Ren Strides Towards Decentralisation with the V0.4.0 Upgrade

  • Ren, a protocol that allows value to be transferred between blockchains, has scheduled its v0.4.0 upgrade for the 3rd of May.
  • The v0.4.0 update brings improvements to Ren’s mainnet and begins transferring control of the Ren Virtual Machine (RenVM), which processes transactions, from developers to users.

Loong Wang, Ren’s Chief Technical Officer, described the update as a major step forward for the platform:

By far and away, the biggest change is that it [the update] opens the way for RenVM to move forward to the next phase of the project. This upgrade will allow consensus to be decentralised. It also allows governance of RenVM to be decentralised.

The update is expected to cause minimal network disruption. Loong Wang said:

Users should not experience any major disruption, as the migration process has been designed to happen without any significant stops to network activity.

How does the RenVM work?

Before we go any further, let’s first break down how the RenVM works.

Imagine you wanted to use dapps in the Ethereum ecosystem, but your holdings are in Bitcoin (BTC). The RenVM acts as a decentralised custodian – it converts BTC to renBTC which is exchanged for an ERC20 token on Ethereum. The ERC20 tokens can then be used to run dapps or converted back to BTC.

Image courtesy of Medium showing the RenVM converting BTC to a token which is usable in the Ethereum Ecosystem.

Essentially, Ren provides Decentralised Finance with much needed interoperability with the aim of “unleashing billions of dollars in crypto assets into the Ethereum ecosystem.”

The RenVM currently supports the conversion of Bitcoin, Bitcoin Cash, ZCash and Dogecoin to tokens usable in the Ethereum and Binance Smart Chain ecosystems.

What will the v0.4.0 upgrade do?

The v0.4.0 upgrade gives users a greater role in managing the RenVM. Anyone prepared to stake 100,000 Ren can run a darknode, but user-operated machines only provide storage and computation power while Ren’s core developers carry out transactions.

That changes on the 03rd of May. User operated darknodes will begin to be added to the Greycore – the codename for the group of third-party users who will begin running the RenVM. Initially, the Greycore will operate on Ren’s Testnet where it will have responsibility for ensuring consensus.

From mid-September, however, the Greycore will assume sole responsibility for executing transactions by generating private keys and signing off on transactions. Changes coming in May, such as new monitoring tools , lower fees for running darknodes and bug fixes, will help to ease the transition.

Timeline for Decentralisation

Phase SubZero – Semi-decentralised

26th of April 2021 – V0.4.0 Upgrade

  • Upgrade Mainnet to v0.4.0.
  • Greycore members will be added to Testnet. Greycore members will be responsible for ensuring RenVM consensus.

28th of June 2021

  • Add Greycore members to Mainnet. Greycore will take control of RenVM consensus on Mainnet.
  • Upgrade Testnet to v0.5.0. Greycore members are gradually added to a Testnet where their darknodes will become responsible for executing transactions.

13th of September 2021

  • Upgrade Mainnet to v0.5.0
  • Greycore members will be responsible for executing transactions and ensuring concensus of the RenVM on Mainnet.

Phase Zero – Further Decentralisation

Date TBC

RenVM One – Full Decentralisation

Date TBC

  • Members of the Greycore will be selected by the Ren community.

Price

Short term:

Increasing the number of darknodes that can carry out transactions should improve network efficiency. This improvement could have a positive impact on the price of REN, as could making more assets compatible with the RenVM.

Loong Wang told ACCOINTING.com that Ren will support new assets following the upgrade. He said:

We’re aiming to support Solana and Fantom, although the former depends on audits coming through in time. After that, we’ll do a bit of a blitz and add most of major EVM-compatible chains.

When new assets were added to Ren during the November Multichain update price convergence occurred on the day of integration. The positive reception of the update was reflected in a short-lived upward price movement.

However, for the ecosystem updates carried out in December, January, February, and March, it is difficult to discern whether micro price movements occurred as a result of market fluctuation or the updates themselves.

Long term:

Conversely, long term data indicates a significant inverse correlation between the Balance on Exchanges vs. Price.

Data suggests that as Ren is moved off exchanges, price increases and vice versa. Between May 2019 – January 2020, the gap between price and balance on exchanges widened.

However, increasing interest in the project since January has led to rising prices and a decreasing amount of Ren held on exchanges.

What is interesting is the potential trend reversal indicated by the blue circle. If the correlatory relationship persists between price and balance on exchanges, more REN in circulation may indicate future downward price movement.

Fundamentally, long-term price movement could depend upon Ren’s developers winning trust for their chain linking technology.

It’s safe to say the crypto community is not entirely sold on the concept of bridging coins like Ren.

In August 2020, the creator of Ethereum, Vitalek Buterin, raised his concerns about interoperability coins on Twitter. Ren’s competitors WanChain, also cast doubt on Ren’s security mechanisms with a critique of how user funds are stored.

Loong Wang believes that allowing user darknodes to participate in transactions is an important step towards putting such concerns to bed. He said:

Although all relevant Darknodes are still run by Ren project team members, this new upgrade is a significant step towards changing that, and by Phase Zero, there will be no central authorities.

Greater decentralisation could increase confidence in Ren’s bridging technology which may impact price positively.