Renegade offers a new trading platform. How does it work?
Renegade is a startup company that attracted investors’ attention recently with it’s ICO RNG. Moreover, its team is currently developing an on-chain version of a dark pool. The latter is a trading venue well-known in traditional financial markets. It’s based on zero-knowledge proofs and multiparty computation (MPC).
However, Renegade aims to create a new product while using the old one’s advantages. Its platform will maintain complete anonymity during a trade, unlike traditional exchanges. Besides, the team plans to use peer-to-peer order matching. It will employ a secure multiparty computation, along with the atomic settlement of matched orders to achieve that goal. The company claims that third parties won’t be able to learn any information about any customers’ token balances, trade history, or pending orders. It also hopes that such a policy will lead to higher-quality trade execution.
The Renegade team noted that non-custodial trading currently suffers from various problems, chief of them being Miner Extractable Value, Pre-trade transparency, Post-trade transparency, and Address discrimination.
Defi traders, who are familiar with the market, know that block producers and sequencers can usually see full transaction information. That allows a chance for arbitrary reordering, backrunning, frontrunning, and trade censorship.
Moreover, non-marketable trades based on a limit order book are also visible to all third parties. The latter can easily access the entire state’s history. Such a situation enables them to track and trace various trading activities.
Market participants can see the origination address (which is actually a pseudonymous identity) of all outstanding orders. All of these make it easier for scammers to help themselves with traders’ money. Besides, trade execution often suffers due to these flaws, especially when whale traders try to profit.
What is the dark pool?
A dark pool is a common feature used in traditional financial markets. Its legal name is “alternative trading system.” Dark pools are essentially off-exchange trading venues that offer better privacy protections for users. They function much like the more familiar “lit” exchanges, such as the NASDAQ or NYSE.
However, there is one big difference. The order book is not visible to the public. Thus, investors and traders can’t see the outstanding quotes of other market participants. Only those, who use a dark pool, will get information about matches on their own trades. Thanks to such a system, traders will be able to privately search for a counterparty. They won’t need to broadcast their trading intentions to the broad market and take a chance of losing opportunities in the process.
Furthermore, investors usually use dark pools to enjoy better execution of trades on large blocks of various equities. If they’d attempted the same on a lit exchange, insufficient liquidity would result in significant price impact, as well as cross-exchange arbitrage. That means traders would lose money instead of gaining it, or at least wouldn’t gain much.
Some investors use TWAP-style orders while using the lit market. Still, statistical arbitrageurs often detect such patterns, resulting in losing money for traders.
Renegade also pointed out that while blockchains offer many advantages, all activities are visible to any interested parties. That might sound great, but some of the current decentralized exchanges have been known to leak data. That’s definitely not a good outcome for investors.
What is Renegade’s solution?
Renegade decided to create a non-custodial dark pool to solve the four main problems that plague the market. It will enable customers to hide all information about the state of the exchange. Zero-knowledge proofs will guarantee that.
Moreover, the team noted that this platform functions like a CLOB-style DEX. But unlike the latter, it uses an encrypted and distributed order book. Thanks to such a system, matches between traders’ orders are inferred via a multiparty computation that is cryptographically secure.
Once the platform finds a match, it makes settlements of swapped tokens via zero-knowledge proofs., hiding all trade information and, at the same time, maintaining the system’s consistency.
The company is using the collaborative SNARK framework from Ozdemir to implement its hybrid MPC-ZKP match-settle architecture. Renegade also plans to launch its ICO soon. Renegade’s ICO is one of the high-ranking projects on various ICO listing platforms. While it’s still new to the market, it has interesting ideas and an experienced team to execute them. The company has already introduced its well-developed roadmap. The initial coin offering will start soon, as well. Overall, Renegade has a good chance of achieving success in the Defi space.
