Ren’s core team holds the keys to nearly $160M in bitcoin in a single wallet. The team says that’s part of its decentralization roadmap

RenBTC, a protocol for minting Ethereum-compatible tokens that represent bitcoin, may not be as decentralized as its users previously thought.

Ren is one of a series of protocols that have emerged to allow people to use cryptocurrencies other than ETH to access Ethereum-based decentralized financial (DeFi) services. Whereas competitors like Wrapped Bitcoin rely on trusted third-parties, Ren is supposed to be powered by a network of “decentralized virtual machines” called Darknodes.

But according to an August 26 report authored by two team members from competing protocol Wanchain, all of the project’s user funds sit in a “honey pot” of nearly 14,300 BTC controlled by the protocol’s core developers. That means that the team members, in theory, could walk with the funds without any recourse for the protocol’s users.

Previous RenVM documentation has stated that cross-chain BTC accounts are managed by the network of Darknodes, which combine their network bandwidth, computational power and storage capacity to power the RenVM network. These nodes are supposed to rely on an emerging technology called multi-party computation (MPC), and Ren has claimed that they are changed on a regular basis to maintain security.

But the authors of Wanchain's report say that's not true.

It’s complicated

BTC cross-chain bridges essentially let people use their BTC on another blockchain. The approaches to pulling this off vary. For instance, wBTC, which has seen its demand soar recently, is managed by a centralized custodian: CoinList. Users send BTC to a Bitcoin address controlled by CoinList, and the organization then mints corresponding ERC20 tokens.

However, many people prefer to use decentralized bridges, which are managed using smart contracts. Popular examples include tBTC, wanBTC, and RenVM’s RenBTC. These protocols also take different technical approaches to security.

RenVM uses MPC, a technology that lets multiple network participants collaborate to compute a function while using cryptography to keep those inputs private.

MPC operates by generating an individual private key for each participating MPC node and a group private key for the entire set of nodes. Whoever holds the group private key will have control over all the account’s assets. The group key isn’t designed to be held by a sole user. It is created when each MPC node collectively contributes its individual private key.

Node regrouping is a process used to prevent manipulation of this system: for instance, a group of nodes might try to collaborate to steal the locked BTC. Regrouping shuffles these nodes, making it harder for users to identify and work with each other.

The Wanchain report found that although RenVM documentation claims the protocol regroups its nodes on a periodic basis, this is not actually the case. The authors say that the renBTC locked account has not been changed since the day it went online, meaning the RenVM team has full control over the funds.

Part of the plan?

But this is all part of the plan, according to the RenVM team. In a report released a few days after the Wanchain report, the RenVM team detailed its roadmap towards full decentralization, which argued that the idea has always been to release RenVM in stages, slowly transitioning from centralized to decentralized.

Chief technology officer Loong Wang defended the protocol’s current setup, saying the decision to run all of the nodes in the protocol’s “Greycore” network was made to reduce security risks.

“This is the safest way to release a complex system, as it allows us to respond to bugs and help users that make mistakes. This is all in our public documentation, and has been since before we launched,” Wang told The Block.

Wang referenced YAM and tBTC as examples of projects that tried to be fully decentralized soon after launching and ended up shutting down due to overlooked security issues. YAM discovered a bug in its system that it wasn’t able to recover from and tBTC had to pause deposits a week after its launch due to security issues.

“If an issue is found, the Ren team is able to quickly coordinate a fix to ensure that funds are not put at risk. This is difficult (and sometimes impossible) to do when a network is fully decentralised. This is critical, because all software has bugs. RenVM has undergone multiple audits, but audits can never catch all issues,” the report stated.

“Decentralisation does not necessarily mean funds are secure. It is important and can add to security, but only once the underlying technology has been sufficiently battle-tested.” Wang said.