#230 Loong Wang & Taiyang Zhang: Republic Protocol – A Decentralized & Trustless Crypto Dark Pool

Transcript

[Music] this episode of epicenter is brought to by kenosis an open platform for businesses to create their own prediction market applications on top of a theorem network they recently launched venosus X a challenge inviting developers to build apps on top of the kenosis platform to learn more go to epicenter about TV slash enosis x hi welcome to epicenter the show I talked about the technologies projects and startups driving decentralization and the global blockchain revolution my name is Celeste encode Jill and today we're

here to talk about the Republic Protocol and dark pools and so to talk about this I have with me as our guests Taeyang Zhang and bloom Wong who are respectively the CEO and CTO of the Republic protocol and so the Republic Protocol is a new protocol that is a decentralized art pool and so a dark pool is is an exchange platform is a platform where traders will come on board and essentially trade large amounts of assets in a way that is off a few skated from the rest of the market

so traditionally dark pools were in traditional finance financial markets called upstairs trading but dark pools still exist today in traditional markets as well as in crypto and so the Republic protocol allows for a decentralized and trustless dark pool in a way that high-net-worth individuals and traders can execute large trades for pairs like Bitcoin ether and ERC 20 tokens so various sides have you gone guys thanks for being on the show yeah thanks very vital said yeah thanks for inviting us happy to be here great so before we get started let's talk a little bit about your

respective backgrounds so perhaps starting with tang please tell us how you got involved in the space and what led you to start an assumed company and building the Republic protocol yeah sure so perhaps it's best to start where I guess the the power of distributed systems first came in for me so I started out as a programmer probably around my teenager yes and got quite heavily as many people do into like that so hacking systems and distributed denial-of-service systems so I think that that was the first time that sort of realized that distributed systems are actually very powerful and then so I

went to the Australian National University which is where I met long and and also we we worked together previously at a startup doing big data for health and more recently we founded new code which was a software development agency so we do a lot of work all around the place so for different clients sort of government agencies Logistics geospatial etc so more recently I I got into the cryptocurrency space because one of my friends asked me to write the I guess the trading algorithms and architecture behind a fund called virtual capital which I co-founded so that was early

last year and the fund is still running it's doing very well so primarily arbitrage strategies um but the way I really got deep into crypto was we were trading Bitcoin and with a fully hedged strategy and it was very um it's very lucrative of course because bitcoin is quite quite a volatile beast and then we started looking into eath and and and i guess the whole etherion platform and and really started getting into small contracts and and looking at the power of what you could really build in a sort of decentralized application or protocol and I think that there are many new sort of governance structures and exciting

applications that can be built so so that's why I really started yeah distributed systems for me has always been a big passion of mine so when I went to the Australian National University and I first started learning about concurrency I kind of came into with mindset but I think a lot of people do which is that it's just a way to make you just go faster by doing more at once and the more I got into it the more I learned that it's a completely different world and I guess my passions in that area were always gonna lead me to blockchain as these things are probably the biggest and most interesting decentralized systems that we have I did

a lot of research at Australia National University around these kind of systems so while I was doing research as a student I threw the ANU I collaborated with Cray there is a supercomputing company and help them with their supercomputing language Chapel and then I went on to do my honors thesis in the same area and built my own language which specialized in systems that were only concurrent only distributed and had no notion of doing things in order and yeah I'd worked together with ty for several years at new code and so when he came to me with the idea of working in blockchain space in the decentralized space there was no way I was gonna turn that up so ty on you mentioned that you

were doing some trading previously when you founded Virgil Capital can you talk about what that experience you're working in a quant trading firm how did that experience play into you know your idea for a public well I think that as you trade on multiple exchanges you start to realize that although these exchanges process you know billions of dollars of liquidity every day cumulative Li there is a lack for like a lack of avenues for OTC trades I mean so there are particular strategies that you can run on sort of lit exchanges which are essentially exchanges where the oil book

is visible and there are just some sort of trades that you don't want to place there so I think that even though there are ways for you to execute I guess trades without with minimal market impact on traditional sort of exchanges in crypto if you can call them that the market impact is still quite great so I mean that's where the need for the doc pol really comes in when you say market impacts so could you describe so when you're when you're a large trader when you're trading say I don't know you want to make a trade for like four hundred million dollars in Bitcoin what are the types of things that you have to watch out for like how how does that trade play out you know if you're

using a traditional market or maybe you have a strategy where you're you're executing some of that trade on on an open market and some of that trade on a through through an OTC can you strive sort of as a trader or a hedge fund like how would you go about doing something like that without a dark pool I mean unless your intentions are to manipulate the markets which is highly illegal the the most important thing is to have the best price for your order so I mean you always want to want the best price if you're selling Bitcoin for example you want the highest price possible so I mean this is where you might be able to source from different avenues and many different exchanges for liquidity that's

