Despite increasingly popularity, the process of trading cryptocurrencies remains difficult. User-to-user trades are risky at best, forcing most to use exchanges. Most major exchanges are backed by some form of regulation or asset. However, smaller market-cap coins are often on less savory exchanges. One solution to create additional liquidity in the industry is the concept of atomic swaps. Complex to create, atomic swaps allow direct trading of one cryptocurrency for another.
The Republic Protocol or REN brings atomic swaps and a concept of ‘dark pools’ to the cryptocurrency market . Including BTC, ETH and subsidiary ERC20 tokens, users will be able to swap back and forth by paying a fee in REN. These swaps will take place within a dark pool – a financial instrument that is already used in traditional finance. These pools obscure both the identity of traders and the amount that they are trading. By doing so, they prevent large trades from shifting the market. It also allows large investors to maintain a degree of anonymity.
The Republic Protocol
Designed by 22-year-old Taiyang Zhang, the Republic Protocol launched via ICO in early 2018. At the height of the ICO craze, it snagged over $30 million USD. His project advances the idea of a dark pool beyond that offered from traditional banks. In addition to obscuring transaction data, it removes the facilitator. Where a normal dark pool requires a third-party to process the trade, the Republic Protocol does not. This means that the transactions have complete anonymity.
In effect, REN is like Ripple’s liquidity protocol. Where Ripple provides liquidity between fiat currencies, REN does so for cryptocurrency. Both create liquidity through positioning their cryptocurrency as a trading gateway. Given the popularity of Ripple, REN could have a strong future if they can reach their goals.
Moving from Exchanges to Atomic Swaps
The Republic Protocol is not the only project developing atomic swap technology. Many sidechain projects focus on atomic swaps between the main chain and various alternate currencies. These trust-less systems remove the added risk associated with cryptocurrency exchanges. Many of these exchanges have suffered some form of hack or fraud in the past year.
However, the technology behind atomic swaps is complex. The first project to successfully implement atomic swaps will undoubtedly reap the benefits, but that may still be some distance off. Republic Protocol’s dark pool offers a solid compromise in the meantime.
Article By: Adam Stone