Ren will issue additional tokens to develop the decentralized Ren 2.0. Can challengers seize the market during this window of opportunity?

After the collapse of FTX and Alameda Research, the cross-chain bridge Ren Project also fell into crisis. The former acquired the latter in early 2021. Since the current Ren 1.0 is not open source and the control is not fully decentralized, users can't help but worry about the security of Ren.

While Ren 2.0 still needs to be developed, some competitors have stepped forward and may launch a cross-chain bridge for BTC during this period. Frax Finance is one of them.

$11.96 million in funding still in Ren 1.0

The Ren team previously stated that the operating expenses obtained from Alameda will only be enough to last until the end of this year. Ren will abandon the current Ren 1.0 and transition to the decentralized Ren 2.0 at the beginning of next year. What is the current progress of Ren?

Ren supports cross-chain transfer of assets such as BTC, DOGE, ZEC, FIL, BCH to seven smart contract platforms including Ethereum, BSC, Fantom, Polygon, Avalanche, Solana, and Arbitrum, charging a minting fee of 0.2% and a redemption fee of 0.1%. According to the official website, Ren's total historical transaction volume has reached 13.2 billion US dollars, with the highest locked funds reaching 1.47 billion US dollars.

The Ren team stated in a Medium article published on November 19 that Ren 1.0 will be closed in 30 days. As of December 27, the expected closing time has exceeded, and now only redemption can be carried out, and new cross-chain assets cannot be minted. The team has also repeatedly reminded users to withdraw assets from Ren 1.0. There is no compatibility between Ren 1.0 and 2.0. Ren 1.0 is expected to be offline after a period of time, which is beyond the control of the team, but there is still $11.96 million in funds in Ren 1.0.

Ren 2.0 will be a fully open source, community-run cross-chain network with its own incentive structure, and will implement a new MPC (Multi-Party Secure Computation) algorithm.

As mentioned earlier, the operating expenses paid by Alameda to the Ren team are only enough to sustain until the end of this year. To continue the development of Ren 2.0, additional funds need to be sought. All assets, including the renproject.io domain name currently used, belong to Alameda. The current site needs to be hosted on IPFS and control transferred to RenDAO.

Snapshot vote has agreed to mint new REN tokens

Ren has discussed future developments several times in the governance forum, and in the Snapshot vote from December 15 to December 22, the majority of votes supported issuing additional tokens to support subsequent work.

Based on the proposal, Ren DAO will decide whether and how many new REN tokens to mint for the Ren Foundation to fund the development of Ren and the growth of the ecosystem. There are five voting options: A) 50M, B) 100M, C) 150M, D) 200M, E) Reject. If more than 50% of the votes choose to reject, the proposal will be rejected. If the proposal passes, the final number of tokens to be minted will be determined based on the weighted average of options A to D.

According to the final voting results, the votes that chose to reject only accounted for 5.12% of the total votes, while 80.78% of the votes chose to mint 200 million REN tokens. The total number of existing REN tokens is 1 billion, and the current price is $0.0775.

The minted tokens will be used mainly for the following purposes:

The cost of setting up the Ren Foundation in Switzerland is approximately $107,000. Setting up the Foundation is an off-chain activity and may require the community to set up a working group and have community members come forward. Funds are raised to fund the continued development of Ren 2.0. The Foundation and DAO are the entities that decide to provide funds to the development of Ren 2.0. A portion of the funds from this additional issuance may be sold to investors at a discount. In order to ensure that the token share held by current dark nodes is not diluted, approximately 20% of the additional tokens will be allocated to existing dark nodes.

In order to switch to the new REN contract, a new token may be issued and a one-way swap contract may be deployed for the migration of existing tokens. Tokens minted to the Ren Foundation will have no lock-up period, but the Foundation will impose lock-up conditions on the allocation of dark nodes, investors, and development teams.

Frax’s BTC cross-chain bridge conjecture

After Harmony's official cross-chain bridges Horizon and Nomad were stolen one after another, Frax launched its own cross-chain bridge FraxFerry. In the private key leak of Horizon alone, Frax lost more than $5 million in FRAX and FXS. Currently, FraxFerry is only used for its own cross-chain FRAX and FXS.

FraxFerry is a simple and secure cross-chain bridge, which sacrifices speed. The funds that cross the chain through FraxFerry will be locked for 24 hours. After the expiration, if it is confirmed that there is no problem, the funds will be credited. If someone in the multi-signature thinks there is a problem with the funds, the cross-chain process can be suspended.

It should be noted that Frax has not publicly stated that it will develop a cross-chain bridge for BTC. The main speculation comes from a tweet written by Flywheelpod and forwarded by Frax’s official Twitter account.

When someone in the community asked when fraxBTC would be developed, Frax founder Sam Kazemian replied, "Does anyone want to see frxBTC?", and then continued to discuss the technical solutions for implementing frxBTC.

frxBTC can bring Frax a minting/redemption fee. If it is assumed that frxBTC can reach the same scale as renBTC at its peak and charge a fee of 0.25%, then Frax can earn 50 BTC (about 840,000 US dollars) through minting fees. Frax also launched the lending market Fraxlend this year. If frxBTC is successfully launched, it can also be used as collateral and generate fees. Frax also holds a large amount of CVX, which can stimulate liquidity between frxBTC and other BTC-pegged coins on Curve.

However, redeveloping and maintaining the BTC cross-chain bridge will take up a lot of resources and time, and the underlying BTC cannot generate income. Sam Kazemian said that it is not clear whether the creation of frxBTC will become a profitable part of the Frax ecosystem, and it is not sure whether the BTC anchor currency makes sense. The new function needs to be in line with Frax's vision.