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If you have ever heard of the Ren Protocol project, you probably know that there is an ERC-20 token belonging to it. This token is called RenBTC and is a decentralized representation of Bitcoin within the Ethereum network.
RenBTC’s goal is to bring Bitcoin into the world of Decentralized Finance that inhabits the Ethereum network. All this in order to manage to boost the growth of the system. It is worth noting that, before this project, many others have set out to bring Bitcoin to the Ethereum network. In this article we will tell you why this token is making it, what it is and how it works.
RenBTC is a token that stands out from the rest, as its main goal is to develop a token that has a value anchored to the value of Bitcoin. In other words, it seeks to make 1 RenBTC equal to 1 BTC, regardless of the fact that RenBTC is an ERC-20 token running over the Ethereum network. The idea itself may seem impossible, but as mentioned above, it is not the first project to propose this. Another project that has set this same goal is wBTC. Both projects are trying to achieve the same goal: to make Bitcoin usable in the Ethereum ecosystem.
To achieve this great goal requires a qualified and prepared development team and RenBTC has it. Among its founders, we can highlight the CEO of the development company behind the Ren ecosystem, Taiyang Zhang. Zhang, before the founding of Ren, held an important position as a founding member of KeeperDAO and is also one of the co-founders of Virgil Capital. This is a multi-strategy quantitative cryptocurrency trading company. Taiyang is a leading expert developer and early adopter of cryptocurrencies.
But the development team does not only consist of one person. We can also highlight the participation of Loon Wang who currently holds the position of chief technology officer at Ren. Wang was a developer of Neucode software in addition to having held the position of academic instructor at the Australian National University. The team also includes three other software developers, blockchain developers and a researcher. Currently, the team has more than 30 members.
All Ren Protocol developers have joined forces to achieve never-before-seen blockchain interoperability.
As a result of their work, RenBTC was born. This token is derived from an even larger project that has made its operation possible. This project is RenVM (Ren Virtual Machine). Before going on to explain how RenBTC works, it is necessary to review what RenVM is and why it is so important.
How does RenBTC work?
As mentioned above, we will first talk about RenVM. This is a virtual machine (universal computer) that aims to function as a bridge between different blockchains in order to enable interoperability between them. Basically, it is in charge of creating an infrastructure that allows cross-chain operations in an easy, simple and secure way. If you want to know more about how this machine works you can see it in this article.
On the other hand, the operation of RenBTC is quite simple. For its operation it uses a well-known method in the operation of transactions called lock and mint. This is a transaction (or several of them) between blockchains that originates in the Ethereum and Bitcoin blockchains.
These operations are focused on the development of smart contracts in Ethereum and a HTLC transaction located in Bitcoin to carry out a third operation of unlocking balance in Bitcoin and minting RenBTC tokens in the Ethereum network. This whole process is carried out in a decentralized manner and best of all, without intermediaries. It should be noted that the process involves tools provided by RenVM.
This process begins when a user sends his bitcoins to RenVM. Once the coins have been sent, the system blocks this sending and takes custody of the coins. Meanwhile, the RenVM is in charge of initiating a process of minting and generating the RenBTC tokens. At that moment, the user is granted what we call “minting signature“.
The minting signature is a signature that allows the holder to obtain the amount of BTC they have sent to the Ethereum network in the form of RenBTC tokens. In this way users convert their BTC coins into ERC-20 tokens within the network and for the same value. In this way Bitcoin and its users can participate in the DeFi system of the Ethereum network without any problems or third-party intervention.
Something very interesting about this operating model is that it not only works for Bitcoin, but can also be adapted to other blockchains such as Bitcoin Cash, ZCash, Polkadot. This means that we can also convert BTC, BCH or ZEC into other ERC-20 tokens using RenVM.
Once we have converted the cryptocurrencies into tokens, the only thing left to do is to withdraw them when we have achieved our goal. This process is very easy. We only have to generate a “transaction burning” through the virtual machine to burn the RenBTC and they cease to exist. This releases our BTC balance that was retained in the system and we recover our cryptocurrency.
RenBTC use cases
Each project has a great utility and this also has its own use cases. We will see them below.
One of the use cases that first stood out in this project was the ability to create a DEX or decentralized exchange. These DEXs would have the ability to carry out cross-chain operations with other currencies supported by the Ren protocol. One of the advantages is to offer these types of transactions securely and without counterparty risk.
In addition, RenBTC contributes to facilitate the participation of users who hold Bitcoin in the DeFi world, as they only have to send their BTC and transform them into RenBTC to participate in the network without any process such as the KYC mandatory in exchanges.
Another use case would be lending. This token allows great flexibility to create pools that offer their liquidity in different tokens in addition to Bitcoin.