probably the single most important thing for many of these algo hedge funds or quant funds so so I think that's that's the primary reason why you would want to source liquidity from a dark pool like this initially we do expect that a lot of the guys who will be using a duck will like Elvis would be your big OTC plays in this space so so guys like you know like Genesis Cumberland mining and circle and a couple of other guys like that they all need more liquidity to source from so I mean this is where we really plan let's just take a step back here and

perhaps talk about the the the phenomenon of a dark pool in in traditional markets I mean this is nothing new it's not necessarily unique to the crypt of space or dark pools exist in in the fight and traditional financial markets in fact most large banks have dark bull markets or markets that are not open to the public can you give us a bit of a background on that and what what how much how much do these markers represent in terms of liquidity yeah so doc pools have been around for perhaps 30 35 years or so roughly speaking a lot of exchanges a lot of broker dealers their own dark pools so

for example there were a couple of large independent dock posts like Triax liquid net and insta net and then you have the more broker dealer own dark box like JP Morgan Deutsche fidelity etc and even the New York Stock Exchange or the ASX the Australian Stock Exchange they all have their own dark pools so there are many people tackling this space on a traditional equities Forex sort of space and you're typically looking at I mean the estimate sort of vary but you're looking at roughly 15% of equities volumes being traded on tacos I mean the number difference between US and European markets

okay so 15 percent of training volumes go through dark pools can you give us an idea of like how important are dark pools to the overall the overall economic wealth of a market because I think we when you think of it I mean we're doing this research today I wasn't super familiar with the concept of a dark pool but it kind of makes sense I mean if you're a high net worth individual and you're looking to make these trades and not necessarily you know many manipulate the market it would be ideal to have some sort of a liquidity pool where you know you're you're not going to sort of manipulate the market in a way that you're your own trades potentially be less advantageous but if you look at it from the other

side so for my like free market perspective you know some would criticize dark pools as be antithetical to the views of an open and transparent and free market can you give us some sense about like how important is a dark pool to the overall economic health of a market well I like to think of it as you know doc polls were created out of a need and that need is really that I have a large volume order and I want to trade it in the best possible way right so I mean I mean this is where the the need comes from and coming to the point on sort of transparency and and the need for open markets I think

that so i would i would like to frame it in a way that you know the issue that most regulators have are surrounding the dark pools rules and the way that people are trading on the exchange so for example I won't quote any exact incidents but there have been many large banks or institutions who have in the past sort of given priority liquidity to customers who pay more and that's something that's sort of seen as not fair in the markets so I think that if we're developing their improvable markets the the rule said that everybody is trading on must not change and you should not be able to bribe your way into the system so to say so I mean this

is where I think a decentralized dog pool is very important because the the rule set on where everybody is trading is very transparent and it's it's the same for everyone and it's probably their so dialing back now and coming down to to the crypto level in the crypto markets you mentioned that 15 percent of liquidity in traditional markets gothe goes through dark pools do you have any idea do we have any estimates of how much liquidity goes through dark pools on crypto markets I think the difference is because I guess reporting is not necessarily mandatory in crypto markets it's very hard to see the exact amount that's going through dark pools and so I mean the estimates

that we've been looking at have been directly derived from traditional equity markets so I think that crypto trading has the potential to do the same if not more in the short term purely because of the size of the market so I mean we're still at a very nascent stage and a relatively small market cap for you know the entire entirety of cryptocurrencies so think that which means that large trades are more impactful than ever on public markets so I think the estimate of 50% is quite reasonable but again it's all just sort of I guess at this stage and what are these trades occur so we we

mentioned that in in traditional markets broker-dealer houses and and and banks have their own dark pools that they operate there they're regulated there they're a product offering that as a high net worth individual or fun I can have access to in the crypto space though most people would just find some exchange and do their traits there you know but if I'm a if I'm a minor or a large exchange and I need to access high amounts of liquidity where do I turn to so where work and I execute a high value of hide liquidity trade in the crypto space today yes so I mean just coming back to the point on the

four hundred million dollar trade which we saw published I think it was probably two months ago that was from for a purchase of Bitcoin um so these trades are typically happening face to face or over the phone over Skype I mean that these are sort of the the avenues that people are choosing the trade right now of course you know you have your large OTC desks which the majority of people are currently going to but I think these are the two primary avenues on which these trades are happening right now now if I'm doing these trades over the phone where am i discovering the other side of this trade or there are sort of platforms of centralized platforms where I can discover people trading yeah so a lot of

