Republic is a decentralized dark pool protocol that facilitates order execution without exposing market sensitive order information. Much like existing dark pools that support as much as 15% of all U.S. stock trading activity, Republic’s dark pool technology allows traders to submit orders for execution with limited direct market impact.
Republic is likely to appeal to institutional traders and individuals placing large orders, given its ability to accomodate orders without revealing intent to the broad market. In addition, traders do not have to remain connected to the network while orders are being matched, trader and order information is secure, and the total liquidity of the dark pool cannot be reasonably estimated by any participant. The order book is disaggregated and obscured, and orders are matched via an engine that is based on a multi-party computation protocol. The computation does not expose the order fragments, and performs a random scaling of the final output to prevent nodes from reconstructing the original orders or otherwise infer anything about the orders. Nodes race to discover order matches, and once two orders have been matched, an atomic swap is initiated between the two traders over Republic’s peer-to-peer Swarm Network.
Republic’s native token, REN, is primarily used to pay order fees and to submit REN- denominated bonds that help prevent Sybil attacks. Traders include an order fee in the native REN token when submitting an order. This is designed to incentivize computational power, rather than directly incentivizing liquidity, and employs mechanisms akin to the Ethereum networks’ transaction process. With the Republic network, nodes that participate in the decentralized computation for a matched order receive a share of the associated order fee. Order fees are variable and at the discretion of traders. Orders with higher fees will likely be favored by order matching nodes, theoretically allowing traders to pay for more rapid processing on larger or otherwise more important orders.
To better secure the network, traders and nodes must submit a REN-denominated bond that meets or exceeds a globally-defined minimum value. During verification of transaction, the Challenger and the Provers (generally the trader and a group of order matching nodes, respectively) put their bond into escrow. If the Challenger is correct, the Prover that is unable to provide evidence of a truthful computation loses their bond. Alternatively, if all Provers are correct, the Challenger loses their bond. In this way, the REN bond acts to incentivize honest practices and prevent Sybil attacks.