Renegade: A New Decentralized Dark Pool Based On MPC And ZKP
- Renegade is developing a DEX based on multi-party computation and zero-knowledge proof.
- In Pool Dark trading, buyers and sellers are anonymous in making large transactions.
- The core difference between Renegade and all other exchanges is that the state is stored in the locality.
The current DEX is completely transparent, and anyone can see the user’s balance and transaction history. In order to meet the needs of investors in the currency circle for transaction anonymity and privacy, Renegade is developing a DEX based on multi-party computation (MPC) and zero-knowledge proof. A new type of decentralized exchange (DEX)-an on-chain version of dark pools, thereby providing users with total transaction privacy, that is, decentralized dark pool transactions, designed to prevent front-running, sandwiches, statistical arbitrage, etc., behavior to improve price execution in DeFi.
Crypto markets need dark pools
Dark pool trading has long existed in traditional finance. In traditional exchanges, information on large orders will be collected by high-frequency trading companies (High-frequency trading – HFT) is a strategy that executes transactions through programmed algorithms.
In simple terms, it is to provide extremely high liquidity in the market and collect toll fees from providing liquidity) to detect or detect, and then high-frequency trading companies will rely on special order types or hardware/software superior to large institutions/banks to buy and sell positions first, and finally sell them to large institutional traders for profits, while large institutional traders face losses.
In order to protect large institutional traders from being “handed down” by high-frequency trading companies (HFT), dark pools have continued to develop, and dark pool transactions have accounted for nearly one-third of the total trading volume of the US stock market.
In dark pool transactions, buyers and sellers are paired anonymously to carry out large transactions. This kind of transaction operation is opaque, and the identity of bid and offer prices and quotes will not be displayed, so trading strategies and positions will not be made public, and executed transactions will not be disclosed to the public details, which is very beneficial to institutional investors.
Advantages of dark pool trading
- Through dark pool transactions, large investment institutions can reduce the impact of market sentiment and hide their intentions from the general public who invest.
- The transaction price is more optimized, and buyers and sellers can get a more satisfactory transaction price than in the open market (buyers buy lower, sellers sell higher).
- There will be no slippage. Most of the dark pool transactions are completed at a preset price, and traders can complete the entire transaction at the expected price.
Due to the above-mentioned advantages of dark pools, and with the continuous development of the encryption market, the proportion of institutional investors and high net encryption asset holders in the market is getting higher and higher, and investors’ demand for transaction anonymity and liquidity is higher and higher.
In order to meet the above needs, decentralized dark pool trading, as a new encryption asset bulk trading protocol, will surely usher in vigorous development in the future. In fact, many centralized exchanges now provide customers with fee-based dark pool trading tools. Dark pool trading is a new path other than aggregation trading and AMM: it provides a suitable place for large institutional investors to trade and helps increase the exchange’s liquidity.
Renegade’s MPC-ZKP architecture
The core difference between Renegade and all other exchanges (centralized and decentralized) is that the state is kept locally. Instead of a central server (like Binance) or thousands of distributed servers (like Uniswap) maintaining balances and order books, all Renegade state is maintained by individual traders.
When a trader wants to perform an action on their wallet (deposit tokens, settle a match, etc.), they must know their old wallet and their new wallet and send three pieces of information to the smart contract:
- Commitment to the new wallet.
- Two “invalidators” of their old wallets to prevent double-spending on old wallets.
- Zero-knowledge proofs: Commitments are computed correctly, nullifiers are computed correctly, the old commitment exists somewhere in the global Merkle tree, and changes from the old wallet to the new wallet are valid (e.g., the user did not arbitrarily increase their balance).
The smart contract maintains a global Merkle tree of all previous commitments and a set of nullifiers showing previous wallets.
By using the commit-reveal mechanism, the protocol allows for complete wallet privacy (i.e., no information about the wallet is leaked on-chain) while maintaining complete state consistency and preventing double-spending attacks.
Fundamentally, Renegade is simply a p2p communication network of many independent relayers that are constantly talking and executing MPC with each other as new orders enter the system. Relayers never hold custody of assets but are only granted access to wallets to calculate pairwise MPC.
Thus, by implementing this MPC-ZKP framework through collaborative SNARKs, the protocol creates a DEX that is both fully atomic (i.e., neither party can exit after MPC execution) and fully private, both pre-and post-trade.
Features of Renegade
Renegade’s dark pool trading service, in addition to avoiding the counterparty risks that exist in centralized exchanges and OTC trading desks, also solves many problems in the current DEX spot market, ultimately providing users with better prices and best execution:
- Pre-transaction privacy: Before the user’s transaction is matched, no one can see any details of the user’s order. For large transactions that have a greater impact on the market, Renegade can hide the user’s order details (price, quantity, direction, etc.), and the user is also anonymous.
- Post-transaction privacy: Once an order is filled, only the counterparty knows which assets were exchanged. This prevents third parties from tracking and copying users’ trading strategies.
- Minimum MEV: Since validators can only see zero-knowledge proofs of valid transactions, block producers cannot pre-run, re-run, or sandwich your transaction in the middle.
By default, Renegade trades at the optimal mid-price calculated based on anonymous order book theory, and there are no market makers for spread trading. However, Renegade can also selectively execute matched orders for complete price discovery and better liquidity provision.
Potential users of Renegade
Given the widespread information leakage issues in the current DeFi system, many different types of traders could see price improvements on Renegade:
- Market makers: If one market maker is long an asset and another market maker is short the same asset, the trading desk can anonymously offset the two positions against each other, balancing the position without incurring the openly traded spread.
- OTC taker: The order taker can directly place an order at the middle price in the dark pool without having to bear the OTC price difference.
- AMM taker: Traders who transfer more than $5,000 at one time through the on-chain DEX usually have a significant price impact, and are caught in the middle by MEV peggers, resulting in losses due to arbitrage. With Renegade, trades are always guaranteed to execute at the middle price.
- Crypto natives with privacy awareness: Renegade remains completely anonymous, meaning no third party can see any details about transactions or payment history.
Tokens and Project Progress
The Renegade project currently has no token information. Renegade is currently in an internal testnet, and the public testnet is scheduled to be released in the second quarter of 2023.
Christopher Bender: Founder of Renegade.
Joseph Kraut: Co-founder of Renegade.
According to public information on February 20, 2023, Renegade announced the completion of a $3.4 million seed round of financing, led by Dragonfly Capital and former AngelList CEO Naval Ravikant, Balaji Srinivasan and Lily Liu, Tarun Chitra from Robot Ventures, Marc from Tagomi Bhargava and Lev Livnev from Symbolic Capital Partners also participated in the round.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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