What is Ren?
As the crypto ecosystem grows, more individual blockchains are being created with their own native assets and functionalities. But many decentralized finance applications—DeFi apps or dApps—want to leverage the liquidity of assets native to other blockchains, not just their own. Interoperability between blockchains, primarily between Ethereum and other blockchains, would mean that participants can exchange, stake, and otherwise make use of any crypto asset in any DeFi app.
Founded by Taiyang Zhang and Loong Wang, both experienced blockchain developers, Ren is a secure network of virtual nodes—referred to as DarkNodes—that facilitates interoperability between blockchains using complex, trustless, and decentralized consensus algorithms and cryptography. Ren takes deposits of one asset (e.g. BTC), holds that in custody, and creates a complementary Ethereum token which can be used on any Ethereum-powered app. Ren is currently in its Mainnet Sub-Zero phase of progressive decentralization, which means that its core team still maintains control of its nodes and of development, but its development roadmap is public.
Ren does not use a centralized custodian to hold the deposited assets; instead, Ren’s virtual machine network (RenVM) is powered by DarkNode operators which use something called the RZL MPC algorithm to manage the creation of private keys without sharing that key with any individual DarkNode. RenVM creates these crypto asset pairs on a 1:1 scale, in contrast to methods like borrowing which usually require an overcollaterization of the borrowed assets, and users burn the newly created Ethereum token when ready to reclaim their deposited assets.
In order for a participant to operate a DarkNode, a participant has to stake 100,000 REN tokens, and in return, node operators earn REN as rewards.
What is the REN token?
REN is an ERC-20 token that powers the Ren network. The Ren virtual machine network, RenVM, is maintained by decentralized nodes called DarkNodes and in order to operate a DarkNode, a participant has to stake 100,000 REN in a smart contract. In exchange for operating a DarkNode and helping to power the network, DarkNode operators earn rewards (in REN) which are calculated as a portion of Ren network fees.
Users of the Ren network, e.g. someone depositing BTC in exchange for renBTC, an ETH token, do not have to pay network fees in REN; rather, Ren network fees are collected from the deposited, locked assets.
There is a fixed maximum supply of 1 billion REN tokens. Since being founded in 2017 (then called Republic Protocol, renamed to Ren in 2019), Ren has sold 65.2% of the total supply in various private and public token sales. The raised funds were used for protocol development. The protocol maintains a reserve fund of REN.
How does REN compare to Bitcoin?
REN differs from Bitcoin in a few key ways.
First, REN is an ERC-20 token, meaning it is a token that runs on—and is backed by—the Ethereum blockchain. This means that REN does not have its own miners. Ethereum miners perform the task of processing and validating REN transactions, just like how Bitcoin miners process and validate bitcoin transactions.
The second major difference between REN and Bitcoin is their age. Ren’s Mainnet was launched in May 2020, compared to Bitcoin’s 12 or so years, which means it’s less proven, less distributed, and has a significantly smaller market value than Bitcoin.
Additionally, the Bitcoin blockchain does not perform any other functions besides processing transactions. Ren, on the other hand, executes functions such as burning and minting via smart contracts.
However, it should be noted that, although REN is different from Bitcoin, it is far from independent from it. Bitcoin, the coin with a larger market (by a long shot), can influence the price of all other cryptocurrencies. If Bitcoin crashes, there’s a good chance that REN will feel the burn too (not directly as they operate entirely distinctly, but through overall market sentiment.) And if Ethereum, the coin that powers the blockchain that supports REN crashes, then REN’s price could be impacted. However, if REN crashes, Bitcoin may be less likely to get hurt by virtue of its size.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:
No Canadian securities regulatory authority has expressed an opinion about Ren, including an opinion that REN is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of REN prior to making it available on Wealthsimple Crypto and has concluded that REN is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.
We evaluated REN based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of REN, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created Ren;
- The supply, demand, maturity, utility and liquidity of REN;
- Material technical risks associated with REN, including any code defects, security breaches and other threats concerning REN and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
- Legal and regulatory risks associated with REN, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of REN.
Like all other crypto assets, there are some general risks to investing in REN. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Each of these risks are described in more detail in our in-app Product Disclosure. In addition to these general risks, REN presents an elevated short history risk, elevated operational risk in that its protocol is still under development, and elevated risks due to the core team having control over most DarkNodes. Further, the Ren community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of REN have no recourse to Ren or Wealthsimple if REN declines in value for any reason.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading REN. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.
Last updated: September 28, 2021