Let’s talk about the transition from last year from dark pool to your functionality and about privacy. Sam participated in the ICO initially for Ren Project. The tech is important but why was Ren built? Why is a privacy preserving dark pool necessary for interoperability? These bring up broader privacy questions connected to these token tracking companies, their whole existence is monitoring on chain transactions. It will be interesting to see how regulatory bodies respond to how users begin using the systems.
Because Ren is basically creating a derivative contract of what is essentially underlying the token, does that mean that securities laws are applicable to Ren? The legal advice is interesting so far says it is not an issue. It is not a derivative in a sense, more a one to one representation. You can always claim back one to one.
Can we talk about running a dark node? What the minimum hardware specification for a dark node? How much does it cost to run a month? We have done some research into this and the costings because the more profitable it is to run a dark node the more likely people are to run a node. And that is good for the network so the more dark nodes you have, the more secure the network is. Have you looked at Incognito? My understanding is that it is a sidechain where things happen in ZeroKnowledge. One thing which they do is that they sell their nodes. For $400 you can buy a node and they have an app….it would add an additional revenue stream for your company. Incognito.org – the first hardware page is what you come to.
Ren is partnered with Aztec. The token that comes out the other side is Ethereum – couldn’t that have privacy enabling features through Aztec. There is a stablecoin project that is going to be using Aztec. The trustless token transfers and swaps is only a small part of what Ren are aiming to achieve and later privacy preserving data transfers across chain.
Essentially once you have an engine that’s capable of doing zero knowledge computations of any kind, it becomes a natural question of how far you can take that and what you can do with it. There are lots of interesting challenges along the way. A broader concept of privacy is something we want to explore. For me Privacy is the most important topic for me in 2020 as we see more and more actual privacy rights in the world outside of blockchain. Does blockchain break the surveillance economy or does it continue to enable the mass surveillance that takes place on a daily basis? There is not something inherent in Blockchain that fixes this. Cryptography in general is a parallel topic to Blockchain and they marry together very, very nicely.
There is this growing connection (due to regulatory shifts) that there will be a unified database for all chains (they already do), they can use the address when KYC/AML happens on an exchange to track transactions.
The NSA analyse the metadata to create reports on people. Having worked in the intelligence community, looking at the metadata and the rapid growth in the amount of data that we produce on a daily basis, you can create a report about people. The data surveillance that is being done my companies like Google. They are not built in the framework of surveillance but then they get provided to the NSA, they just seem to collaborate with one another. The data being harvested from Google is how they have built behavioural models on their users.
There is a big difference between doing that for business purposes and advertise to me more effectively based on my user data, then great. But then if you told me the same data was then being passed over to a military organisation I am suddenly getting less comfortable with that. There does not seem to be a way to opt into one thing, and opt out of the other. What if I am taking all that data and then using it to build models that are not just targeting advertising, I am also running psychological operations to modify your behaviour in the real world. When you become the subject of the manipulation rather than the business being the subject, who doesn’t change their business based on feedback from the community? The problem is when it is about manipulating user’s behaviour that is not acceptable.
The root of the problem is that Facebook is really good at isolating their ecosystem from all other ecosystems. So in order to maintain your privacy, you lose all your friends on Facebook or you keep your friends, but give up all your privacy by being in the ecosystem because by being there you are opting your data in completely. The trade-off you are making… even if you solve all these problems with blockchain, how do you stop someone from opting in anyway because socially there is a huge incentive to behave this way especially when most people don’t understand what’s going on. None of my friends care about data privacy and unless you explain it to them, they don’t understand. Only people who have worked in the industry understand, it is crazy.
If you asked a normal person do they want privacy preserving features, they would say yes. I guess this ties in nicely with that Ren is doing. In the beginning it was focused on dark pools, now it is focused on interoperability between chains, it has privacy preserving features. In the initial phase, it will not have privacy preserving features. In the future, we will be able to use Zcash to preserve privacy between chains. Once it is on Ethereum, you can do all kinds of transfers on the network. Once you bring it out of the ecosystem, it will become transparent. There will be large sums of value, even for small amounts of value… But the five dollar transaction on coffee do you that to not be private? I think the larger company will bundle everything in like custodians who act as mixers.
There are so many layers of privacy. It is hard to know where to begin at particular levels. You can start with anonymity, you can see various levels moving around but you can not tell where the money came or went to. On another level you can hide the amounts but you can tell I made a transaction but you can’t tell what the amount was. The actual logic prevents front running. I can use RenVM which allows RenBTC on the other side, is created on Ethereum. There are other tokens supported: ZenCash and BitcoinCash. There is no scripting on Bitcoin. That scripting system being able to import this onto Bitcoin allows for all the crazy DeFi products to built using this.
When metadata is produced between the two chains, when you sent one Bitcoin to RenVM and RenVM Sent this on RenBTC onto Ethereum. You can see all this and verify this information – the fist transaction has to be visible and verifyable. In the future, when it integrates with Aztec, there will be a triangle between all these protocols.
What will change with later integrations? Mainnet 1.0 is basically focused on being decentralised. You need to do incentive testing. We will look at features for the system and working with privacy coins, like ZCash. Having shielded transactions through RenVM, would allow you to see the transaction but you could not see the amount or vice versa. This would preserve privacy.
