Inter-Blockchain Liquidity: Minting Synthetic Bitcoin Cash With the Ren Protocol

zec	2020-8-24 04:00

The decentralized finance (defi) ecosystem has matured quite a bit in 2020 and one project that’s seen some growth is the Ren Protocol. The application that allows people to access inter-blockchain liquidity for a number of defi applications. The following post is a step-by-step guide on how to leverage the Ren Protocol with Bitcoin Cash and a Metamask wallet.

This week news.Bitcoin.com tested the Ren Protocol, another decentralized finance (defi) application that has been making waves within the crypto community. This is because the total value locked (TVL) in the Ren-VM system right now is more than 12,600 BTC ($146 million).

Defi Pulse data shows that the Ren-VM Protocol has around 12,600 BTC locked into the system on August 23, 2020.

The Ren protocol also works with zcash (ZEC) and bitcoin cash (BCH) as well, as it offers cross-chain capabilities with three blockchains and then connects them to Ethereum. In order to give our readers some perspective on how the project works, we tested the Ren Bridge to mint a very small fraction of renBCH.

In order to create Ren-based synthetic bitcoin cash (BCH), zcash (ZEC), and bitcoin (BTC) users need to visit the website bridge.renproject.io/.

Essentially renBCH is just like renBTC, as it is a synthetic form of bitcoin cash. After the tokens are minted they can be leveraged on a number of defi applications like Curve or Uniswap.

The following guide illustrates how easy it is to utilize these defi platforms, but it also shows how Ethereum is suffering from fee issues.

Paying $3 to $6 per transaction is nothing to someone leveraging various defi apps in order to yield off of 6,000 USDC with an intricate flash loan. In my experiment, I only minted $1 worth of BCH to test the system for this article and this is totally not a recommended amount with current gas prices.

On Saturday, August 22, 2020, I minted $1 worth of bitcoin cash (BCH) as a test to see how the platform works. It is recommended by the Ren developers to leverage more than $10 worth of BTC, BCH, or ZEC, but with fees today it’s likely the person should spend a lot more money to make it worthwhile. In this example, it cost $6.52 in gas to settle the smart contract and there’s also a small fee involved in the minting process.

Before even leveraging the Ren Bridge the website explains that the platform should be used for over $10 worth of BCH, BTC, or ZEC. I found with gas so expensive today, it’s probably better to leverage a bit more than just $10, but for this test, I had the audacity to mint $1 worth of bitcoin cash (BCH).

Despite the fact that Ethereum (ETH) has high fees, some traders are able to leverage complex transactions like flash loans that utilize a combination of defi applications in order to profit significantly. A $3-6 gwei fee is meaningless to the person who conducted this transaction making tens of thousands of dollars.

The first thing you will need is some ethereum (ETH), bitcoin cash (BCH), and a Metamask wallet. You will also need a bitcoin cash (BCH) compatible wallet too and then you can head over to the website at bridge.renproject.io/.

From here you can connect with your Metamask wallet and accept the interaction with the Ren Bridge.

Once the wallet is connected, you can then leverage the Ren Bridge to mint renBTC, renBCH, or renZEC. As mentioned above, I decided to mint 0.0035 BCH ($1) into renBCH and the application lets you choose the asset, amount, the destination address, and it also shows you how much you will receive.

The invoice that I sent the $1 worth of bitcoin cash to in order to execute the process.

The window told me I would get 0.002797 renBCH and the next page breaks down the settlement fees. After accepting, the bridge gives you an invoice or bitcoin cash address to send the BCH to in order to continue. I sent $1 worth of BCH from my Bitcoin.com Wallet by scanning the QR code given with the invoice.

15 confirmations adds quite the wait time to the process, but that’s what it takes to mint bitcoin cash (BCH) using the Ren Protocol. Other blockchains like BTC take fewer confirmations.

Paying the invoice takes a while, as the Ren Protocol wants 15 BCH confirmations in order to continue the process.

From here, I walked away for a few hours and came back after my transaction made it through 15 confirmations. Once the wait time is over, the Ren Bridge will ask you to submit the transaction to the Ethereum network.

After the 15 confirmations finished, I submitted the interaction to the Ethereum network. From here after a confirmation, the swap for bitcoin cash (BCH) to renBCH is complete.

After hitting confirm, the Ren Bridge connects with Metamask again and the wallet explained the fee would be $6.52 to process the action. Even though I knew the fees were well above what I minted, I continued the process for testing purposes only.

The $1 renBCH mint completed on Saturday, August 23, 2020.

After the Ethereum blockchain confirmed the transaction, I was the proud owner of 0.002797 renBCH. The Bridge application also allows users to “release” the renBCH and you can get bitcoin cash (BCH) or whatever coin you leveraged during the process back at any time.

Instead, you can also leverage the wide variety of defi applications with the newly minted coins. Defi apps with few or no trust assumptions are available on the open web and renBCH and other crypto synthetics are supported for trade. My newly minted renBCH was identified on Uniswap and other platforms after simply connecting my Metamask wallet.

After minting renBCH, renBTC, or renZEC users can leverage other defi apps like Uniswap, Balancer, Curve, and other applications. (Picture on the left) The $1 worth of renBCH was recognized by the Uniswap version 2 protocol, but $1 worth is too small to trade. If you do have enough coins to trade (as shown in the picture on the right) you can swap for nearly any token created with Ethereum.

Overall the experience was simple to process and as mentioned a few times above, minting less than what it costs in fees is not sustainable. I highly recommend leveraging at least $50 or more, of any crypto asset supported, in order to use the Ren Protocol with gas fees today.

Although, people should research Ren with due diligence and never use more crypto assets than they can afford to lose with any defi application in existence. Even though defi offers solutions with little to no trust involved depending on the protocol, there is always risk involved.

However, those with deeper pockets who do want to leverage these defi applications in order to obtain certain preferable actions are likely willing to pay for such fees.

Users can make a whole lot of money farming yield, executing flash loans, and providing scalable dark pools of liquidity. All three of these concepts can be worthwhile even with $6 gwei prices if the person knows what they are doing.

What do you think about the minting experience using the Ren Protocol? Let us know what you think in the comments section below.

The post Inter-Blockchain Liquidity: Minting Synthetic Bitcoin Cash With the Ren Protocol appeared first on Bitcoin News.

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