract owner (simultaneously changing the maximum number of nodes). Republic Protocol mentions that the bond threshold will eventually be controlled by a Decentralized Autonomous Organization (DAO) and decided through voting, utilizing the governance function of the REN token.

III. Review

The main technical goal of Republic Protocol is to enable a decentralized network of nodes to match orders. While this may seem impossible, it can be achieved by applying cryptographic techniques that have been thoroughly researched for 30 years and modifying them to suit the world of decentralized computing.

Republic Protocol utilizes Shamir's Secret Sharing Scheme to break down orders into a large number of order fragments and distributes them across the network. The order cannot be reconstructed unless a majority of the order fragments are recombined. To prevent this from happening, Republic Protocol defines an Ethereum smart contract called a Registrar which organizes nodes into a network topology such that it is computationally infeasible for an adversary to obtain enough order fragments to reconstruct an order. As long as traders respect the network topology defined by the Registrar, their orders will be secure.

Using order fragments from two different orders, a node can engage with other nodes in Secure Multi-Party Computation. To perform the same computation over two orders which will determine whether or not the two orders match. Decentralized computation does not reveal the order fragments and performs a random scaling on the final output. This prevents the nodes from reconstructing the original orders and prevents them from using the output to infer anything about the orders. Zero-Knowledge Proofs are used to verify the integrity of the computation without revealing any information. These proofs are computationally inexpensive which allows them to be enforced by an Ethereum smart contract known as a Judge.

After two orders are matched, an atomic swap is initiated between the two traders over the Republic Protocol Network, a decentralized peer-to-peer network that utilizes standard asymmetric encryption to keep the details of the atomic swap secure.

Related Links:

• https://renproject.io/

• https://medium.com/renproject

• https://www.chainnews.com/articles/745459795256.htm

• https://help.bybit.com/hc/zh-cn/articles/360024861754-%E4%BB%80%E4%B9%88%E6%98%AFRepublic-Protocol-%E4%BB%80%E4%B9%88%E6%98%AFREN%E5%B8%81-