Understanding Darknodes
RenVM operates as a cross-blockchain liquidity network and relies on many darknodes, which are autonomously managed nodes.
Anyone can host darknodes, but certain conditions must be met, including:
- The node must run the RenVM software on a virtual private server.
- The node operator must invest 100,000 REN coins into the darknode registry contract.
These conditions incentivize node operators to behave honestly, as they put their deposits at risk.
Darknodes and RenVM Platform
Darknodes are decentralized and trustless custodians for digital assets stored on the RenVM platform. Users can earn fees when the platform transforms a digital asset into an ERC-20 token.
In peer-to-peer networks, nodes play a vital role in ensuring protocol security and facilitating network operations, and the decentralized dark pool of the Republic Protocol is no exception.
The primary function of a darknode is to correlate orders from the Republic Protocol’s dispersed hidden order book. This collaborative effort is less computationally intensive than Bitcoin mining.
Darknodes and Order Matching in Dark Pools
When darknodes discover and confirm a match in the order book, they use order fragments to reconstruct the private data of the orders, validate them, and send the matched orders to the relevant dark pool’s settlement layer.
Third-party dark pools define at least one settlement layer.
Darknodes are rewarded for initiating the settlement by collecting and verifying similar orders, with the first darknode to acquire a sufficient quantity of matching order pieces and commence the settlement receiving the reward.
Distribution and Settlement in Dark Pools
It’s important to note that order shares are evenly distributed throughout the network, and transaction settlement costs are not exclusively paid in REN. Nodes can receive fees in other currencies, such as ETH and various tokens.