Here’s a look at SOVYRN – the project that is quietly revolutionizing the Bitcoin network with once-incompatible functionality: decentralized finance. With time, it may fully correct Bitcoin’s limitation on programmability, rendering various altcoins obsolete.
current cryptocurrency division
As it stands, Bitcoin is still the most valuable cryptocurrency on the market. Having recently surpassed its all-time high, the digital asset now has a market capitalization of more than $ 1.1 trillion. In addition to the total cryptocurrency market capitalization of $ 2.7 trillion, Bitcoin’s market dominance is indisputable.
currency is also being adopted in the outside world at breakneck speed by both companies and hedge funds. From allowing Bitcoin payments, until Tesla adds BTC to its wallet, the legitimacy of Bitcoin as an asset is also true. It has even been recognized by various companies as an inflation hedge above gold.
However, despite the popularity and network of Bitcoin, it is no longer the only traditional cryptocurrency out there. Instead, various other cryptocurrencies, tokens, platforms, and protocols have emerged. While some have been nothing more than speculative and short-term fads, others have proven viable in the long term.
Fervent Bitcoin maximalists may argue that this is due to ignorance or sheer market speculation. However, a more charitable interpretation would be that such altcoins fill gaps in the decentralized economy that Bitcoin cannot. For example, Tether serves as an affordable yet stable form of liquidity for cryptocurrency traders. Meanwhile, Monero offers greater privacy of transactions in which Bitcoin fails, due to its public blockchain.
However, the most notable alternative blockchain network is currently Ethereum. Founded by VItalik Buterin and others, Ethereum’s market capitalization is currently over $ 500 billion. It is the only cryptocurrency network that most people believe can become bigger than Bitcoin.
Guiding this belief is the following observation:
Since Bitcoin uses an incomplete Turing programming language, it is not suitable for smart contracts. Hence, it is inferior to Ethereum for decentralized finance.
Why is Defi important?
Decentralized Finance (DeFi) is the most popular development use case for blockchain technology and decentralized networks. It is a simple set of peer-to-peer financial services that do not require a central authority to provide them. se could include savings, loans / loans, exchanges, and even insurance.
appeal of such technology is that it is permissionless, efficient, and almost always active compared to centralized financial alternatives.
For such a parallel financial system to function, three main pillars are needed:
Stable currency
Checking / savings accounts
Various exchanges
In the developed world of centralized finance, each function is performed by several parties. Just one example of each would be the US dollar, Chase Savings, and the NASDAQ stock market, respectively.
Meanwhile, Defi developers are already creating equivalents of these less centralized and more efficient blockchain-based systems. For example, the Ethereum platform hosts multiple dollar-pegged stablecoins (Tether, USDC, DAI, etc.) to serve as stablecoins. Meanwhile, Compound is a lending / lending protocol that allows people to earn from their cryptocurrency savings in contract-controlled smart loan pools. Finally, Uniswap works as a decentralized exchange for ERC-20 tokens, which could practically be used to exchange tokenized assets like stocks.
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se days, Ethereum’s facilitation of smart contracts and Defi protocols has given it a huge niche in the cryptocurrency market. It is the backbone and standard of decentralized applications that improve finance beyond storage of value and transactions. Furthermore, as all the tokens traded on the platform require an ETH expenditure on gas, the cryptocurrency accumulates additional levels of demand.
se factors have led to Ethereum being recognized as the second ‘primary’ cryptocurrency, alongside Bitcoin. Serving various functions, Ether is often referred to as ‘digital oil’, while Bitcoin is known as ‘digital gold’.
SOVRYN: Combining Defi with Hard Money
What if the benefits of Bitcoin’s trust, security, and decentralization could be combined with Ethereum’s smart contract support? What if the advantages of “digital gold” and “digital oil” could be brought together under a single curtain?
As of 2021, an emerging protocol is being developed in the Bitcoin application layer that strives to do just that. It’s called SOVRYN.
SOVRYNA is a “non-custodial, unauthorized smart contract system for borrowing, lending, and margin trading of bitcoins,” according to its website. Co-founded by Edan Yago, SOVRYN launched in April 2021 and is now the most feature-rich Defi platform for Bitcoin.
SOVRYN Features
Current SOVRYN features include (but are not limited to) the following:
A pool of loans with which HODLers can earn interest on their tokens from borrowers and margin traders, including bitcoin. This is like Composite on Ethereum.
Loans excessively secured by the loan pool.
A decentralized spot exchange that allows users to instantly exchange tokens using the loan pool, similar to UNISWAP.
A symbolic bridge between RSK, Ethereum and Binance Smart Chain (BSC).
Trading with up to 5X leverage, also borrowed from the loan pool.
stablecoins backed by bitcoin and pegged to the US dollar, all backed by overcollateralized bitcoins. This is a Bitcoin equivalent of DAI.
Features currently in development for SOVRYN include a fiat exit ramp and trade limit orders.