it is happening where through word-of-mouth I'm so people were just connecting people together as far as the OTC desks go I mean these are entities that you can just go to and they will help you source liquidity so I mean they might have an algo I'll go on the other side sourcing liquidity from public markets or they know you know a couple of other people looking to buy or sell huge quantities of crypto assets okay so there seems to be a need then for for something like Republic because I would assume that you know discovering discovering another side of a trade a through word-of-mouth is not necessarily the most efficient way of going about it yeah it's not the most efficient but I

think that it will it would definitely exist for a long time alright so then let's let's dive into the probably protocol so this is a this is a new protocol that that you're launching you know explain them so what at a high level what are the different components of this protocol yes so looking looking at the protocol and the different components the the most important thing for us is you know it's quite counterintuitive to develop a decentralized our pool where the order book is hidden yet everybody still owns it and you're still able to match orders and settle them in a way that's anonymous until execution so that there are various components of the protocol

so we we have the settlement layer which is on the relevant change so BTC if and that layer is currently at an atomic swap we are looking at other solutions but right now that's the most stable one and then we also have in the system we have an order book which is propagated through a peer-to-peer network so it's not a blockchain purely because we don't require consensus for it and it would be inefficient if we were to create a blockchain for that so so yeah those are the primary components so a hidden order book and then we have people who match orders so these nodes match orders and then they are settled so those are all

the components there's an atomic SWAT mechanism that essentially allows two parties to settle the transaction peer-to-peer so we'll talk about but more about that later in the discussion a decentralized order matching system which allows two two parties or more parties and well we'll get deeper into that but so multiple parties to match orders without knowing necessarily the underlying details of the larger order and a decentralized order book where the orders are hidden why is it important for the orders to be hidden so it's important for the orders to be hidden

because let's just say say that I do want to trade legitimately a huge amount of crypto assets so we saw last year I think it was around the april/may period in which I'm G decks had a flash crash it was just a very large order that you know triggered the market and triggered a lot of margin calls essentially and then the price of each just sort of crashed down to a very low point a car remember the exact amount so it's really I think that that's that I mean that's the primary reason so walk us through then a trade let lets let's imagine that

all three of us are involvement trade so tying you know you're a high net worth individual and you've got four hundred million dollars of Bitcoin that you want to sell for ether and on the other side of that trade there's myself and alone and let's say I have 100 million dollars in ether and Logan has 300 million and we're we're participating in the in Republic Protocol as as traders so can you walk us through then that trade how does that play out for all of us yeah so what happens is that each of us has to take our order and we follow the Republic Protocol encoding of that order

and we break it up into a bunch of fragments now these fragments aren't smaller orders they're information theoretic secure cryptographic encoding of this order and you need a large number of them to get together to rediscover what the original order actually was and so ty would take his 400 million dollar order and he would split it up into these fragments and hit submit one fragment to each node in the network or some subset of nodes and you and I would do the same for our orders now these dark nodes would engage in the automation game where they take these fragments and they compare them locally without sharing them and when they've

reached the end of the computation they eventually do get together and share them and they reveal a boolean true or false that says yes there's a match here or no there is not a match here at that point we can observe that match and the network is expecting us to execute on that and we deploy our atomic swapping contracts to a theorem and Bitcoin respectively and then we observe the deployments of these contracts make sure that everything is as we expect and if not the network is able to inspect them and see which one of us is actually acting maliciously and then assuming everything is going fine we execute the atomic swap tie with sailfin and talked with you also from a

user experience perspective just so I get an idea we get an idea here of how how long this trade would occur let's say that uh you know Tang puts up a straight his his order for four hundred million in Bitcoin and the liquidity the ether the ether liquidity is there to match that order right let's assume that the liquidity is there instantly how long will the will it take for this trade to occur once it's been sent to so this actually depends on how many pending orders there are in the system because the dark nodes have no information about the order or very little information about the order they really have no choice but to do a brute

force computation where they check every possible comparison assuming the liquidity is there and assuming that you're handling a couple hundred orders per second which is how much we expect the network to be able to handle then you would expect to see a match within a couple seconds and the atomic swap itself will settle in Mahalo well that's depending on the underlying blockchain so at the moment we're picking atomic swaps because they're the most stable and sort of tried and tested solution they take a couple minutes if you're trading Bitcoin too with you but they can take up to 24 hours if both parties aren't cooperating heavily and

so this is why we're sort of exploring other other avenues as well okay so let's come back to this example and maybe break it down a little bit so when when Tang puts up his order his order for 400 million you said that he breaks it up into fragments can you explain what you mean by that exactly what are these fragments and what do they represent with regards to the order itself so it all comes down to this idea of being at a build lines from points so if I want to have a secret number and I don't want anyone to know what it is but I want a bunch of people to get together and know what it is I can take that number and put it on the y-intercept of an of a two-dimensional graph now if I

