How Sovryn Offers Non-Custodial DeFi to Bitcoin Holders

December 16th 2020 new story

Until today, access to DeFi services for Bitcoin holders has required handing Bitcoin over in return for an IOU on ethereum. Now Sovryn aims to change that with its Bitcoin native DeFi platform, with a strong focus on trading, leveraging, lending.

This new decentralised exchange is permissionless and non-custodial, putting users in full control of their funds. 

An Introduction to Sovryn

Even though the DeFi industry has noted strong growth in recent months, Bitcoin holders have had no way to fully participate. The only way to explore DeFi as a Bitcoin holder is to convert BTC into an Ethereum “wrapped asset”.

This intermediary step introduces a layer of centralization that is antithetical to the community’s ideals, not to mention the security risks and additional fees involved. 

Sovryn follows a different path, with decentralized trading and lending for Bitcoin. It is a Bitcoin-native decentralized finance platform that requires no permissions and it will never take custody of your coins. Instead, it offers a few core features that can elevate decentralized finance to a whole new level.

Secure Trading

At the center of Bitcoin’s economy are traders and lenders that typically rely on centralized platforms and services. Sovryn wants to emphasize the decentralization aspect of Bitcoin, as well as user sovereignty. In this way it advocates the original vision for Bitcoin of a global, permissionless currency as designed by Satoshi Nakamoto.

Through its ease of integration, Sovryn’s functionality can be used on the backend of exchanges all over the world, or be experimented with through Web3 portals. 

Powering this vision are Solidity smart contracts built specifically for Bitcoin users. These contracts have been audited over a period of three months, and will continue to be monitored by multiple auditors and bug bounty programs.

Combined with secure oracles for greater decentralization, and an insurance fund protecting against undercollateralized loans, the service checks the right boxes. More importantly, Sovryn is fully open-source, thus anyone can review the code as they see fit. 

Benefits Anyone can Enjoy

Under the hood, Sovryn offers several core benefits to all of its users. Not only is it easy-to-use and a DeFi alternative, but it also introduced the following concepts:

No account needed / No KYC / No user tracking

Self custody: Users remain in control of their funds at all times

No token swaps or wrapped assets required

Deepening of the decentralization of Bitcoin’s economy

Making Bitcoin more versatile 

All of the aspects outlined above will help illustrate why Bitcoin was designed for decentralized finance, even if it has been mainly overlooked up until this point. There are multiple ways to make money with Bitcoin without giving up control of one’s private keys.  

Exploring Sovryn Lending

Contrary to other DeFi solutions on the market, Sovryn offers not one, but two options to lend Bitcoin through the protocol. 

The Non-custodial APR 

The first option lets users lend BTC on leveraged trades to begin “stacking sats”. None of the funds has to pass through an intermediary to explore this option. 

The APR will fluctuate depending on the demand to borrow BTC. All interest payments are distributed to lenders, with 10% of the interest collected by Sovryn to build the insurance fund.

AMM Liquidity Provision

Option number two is akin to what DeFi enthusiasts have grown accustomed to over the past few months: providing liquidity to the AMM protocol. Users will be able to swap between Dollar on Chain stablecoins and Bitcoin. Those who provide liquidity earn trading fees and yield from future liquidity mining programs offered by Sovryn. 

However, the AMM implementation of this protocol is different from other DeFi solutions. Users don’t need to provide 50/50 liquidity for both sides of the orderbook. Instead, they only need to deposit one asset - in this case, Bitcoin - and earn swap fees. Those fees equal 0.1% per swap per coin. 

Sovryn’s Leveraged Trading

Catering to the trading aspect and risk appetite of Bitcoin holders, Sovryn introduces leveraged trading solutions. The basic concept of going either long or short will offer a familiar feel to experienced traders. Positions can be leveraged by up to 5x, letting users borrow leverage from the lending pool. 

This lending pool is filled by Bitcoin holders willing to lend their BTC holdings to margin traders and borrowers. In exchange for doing so, the liquidity providers will earn interest based on their position and liquidity. Being able to earn money by lending otherwise dormant BTC to margin traders taps into new revenue streams while remaining non-custodial. 

One crucial aspect of leveraged trading with Sovryn is the interest. Traders will pay this interest partly upfront at the rate specified for the next 28 days. If a position is closed prior to this 28-day period coming to an end, the difference will be refunded. Any position rolling over to another 28-day period will need to have its interest paid in advance again. 

Every leveraged trade performed through the Sovryn protocol is subject to a 0.15% fee. 

The Fast BTC Relay

The third main component of Sovryn is access to FastBTC. The FastBTC Relay is a solution to convert quickly from Bitcoin to rBTC (RootstockBTC) in a trustless way, where everything is handled through atomic swaps with the smart contract as a counterparty. 

As Sovryn leverages the benefits of Rootstock to bring DeFi to Bitcoin, gaining exposure to rBTC can prove beneficial. Every rBTC is a Bitcoin on the RSK sidechain, which is used for participation in smart contracts designed for the Bitcoin blockchain. Moreover, it is natively used by Sovryn in all of its features and services. 

For more information, visit https://sovryn.app/.