As we can already see, SOVRYN now offers the three basic services necessary for a parallel financial system. However, in this system, bitcoin is the base asset.
How does it work
Rhizome
This DAO is based on Rootstock (RSK), a Bitcoin sidechain that enables smart contracts. RSK is connected to the main Bitcoin blockchain through combined mining, whereby the same miners and energy protect both networks. Using a bidirectional plug, users can convert their bitcoins from the Bitcoin network into “smart bitcoins” (RBTC) at Rootstock. refore, users can take advantage of various dApps as they would on Ethereum, along with the unmatched security and asset value of Bitcoin. SOVRYN is one of these dApps.
SOV Token
In the spirit of decentralization, SOVRYN is governed by a “Bitocracy” that uses the native government token of the “SOV” platform. SOV tokens allow holders to manage the SOVRYN protocol through betting and voting. holders will also be rewarded with the funds generated by the protocol.
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supply of SOV tokens will be limited to 100,000,000 and will be distributed over a period of 7 years. y are awarded in varying proportions to joint founders, early funders, early adopters, developers, and contributors. Additionally, some SOVs will be distributed through programmatic selling, allowing users to exchange bitcoins for SOVs.
According to Edan Yago, SOV token holders are encouraged to participate and contribute to the development of the network. This sets it apart from having a standard corporate stock.
“If you just passively hold a Walmart stock, you get money. If you only passively maintain SOV, don’t do it. You must actively participate in the system. It is a kind of pass to access participation and influence in the system ”.
Due to the various incentives provided, over 4000 people had blocked SOVs on the platform as of early June. In addition, network improvement proposals regularly received more than 60% participation from these owners.
In general, users who manage to accumulate more SOVRYN through its various distribution methods have a more influential voting power. Once a user puts their SOV into play, they can even delegate their voting power to another network address. Although SOVRYN admits that its protocol cannot achieve decentralization like the grassroots level of Bitcoin, SOV allows it to go a long way. Also, this form of decentralization does not come at the expense of functionality or scalability.
SOVRYN advantages
SOVRYN offers a number of unique benefits for dedicated Bitcoiners, as well as the robustness and security of Bitcoin itself. Some of these benefits include the following:
Privacy
Being a uniquely decentralized bitcoin lending service, users can remain protected under the Bitcoin pseudonym while putting their bitcoins to work. This is in contrast to centralized loan services that typically adhere to user tracking and KYC restrictions.
Self-sufficiency
Your private keys no longer have to be concentrated in a single centralized party. With peer-to-peer loans available, SOVRYN users carry out “sovereign” financing over their funds.
Native bitcoin
With Bitcoin as the native asset of the Rootstock chain, transaction fees are paid in BTC. Since SOVRYN is a platform dedicated to bitcoin lovers, this will make transactions much more convenient for the average user, who will probably trade bitcoins anyway.
This is different from the Ethereum blockchain, which requires Ether to be used for transactions despite the fact that most of the people on the network transact in USDT. Buying ether can be a hassle for those interested only in its platform, but not the main resource.
birth of Bitcoin also involves overcoming the unmatched security of the Bitcoin network, backed by miners around the world.
Keep Bitcoin decentralized
Decentralization is not just a feature, but a necessity for network integrity. If Bitcoin’s use cases did not increase, its more complex financial applications would risk being concentrated in the hands of centralized services. This would defeat the purpose of Bitcoin, as the money passes back through the financial giants for the sake of additional profit. Meanwhile, the path to censorship would be reopened.
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Through SOVRYN, users have an uncensored access pass to the sophisticated finances of Bitcoin. protocol itself is fairly decentralized, greatly reducing the risk of targeted censorship.
conclusion
SOVRYN’s characteristics continue to multiply over time. It seems to be emerging as Bitcoin’s native decentralized financial protocol. Additionally, as Defi’s ideas and applications develop on other blockchains, SOVRYN will have the freedom to adapt them as the community sees fit.
This raises an important question about the future of other cryptocurrencies, blockchains, and Defi protocols. If SOVRYN is incorporating Defi into Bitcoin, do other chains have a reason to exist in the long term?
As mentioned, most cryptocurrency lovers, even ethereal ones, recognize bitcoin as the top-tier asset. It has the best chance of all cryptocurrencies to earn global trust on the scale of a world currency. Its decentralization and inception are characteristics that no other blockchain or cryptocurrency can imitate. refore, Bitcoin faces little competition in its role as ‘digital gold’.
Meanwhile, Ethereum, Cardano, Solana and other networks face stiff competition with each other to provide the best DeFi services. While Ethereum is currently winning that contest, bitcoin could take over over time thanks to SOVRYN. Also, if bitcoin gains enough traction over time, SOVRYN could be the preferred protocol for users thanks to its use of BTC as a primary asset.
This future is still a long way off, if it exists at all. However, innovations like SOVRYN can render Ethereum, and all other blockchains, useless alongside Bitcoin.
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