want to people did add to discover this order I can create a that goes through that y-intercept now if you had two points you would be able to reconstruct that line perfectly and you better see exactly where on the y-intercept it touches and then you'd be able to see my secret but with only one point on that line you have no chance of knowing exactly what it looks like and where my secret actually is and it turns out that this property holds for arbitrary dimension polynomials so if I want three people have to get together to discover my line I create a polynomial of degree two and if I want four people to get together I create a polynomial of degree 3 and so on and so on so you construct a network that has a large number of nodes in it and you take

your order or parts of your order and you encode them as numbers and you put them on the y-intercept of a polynomial and then you take points on that polynomial and you give a different point to each node and these sets of points that make up an order or what we call the fragment ok so this is the this is the concept of the position is a secret sameer secret sharing okay so for non-engineers non mathematicians such as myself just to sort of give an analogy to this year you're giving the analogy of of a graph on an x and y axis and so I can have a point on this graph with

with only one point I I cannot determine the trajectory of a line on this graph so however with two points I can determine the trajectory of this line so what you're doing is you're taking this line and breaking it up into several points and sharing that information but the individual points with nodes who unless they collude and we'll get back to the incentive model the incentive model a bit later but unless they collude won't be able to reconstruct the the the entire the entirety of the information that makes up this line

that's good ok and so once this order has been broken up into fragments it is sent to nodes on the network so could you explain who are these nodes and what work what kind of software they're running and what is their role I guess in the in the system sure so these nodes can be run by any member of the community as long as that member of the community has taken a an amount of rent which we call the bond and they've registered that on aetherium and they've submitted that which is essentially a good behavior bond and that ties into the incentive model it's also a way to bound adversaries we assume that no

adversary has an unlimited amount of money so they wouldn't be able to register some huge number of nodes if there's a financial requirement to do so and so these nodes the software that they're running is any implementation of the republic' protocol we provide a reference implementation in go and we'll be providing web reference implementations in other languages and these are open source and available our github for anyone to go and check out and the way that they work is that they take these points that they were given and one of the interesting properties of polynomials when they're used in this way is that you can perform computations on just the points that you have and then when you get together and

reconstruct the resulting polynomial from the new points after they've been computed on the result has the same computation but applied to the secret so I can construct a computation that essentially asks the question do these two orders match and instead of asking that question on the orders I ask them on the points that I've been given that make up my fragment of that order and then once I ask that question I have this result which is actually meaningless it represents a new point on a polynomial I get together with all of the other dark nodes we reconstruct this line and we look at the ultimate answer which will say yes or no the actual underlying orders did or did not match and so these nodes participate in in a

network that is not part of the a theorem Network it's it's another independent network of the of the etherium chain but it's not a block chain correct yeah that's great ok so it's a it's a it's a DHT right yeah that's correct so it's a peer-to-peer network so it's a peer-to-peer network where there's information sharing between the nodes why not why not build this on why do you choose to build this as DHT and not like a tenement blockchain or some other distributed ledger tech in particular the major problem with block chains that a lot of block chains are facing at the

moment is the publicity of information so the whole point of these fragments is that you don't want them to be shared publicly because if you had enough of them you could get together and reveal the secret if you were to post these fragments to the blockchain you'd have a lot of issues because everyone could see them and if you posted them to the blockchain in an encrypted form then the computation that you have to do on these fragments to get some some result out is incredibly computationally expensive it would have a lot of associated fees it may not even fit into a single block and even if you're doing a simple kind of transaction on the theory it can take several minutes before that computation is actually confirmed whereas we can do it off chain in a couple seconds because we don't have to have reached this sort

of consensus that every single node has all of the same information this episode of epicenter is brought to you by kenosis gnosis is an open platform for businesses to create their own prediction markets on the theory network prediction markets are powerful tools for aggregating information about the expected outcome of future events so this can be used for things like information gathering incentivizing behaviors making governance decisions or even creating insurance products so in order to turn kenosis into the most powerful forecasting tool in the world they recently launched gnosis X it's a challenge that invites developers to build applications on top of the platform and the best applications per category will be rewarded up to $100,000

in GNO tokens so throughout the year kenosis will announce different categories for the challenge and the current challenge has categories for science in R&D token diligence and blockchain of project integration notice also provides the SDK which allows you to easily get started with everything you need to get coding and they also provide dedicated support channels through the challenge for teens and solar builders I up for the challenge gets served now to learn more and to sign up go to epicenter TV slash kenosis X we like to thank gnosis for their support of epicenter okay then describe maybe the dynamics then between because republic is built as an aetherium smart contract and from what I've read republic could also be

