Sovryn Litepaper

29 Aug 2020

The problem

At the heart of the Bitcoin economy there are traders and lenders. All of these activities are currently being channeled through centralized services because great, easy-to-use, decentralized alternatives do not exist.

We came to Bitcoin for decentralization that empowers user sovereignty. Yet we must often give up that decentralization if we ever want to use our Bitcoin. This absurdity must end.

The solution

Sovryn is a decentralized protocol for Bitcoin lending and margin trading. The protocol can be easily integrated into new and existing exchanges, or accessed simply through a web3 portal.

Sovryn will provide decentralized alternatives of all the most popular centralised Bitcoin finance tools.

Current Features

Spot-Exchange: A low cost, low-slippage, AMM allowing instant trades between tokens

Margin Trading: Creates up to 5X long/short trades, allowing users to borrow leverage from the lending pool

Lending Pool: Allows HODLers to earn interest by lending tokens to margin traders and borrowers

SmartBTC Relay: Allows use of Bitcoin almost instantly with smart contracts and decentralized products, from any Bitcoin wallet

Bitcoin-backed Stablecoin: Users can use a USD-pegged token, backed by overcollateralzed Bitcoin

Future Features

Borrowing: Allows users and smart contracts to borrow tokens from the lending pool. All lending is over-collateralized Perpetual Swap: BTC backed perpetual swaps allowing trades with up to 20X leverage

Benefits to Bitcoin and Bitcoiners

Sovyrn benefits the entire Bitcoin ecosystem by providing easy-to-use, decentralized finance alternatives.

• Privacy: as a decentralized service, Sovryn does not require user accounts, KYC or user tracking. Your privacy and pseudonymity are protected.
• Self-Custody: Don’t risk giving up your keys to centralized services that can be compromised or censored.
• Bitcoin-Native: All fees are paid in Bitcoin and all transactions are merged with Bitcoin PoW so that DeFi can be both scalable and secure.
• Increase Bitcoin Defense-in-Depth: Trusted third parties are security holes. The more the Bitcoin economy falls under the sway of centralized services, the more vulnerable the economy and its participants become to censorship and other attacks. Sovryn increases Bitcoin’s security envelope by increasing the depth of decentralization in the Bitcoin economy so that it becomes, as we like to call it, a Bitocracy.
• Hyperbitcoinization: Increase the usefulness of Bitcoin and its ability to grow. Adopt the best innovations of other tech stacks and accelerate innovation in the Bitcoin ecosystem.

Use Cases

Stacking Sats and HyperHODLing

Alice, a hodler, wants to put her BTC stack to work by lending them to a margin trade.

Bob, a trader, is so bullish, he isn’t satisfied just to HODL. He wants to HyperHODL. He opens a long position on BTC, borrowing the funds from Alice.

Alice and Bob do not want to move their BTC onto a centralized service and give up control of their keys. Using Sovryn, Alice issues a peer to peer loan straight from her wallet and Bob trades straight from his. Alice is now stacking sats, and Bob is HyperHodling without compromising their privacy, control or ideals.

LegoLand

Carol is building a centralized exchange. David is building a decentralized hedging dapp. Both can integrate permissionlessly with the trading, lending and liquidity of Sovryn. In doing so, they gain instant access to more liquidity, more features and can provide greater functionality for both their users and those of Sovryn.

Roadmap

Decentralized Governance

Decentralization is the key to user Sovereignty. By denying central points of control, it shifts the balance of power from centralized authorities, back to the users. Sovryn is being built with the goal of maximal decentralization, while still being able to provide ease-of-use and the ability to constantly improve. Sovryn will never have the same level of decentralization of Bitcoin but it’s also not trying to be the next global reserve currency.

We expect to continue engineering greater assurances of decentralization, as Sovryn evolves. In the early days, Sovryn will be decentralized by the following means:

• “Bitocracy” Governance Token: The SOV token will grant holders the ability to manage the protocol by staking and voting. In doing so, they will earn the right to the revenue the protocol generates.
• Fee Collection: The Sovryn Bitcoin-Native DeFi protocol generates revenue as upheld by its governing SOV stakeholders. Fees generated include from swapping, lending, borrowing and leveraging. All future fees collected by additional features introduced by Sovryn will also be automatically distributed in a decentralized manner to all stake holders.
• Distributed Smart Contract Keys: A central point of control that afflicts almost all Dapps is control of the smart contract keys. If one party controls those keys, that can make almost any change to the protocol, including stealing users funds. However, some degree of control is necessary, to allow for system and feature upgrades. Sovryn will distribute control of smart contract keys and place them under the control of the SOV holders. No one party will be in control.