You don’t have to understand you are interacting with RenVM, without recognising this. RenVM wants to create a native flow to allow Bitcoin to interact with DEX or a lending platform, etc. It will be necessary to move value from one chain to another over the next few years. Ren wants to get to the point where the user does not know which blockchain they are interacting with; to be protocol agnostic.
It is important that users understand the security issues of the platforms on which they hold their assets on. As an Australian that has Australian dollars, I have an understanding of the Australian dollar and my government or the US dollar. If you go the other direction, if they are not a 100% sure what the security implications are for your assets on the blockchain you are on. If you are holding Bitcoin and you do not know which blockchain your bitcoin in on, that is really important. Blockchains are about the ability to self-govern and the ability to self-control, to be responsible for your own assets and that is the price of freedom if you want to call it that, the price of self-sovereignty. You only have to see on Twitter that this can go well or really badly. From a user experience perspective, it would be great if they could stop thinking about wrapping and unwrapping, and just use the system. Ren was one of the founders of RapBTC.
RenVM is decentralised and trustless. Do you think regulated structures or unregulated structures will capture more value, like the one you are building with Ren? It is hard to say. I don’t think so because the average user struggles with the process of getting RapBTC. I always feel a little bit dodgy when I don’t want to do KYC. I don’t trust people who keep my data. Recently there was a big hack at my university and there was no choice when I became a student. A Chinese hacker came along and took all the data. People don’t have comfort with data security in a centralised system. It doesn’t even have to be your university, it could have been a third party they gave the data to under their terms and conditions. No one reads your t&cs. If it takes lawyers to write it, but doesn’t take lawyers to read it and agree to it. There is something wrong with that.
That is the process with DeFi you know what is coming out the other side and you are in control of your data. How many dark nodes are online right now? About 60 dark nodes run by members of the community who are helping us understand under what circumstances people run dark nodes and what effect do they have on the system when we try to do things like upgrades? It is very helpful and it is a small playground to test out economic incentive. At peak we have 250 dark nodes in our testnet, that is about 25 Ren. This has never been shut down since then.
How do the upgrades work? When you look at the dark node configuration. There are upgrades that break things, and there are upgrades that don’t break things. Some are efficiency upgrades which we just automatically set out. Once we get closer to mainnet, we will need dark node governance to address breaking upgrades and need time to stage roll outs over time. You can’t expect everyone to take on upgrades at once.
What are the hardware requirements for a dark node? They are the smallest load you can run a machine on AWS free for a year. Even after the first year it is about 10$ a month to run. What about running it at home? You could in theory but we would rather you ran the dark node on a cloud service. You need 99% uptime requirements to earn rewards. How does the security preserved by Ren on the network? If you are transferring a large amount of BTC, there are safety properties in the network and livelyness properties. You have to look at both attack vectors. The private key that is being held by Ethereum is not none to anyone why it is on the network.
Is there randomisation within your node structure? Every epoch (which is 4 weeks now instead of 24 hours initially for dark pools), a new node selection occurs. Even at 24 hours, it is importantly hard to attack in 24 hours. What prevents me from spinning up 400 AWS nodes and then owning 2/3rds of nodes on the network? Staking: unless you have 400,000 REN tokens, staking makes the token not hardware the limiting factor. Bonding nodes requires REN Tokens which nodes earn.
There are fundamental valuations for dark nodes and the fees those nodes are earning. There are millions of BTC locked up currency. There is velocity which generates REN but does not create an assets on the network. Volume generates income but consumes bandwidth. On the velocity side it is about integrating with exchanges or DEX; to allow people to move velocity through the system quickly. The more you have locked up in RenVM the greater the incentive to attack the network. Driving higher value, like MakerDao, where you see bulk assets under management or lent out through the platforms. The way we modelled the fees we look at the ratio of velocity to volume… by using RenBTC, you could double the volume in DeFi by bringing this into the sytem. You could run dark nodes to keep the network secure.
Maybe Bitcoin will introduce a smart contract system for Bitcoin. Why add other features from Bitcoin? Bitcoin is very cheap and fast. My one-hour transaction on Bitcoin is very good.
The point is interoperability becomes even more important as the ecosystem diversifies. Interoperability is not so important when Ethereum has the biggest market share… but tomorrow you need to be able to tap into different markets.
The Ren Alliance is a group of project committed to using RenVM in many different ways. They are going to use RenBTC on their platform or project. They will help us run our decentralised ecosystem by taking on dark nodes. There are lots of projects who are waiting on RenBTC to see how it goes. They need liquidity on a lending platform so you need to see where RenBTC will be so then they can launch it. The other projects are giving us feedback on our security standards, design etc. The feedback is helpful when we are building our ecosystem. They are contributors to our ecosystem over the longer term.
Could a centralised exchange integrate RenBTC? It could. In the future you could use Binance as an example, you are going to choose what you are going to withdrawal options and there are options including RenBTC. I have done is. You can deposit RenBTC directly into an exchange regardless of it being decentralised or centralised.
If you can use interoperability to bring tokens to other chains, then where would the value aggregate? In the long term it should move toward Ethereum because the volume is there and growing exponentially. All new projects are going to gravitate to Ethereum as a result. There is a reason why Ren is focused on bringing Bitcoin to Etheruem and not vice versa.
All the functionality is on Ethereum but all the value and liquidity is locked up in Bitcoin. I think we can bring that value into the Ethereum network and launch our MainNet.