deployed as a smart contract and on another blockchain just you've chosen the etherium because it's the one that has sort of the most you know the the the most secure security model and sort of easiest deployment options available at the moment it's the most mature a smart contract blockchain I guess we could put it that way so but describe so then the the dynamic between this this ght network that sort of sits off chain where computations are executed by individual nodes and the etherium smart contract that I guess execute the traits is a good way to put it yeah so there's actually a very

minimal amount of interaction the only instruction that there really is is that the dark know is when they want to join the network they have to register their Ren bond and they have to do that on chain and that registration becomes public because it's underneath you object to all the other nodes so the nodes kind of passively passively observe the etherion blockchain and they get to see who else is registered and this prevents a potentially malicious node from coming along and saying hey I'm a dark note I'd like to participate in this computation and you could verify whether or not that was true by observing the information that they were meant to put onto the etherion blockchain and you could verify that their bond was in fact there that the signature that they're meant to be producing is the signature that they are

producing but the actual distribution of orders that happens completely off chain and the computation happens completely off chain and the only time it comes back on chain is when the order executed and the fees are taken so as a as a trader participating in the network and executing trades on the network am i interacting with the Diaz she network or am i interacting with aetherium it seems like the a theorem network has only you used for the bonding mechanism that service it's a little bit of both so initially you interact with the Republic protocol and network that's often and once you discover a match you go ahead and execute the atomic swap on chain right

so I execute the atomic swap Unchained but say I'm say if I'm if I'm selling Bitcoin I'm not interacting with the etherium I'm not interacting with the a theorem smart contract I'm you interact with whatever smart contract uni sorry whatever contract you need to on the relevant blockchain to execute the trade so if it's a big coin to either one of you will be on Bitcoin one of you will be on ether okay so just to summarize then so there are the the dark nodes that that make up this the Republic Protocol network and I think in some of your documentation you you call this network the ocean yep the dark ocean the dark ocean okay and there are there is the theorem smart contract that serves

as the bonding mechanism where the red tokens are bonded by the nodes that are executing the computations on the traits and then there are the individual block chains themselves so it could be aetherium it could be Bitcoin where the traders are interacting with that blockchain once the order has been executed once the trade has been executed and confirmed then I post my trade to my relevant blockchain whichever one I'm interacting with could be Bitcoin ether or whether whatever other blocks and you support and I execute the atomic swap on that block chain yeah that's correct okay

interesting so as a trader then I don't necessarily interact with that I guess I only interact with the with the dark ocean when I'm posting my trade presumably using a client or an app or something like that that is connected to the DHT Network yes right so each of the nodes in the network provides an API that you can interact with and this is because the majority of traders in OTC desks on a guy's at a computer interacting with a user interface they're doing some kind of rhythmic trading but there is going to be the Republic Terminal which will be a decentralized app which I network individuals who don't have that kind of

trading approach can interact with a visual interface so in your documentation you also talk about pools so there are nodes individual nodes and you have pools of nodes and pools can all sort of notes can group up into pools and then pools constitute the ocean what's the role of a pool so that idea of saying that we have because the nodes don't know anything about the orders they can't filter this down in any way and do anything but a brute force computation so by breaking the nodes down into pools we can parallelize the processing of the order book so instead of every node just crunching through computations one at a time you could have multiple pools and each of them are processing a separate part and you gain performance through

parallelization the other significant aspect of that is that the secure multi-party computations that these nodes do are not actually that cheap to do they're quite expensive in terms of computational time and the larger the group of nodes that are participating one of these secure multi-party computations the longer it takes and so by breaking them down into randomly sampled pools you can maintain similar security thresholds but massively increase your performance so what kind of computations are we talking about here there's one require a special hardware or to perform these computations these computations are what actually slows them down is the network

communication that happens so when you have a large number of nodes participating in one of these computations there's a a big strain on the network where every single node has to communicate with every other single mode obviously the fewer nodes there are other less communication is happening and the faster this happens compared to that the computational requirements of secure multi-party computations are not actually that high so GPUs and those kinds of mining equipment might give you some computational edge but not not a huge one okay so just just about anybody then can participate in whether CPU you know can participate in me that's right all of all of our testing operates on sort of your basic everyday laptop 4 CPUs 16 gigs of ram I mean maybe it on

everyday laptop but certainly a consumer available laptop and we provide our reference implementation packaged up into cloud friendly images so that you can quickly deploy a dark node to the AWS cloud and of course to away from the site of centralization will be providing images for varying platforms clack platforms interesting so let's talk about the security model a little bit and the incentive mechanisms that secures the network so one of the one of the premises of Republic is to have a private order book and the whole point here as we discussed earlier is so that you know this this is dark pool and the

