EL World DeFi or Decentralized Finance, has brought a whole series of new projects and tokens to the world, and one of them is RenBTC.
This curious token seeks to lead Bitcoin to the DeFi world of Ethereum, in order to boost its growth. While it is true that they are not the only attempt to bring Bitcoin to Ethereum, RenBTC works on a structure with great flexibility, something that has earned it high praise in the community.
But what exactly is RenBTC and how exactly does it work? Well, you will know that and more in this Bit2Me Academy article.
RenBTC, the origin
RenBTC is a very unique token, because its goal is to create a token whose value is anchored to the value of Bitcoin. That is, 1 RenBTC is equivalent to 1 BTC, although the first is actually a ERC-20 token running on Ethereum. This idea is the same as projects like wBTC, since both projects have the same objective: bring Bitcoin to the world of Ethereum.
However, behind RenBTC is a team dedicated to doing much more than that. It's actually just one part of a huge effort to take blockchain interoperability beyond anything imagined.
As a result, RenBTC is part of the successes of a project that receives the name of RenVM. It is for this reason that before explaining exactly what RenBTC is, we will know a little about this RenVM and its role within this token.
RenVM, a virtual machine to join and interoperate blockchains
RenVM is a virtual machine created in order to be the heart of the Ren protocol, and to be the bridge that joins different blockchains in such a way as to enable interoperability between them.
That is, it is possible to perform operations in Ren whose effects have consequences on two or more blockchains at the same time. The heart of all this are smart contracts or smart contracts that RenVM is capable of handling, and that they allow this type of actions.
Picture it this way: you have 10 BTC and you are interacting with the Ethereum blockchains and Bitcoin Cash using RenVM. Thanks to this, you could be able to make a smart contract that under certain conditions mobilizes your 10 BTC between ETH and BCH in an almost native way, without intermediaries, with low commissions and with a speed higher than what you could see for example, in the atomic swaps.
Thus it is clear that the objective of RenVM is to create a huge network of nodes that allows the execution of a virtual machine capable of joining different block chains under the same platform. It basically seeks to create an infrastructure that allows cross-chain operations in an easy and simple way.
This idea is something that is extremely useful. For example: in Decentralized exchanges (DEX) or DeFi, where thanks to RenVM you could perform direct operations using your cryptocurrencies, even if they are not ERC-20 tokens, without having to make intermediate changes. Without a doubt an interesting feature, which also comes with a high level of privacy.
RenBTC How does the token work?
The operation of RenBTC is quite simple, the most common method of operation is lock-and-mint transactions (lock-and-issue). This is a type of cross-chain operation that takes place between the Bitcoin and Ethereum blockchains.
Basically, what these operations do is create a smart contract in Ethereum and a HTLC transaction in Bitcoin to carry out with them a balance blocking operation in BTC and minting of RenBTC on Ethereum, and all this in a decentralized way, without intermediaries and using the tools that RenVM allows us.
The process begins when the user sends their BTC to RenVM, to which the system blocks said sending, keeping custody of them. At that point, RenVM begins the process of minting or generating the RenBTC tokens by granting the user a “minting signature”, a signature that actually allows obtaining the same amount of BTC that has been sent on the Ethereum network in the form of these tokens. . In this way, the user converts his BTC into an ERC-20 token within the Ethereum network, with the same value as a Bitcoin, thus allowing him to participate in the Ethereum DeFi ecosystem without friction.
What is really interesting about this model is that the process not only works with Ethereum, but it is also possible to carry out operations of the same type with other blockchains such as Polkadot, Bitcoin Cash y ZCash. Yes, you can also transform your BTC, BCH or ZEC into other tokens in the same way using RenVM. For example, you can send your BCH and receive RenBCH instead, or directly ZEC if you wish.
Now, then we have to explain the process of withdrawing your tokens. In this case, transforming your RenBTC to BTC is just as simple. It is enough to generate a burning transaction or burning of tokens using RenVM so that said RenBTC are burned (ceasing to exist) and in this way your BTC balance held by the system is released. In this way, you return to the starting point and recover your BTC without problems.