As such, we will be officially be providing the ability for third-parties to develop dark pools on top of Republic Protocol. Order book, order matching engine and settlement will be provided by Republic Protocol Darknodes, who will be rewarded for their work. The same Darknodes will power all dark pools on the network.

This is a longer-term vision for our protocol. We intend Republic Protocol to be the base layer on which many dark pools can be created. A more open protocol ensures traders with different needs — with respect to fees, regulation or governance — are able to trade on a dark pool that is suitable for them. By supporting multiple dark pools, we are able to capture more trades that would otherwise be lost.

The purpose for introducing this concept at an early stage is to share our long term goals for the project with our community, and also begin to develop the rest of our protocol with this vision in mind.

Diversification of counter-party risk for Darknodes

An additional benefit of enabling multiple dark pools to be built on top of Republic Protocol is the added resilience of the network as a whole. Should a single dark pool fail to reach critical mass or fall due to other reasons, other pools are still able to succeed. We believe this will provide an additional incentive for operating a Darknode long-term.

Dark pool creation

As dark pools built on top of Republic Protocol leverage the exchange engine that Darknodes provide, it is important for the existence of a dark pool to benefit their operators. Therefore, these operators must have a strong, if not absolute say in the creation of a new dark pool on Republic Protocol.

A dark pool is only able to provide Darknodes with the ability to match orders and earn fees if there is liquidity within the pool. Therefore, we make the assumption that Darknodes will act in their economic interest and support dark pools that provide the most liquidity. A full post on governance is warranted some time in the future. Until then, one can assume the existence of an additional dark pool will be beneficial for Darknodes and the wider Republic Protocol ecosystem.

It is also feasible that different dark pools may have various governance mechanisms. One pool may have decentralized DAO-based governance whereas another might stick with “traditional” centralized governance.

RenEx: An official Republic Protocol dark pool