trades happening on this dark pool don't you know disrupt the the price of the underline of the assets on on the public networks on the public exchanges and public markets and so you know I might have an incentive one might have an incentive to disclose the information that is within the dark the dark pool within a republic protocol on an open platform so you know if I'm a malicious actor I may have an incentive to take the information that I am retrieving as a node and post it so the information about trades and post that on an open forum

talk about the incentive mechanisms that prevent this sort of behavior and the sort of attack vectors that republic' protocol can mitigate against showed so there's two sorts of adversarial models to consider here one is the non adaptive adversary and the other is the adaptive adversary so in the non adaptive adversary case you're assuming you've got one a person or one very close-knit trusted group of people that are trying to attack the network upfront and to prevent against these kinds of our series all you can really do is make sure that adversary doesn't make up a large portion of the network and so this this is true of pretty much every

blockchain where you need 51% of the mining power to be honest in order to make sure that the security of the blockchain holds in Republic protocol we decide to set the threshold for Shamir secrets at 2/3 so unless you have 2/3 of a pool it's impossible to actually reconstruct the order at all and if you have 2/3 less one you have just as much information as if you only had one so against the non adaptive adversary these Ren bonds prevent someone who is financially bound from attacking the network at scale and acquiring that much rent in order to attack the network in

that way it would be quite expensive for the adaptive adversary this is one way you sort of say oh look it has become apparent that all of us are in the same pool together why don't we decide to collude and we'll share fragments with each other discover the orders and take advantage of that in the market the incentive that stops you doing this is that the trader and the nodes when they exchange fragments they enter an agreement by signing the hash of the fragment and if anyone at any point can reveal the actual fragment that hashes to this hash they gain a reward by slashing the bond of the node that was in charge of this fragment and so in the adaptive adversary case it's very unlikely that

we are highly trusting each other or that we were already working together and so there's nothing stopping us sharing the fragments with each other manipulating the market or getting insight into the market and taking advantage of it there and then also taking our fragments and attacking each other by extracting out bonds and so you provide an economic incentive not to reveal fragments by saying that if the fragment is ever revealed you will lose your bond as an actor or wishing to manipulate the market or get inside information so what prevents me from simply extracting certain information about the about the fragment that wouldn't allow me to sort

of reconstruct that fragment not so like not not publishing the fragment itself but only publishing some amount of information about the fragment that on its own wouldn't allow a third party to look at that frack look at that information reconstruct the fragment itself and then this strike the box you can show that unless you actually have the the fragments in full you don't get any kind of information so you can verify mathematically that unless you do have two-thirds of the fragments proper there's no way to extract any information from having some information about some of the fragments gives you absolutely nothing at all okay so I would need to have two-thirds of the fragments in order to extract any sort

of information and since this is because of the way that these fragments are constructed in the stream your secret sharing scheme yes that's right okay interesting do you know of any other blockchain systems that are using this Shamir's secret sharing scheme it's kind of a mouthful yeah there are two that I'm aware of there's keeper and enigma so keepers focused on secret keeping and having secret information on the blockchain specifically they focus on on keys and providing signatures and enigma is attempting to provide arbitrary computations using secret sharing where that differs from what we're doing is

that we acknowledge that we've got a very specific focus without computations we're not trying to do arbitrary computations we're just trying to do an automatic computation which at the end of the day is quite simple you take two numbers you subtract one from the other and you check whether it's greater than zero this is far from being arbitrary but it means that we can create a lot of optimization that allow us to do this orders of magnitude faster than current industry standards and how does this secret sharing method relay to zero knowledge proof sand zkp circuits are they similar there's some similarity in the sense that they provide a level of zero knowledge you can verify the computations completely correct and so you can know some

information about some inputs without knowing anything about the inputs but they're not based on the same principles do you use ZK P's and you keep your circuits in anyway we use very small very efficient your knowledge proofs when it comes time to challenging an opponent to check whether or not they've done a computation faithfully but know there other than that we don't usually touch them or we don't touch them at all and they're not zero knowledge proof sin the way that they're traditionally seen in the rest of crypto okay so let's let's talk about the atomic swap part so we've covered posting the orders how do those are matched the incentive

models but then when it comes down to it I mean you really want your trait to be executed and that happens through an atomic swap I mean we we have talked about atomic swaps in the past to some extent but we haven't really gone into detail about how they work I don't I don't think any way that we call having but could you describe and how an atomic swap works and how it pertains to the Republic protocol sure so they're based on a thing called hash time lock contracts which is a fancy way of saying that I'm gonna put my ether up in a contract and I'm gonna send it to you but only if you can reveal the preimage

of a particular hash and we'll call that hash to the lock and so I have some passion if you can reveal the thing that becomes that hash then you can extract the money and I have this secret then you take the same lock and you send me money on the condition I can reveal the preimage now I have the pre inch which means once you've set that up I can go and submit that to your blockchain and extract the funds that you wanted to send me but the point of the blockchain is that it's all public information so as soon as I do that I've revealed my free image and you can now take that and submit that and get my theorem and whether time aspect becomes in is just a way of getting refunded if

either participant decides to stop that process and just not participate so currently or at least when you launch the Republic protocol will support Bitcoin and ether and ERC 20 tokens can you talk about what what makes it possible today for those those pairs to work and why are we limited to these three pairs is it is it sort of more technical on your side or does this have to do with compatibility with other block chains yes so um I'll just jump in here the primary reason we're looking at these three pairs is not necessarily

because of technical limitations the primary reason is that we want asset pairs that are traded heavily so there's no point picking I guess two tokens or you know different chains that support these tokens there's no point using them choosing them to be supported in our protocol if they have no liquidity so I mean the whole purpose of Republic protocol is collage trades for small trades it makes no sense to trade on our protocol it's actually more efficient to trade on the public markets so I mean with it's just a it's very evident that BTC the I see 20 tokens and eath traded very heavily along with the tether pair for many

exchanges so I think those are the things that we look to support initially as for other chains I mean there are I dunno the sea cash for example has hash time lock contracts built in like coin but coin D cred I mean these are all chains that do support such trades but we really look to focus on a few initially to bootstrap so how common are atomic swaps at the moment I mean do do a lot of trades happen on save for instance like Bitcoin ether through atomic swaps not really they're fairly new concept I think really popularized last year I think Charlie Lee did the did a swap with from

like coin to deke red and and I really kicked off the whole wave of media but so far people haven't really sort of executed it in a way that is massively used just to stay on this topic what what is so you the only real requirement is that the blockchain supports these these locked on contracts as you mentioned litecoin supports that bitcoin ether what what is what is what does it look like in terms of ecosystem adoption for locked on contracts and she's just being able to do atomic swaps between any blockchain well I think that it's for adoption it's less about having the

technology there but making it usable similarly to our system we you know we have a lot of complex moving pieces but to the user it's very simple they can interact through with it through an interface so it's the same thing for atomic swaps there just hasn't been a lot of this sort of auxilary UI and UX built for them yet to make them feasible for the general public and there are quite a few people work working on this so yeah I suppose you also need not only the the sort of user interface aspect but you would also presumably need some sort of price discovery mechanism and like a way to match buyers and sellers in a trade yeah so so an interesting one

that I have seen is some larger OTC desks working on atomic swaps for their clients so that's quite an interesting one I think that it's a very applicable use case but such things won't be sort of popularized by the media which is why we don't hear about them so you I think it's a very interesting technology that can be used in many different places and it's just a matter of time before we see it popping out around the place in many different forms what are your thoughts on how atomic swaps might affect the the exchange business model in the future sort of centralized exchanges I think centralized exchanges have many

sort of efficiencies compared to decentralized exchanges I and atomic swaps so I mean I think the the the fact that all the older books sort of centralized and automation can happen in a centralized way and when you deposit money into an exchange it becomes a number in a database that can be freely traded I think that these are things that the atomic that centralized exchanges will have over these centralized exchanges and atomic source for a long time so so I see it being on yeah less less of a harsh impact I'm not gonna take the view that one is necessarily better than the other at a particular time I see and regard regarding Republic Protocol than I mean

you know being a decentralized dark pool couldn't you also deploy a similar network that doesn't have all of the privacy and just have it be like a an open public decentralized exchange have you thought about that yeah we have thought about that as well I think that the dark will is suited for a few reasons and one of the reasons is that while blockchain skill we're still able to capture this market because people who are trading you know millions at a time perhaps are not so concerned about the split-second change of course there will be people who are concerned but it's not a necessary requirement for a lot of these traders so for example if

I call up an OTC desk maybe they take you know I add a minimum one day to fully fully execute my trade and I think that for us you know the maximum time lock for a for atomic swap contract is 24 hours anyway so I think that speed think speed limitations are less I'm worrying for us of course if we do want to so in the future where you want to support so the second layer scaling solutions so we can bring on these high frequency traders but in the short term it it's um it's better that we tackle this problem first compared to making it a public sort of public decentralized exchange so to speak now in your I believe it's in your white paper where you mentioned that the

Republic Protocol could be could also run on other block chains so for instance you know could run on on a house or could run on another botching like Tasos presumably or any platform that supports smart contracts is this something so why is this something that you're looking to do at some point in the future why would you choose to deploy it another smart contract platforms so I think that with regards that we're really talking about the the rent token and the brand ecosystem so really uh rent tokens interact with the etherion blockchain at a minimal capacity so as long mention

before we we use them to register traders we use them to register nodes and pretty much the advantage for registering a node is that you can start earning order fees in the in the ecosystem but coming back to the point on why we would not deploy on another chain with these set of contracts um there is no reason why I think that if their aim is just the most stable ecosystem that we've seen so far so speaking of this of this ecosystem I'd like to come back to one topic that I just occurred to me we failed to discuss during the the show and that is the the amount posted by the bonders or

by the by the network participants what defines this amount and was is is there as they're like a an algorithm that defines how much one would have to bond in order to secure the network yeah for registering a a dark node to enable you to match orders on the currents of the preliminary number is a hundred thousand Ren tokens so it's the reason we picked this is because they're they're a total of 1 billion Ren tokens in a for for the supply and if we choose a number like 100,000 per node that means that there can be an absolute maximum of 10,000 nodes in the system which is sort of a billion divided by 100,000 so I think

that the reason we pick such a number is that the more nodes that we have in the system the the slower it becomes but the more nodes that we have in the system the more security so it's always a trade-off between security and speed and also the sort of the profitability for that particular node to earn fees so this is the reason we've picked such a number so before we wrap up I'd like to talk about both the company in your building and so you recently completed an IC o---- can you talk about what your IC o---- how much did you raise and who were your investors yes so we finished our public IC o---- on the 2nd of

February so we've raised five thousand in the public ICO and thirty thousand in the private presale sum of two of our lead investors for the ground were FPGA and poly chain and also Signum capital and hyper chain have been very helpful to us in Singapore so yeah that was the race so the company is based in Singapore yeah the company is based in Singapore and you have operations also in Australia so the development team is spread across Singapore and Australia okay and particular reason why you chose Singapore as as a place to launch this company I think Singapore has a very vibrant ecosystem when it comes to the sort of cryptocurrency community whereas spaces

like Australia are still sort of getting the hang of it and and the ecosystem is developing there it's at a much earlier stage so I think the the number of connections that we can have in Singapore to projects to founders to funds is is much greater so this is the reason we pick Singapore I would definitely agree I mean I've been I'm actually in Singapore at the moment and I've been here for about a week I listeners might recall a few weeks ago we did an episode with Anson Zeile who is part of access the sort of cryptocurrency startups association in Singapore and we were talking about the ecosystem and the fact that it's it's it's actually quite an active ecosystem

there's a lot of stars here and I was you know we actually met you and I at the decentralized Singapore conference which was just last week and there's there's I mean I was quite surprised to see so many companies here and I mean sort of in the West and like Europe and in the u.s. we don't necessarily get to experience what's happening in this part of the world but one thing that was quite clear to me is that there are quite a few companies here doing a lot of interesting things and so I've very very pleased to be able to take part in that and sort of win that witness that firsthand yeah it's great I think that unlike other areas if you want to visit a a company here it's just a walk away

so yeah I know it definitely feels like the ecosystem is quite tight knit and even with other Asian countries and sort of Southeast Asia I mean at the conference there were people from from China from from from taya a Thailand from Korea we had a lot of delegates from India as well so it does it's just kind of I mean it for me it was my first time in Asia actually visiting Asia so it kind of sort of felt like like yeah like Europe and sense where every country serve just to skip and a hop away and like a cheap flight away and so you have this very tight-knit ecosystem and Singapore seems

to be a place where all that is kind of codifying definitely agreed yeah so those who are interested in sort of seeing the talks from from that conference decentralized Singapore the website is decentralize with a Z dot s G and I believe the talks will be online in the coming day so just about when this comes out you know the talks will be made available online so definitely check out the website and I'll we'll put some links in the show notes to where you can find those videos so in terms of roadmap tell us when will the Republic Protocol launched publicly so we're looking at s net very soon so within

this quarter and the public main that release will be in the third quarter so roughly around July and so if one is interested in becoming a node on the network or participating in the project and in some capacity how can one do that so one can just follow our medium blog we post updates there semi often and we will have be having an an update about I guess the the criteria for running a node and now you can get in touch and start running those great terrific well guys thanks so much for for being on the show today it was a pleasure having you

and there was a pleasure meeting you here in Singapore yeah thanks ed you too yeah thanks it was enjoyable and thanks to our listeners for once again tuning in you can find new episodes of epicenter on iTunes SoundCloud or wherever you get your podcasts you can also get the video version on YouTube and of course we release new episodes every week and if you're interested in supporting show you can obviously leave us a review on iTunes and help people find the show and we're also very grateful as seeing the reviews and you can join our community we're on Gator at epicenter TV slash Gator so thanks so much and we look for being back [Music]