The developers of Sovryn, a Bitcoin-native app supporting decentralized lending, notes in a blog post that we are all in the middle of a truly historic transition from a global economy largely based on fiat money to an economic system based on crypto-assets and dominated by Bitcoin (and now Ethereum to a great extent).
This unprecedented transition, from the outdated legacy system to the new, is occurring at a rapid pace yet quite unevenly, according to the Sovryn team. They’ve pointed out in a blog post that most economic activity, even in the crypto and blockchain sector, is denominated in US dollars and depends on fiat gateways. Exchanges are basically fiat gateways and centralized stablecoins are also serving as gateways. However, both are actually points of control and capture by the legacy system.
According to Sovryn, truly decentralized, Bitcoin-backed stablecoins are “perhaps the single most necessary tool for the continued transition away from fiat.”
They aim to offer consumers international access to borderless finance that is “stable enough to use for everyday transactions,” the Sovryn team noted. They also explained that they’re basically dollars, but uncensorable. They are Bitcoin, “but non-volatile,” the developers clarified.
These stable assets aim to “reduce reliance on the gateways and further limit the capacity for the old system to control or hinder the new.” The update also mentioned that the dollar is quite familiar and requires almost no explanation. Millions of consumers who would hesitate to perform Bitcoin transactions may use stablecoins for their “day-to-day economic activity.”
The update also noted that there’s “perhaps nothing the Bitcoin ecosystem can offer that will do more for financial inclusion than providing stable money, backed by sound money.”
As explained in the announcement:
“During the gold standard, people rarely transacted with the metal itself – preferring to transact with notes that were gold-backed instead. Indeed, banknotes were the mechanism that allowed for the gold-backed economy to transition to the fiat economy. Stables are the mechanism by which we will transition from fiat to digital gold.”
Sovryn Money for Sovryn People
The Sovryn protocol will be introducing subprotocols that will aim to “kick start the adoption of Bitcoin-backed stables and demonstrate their transformative power,” the announcement revealed.
These subprotocols will be the Sovryn Mynt and Zero, the update confirmed.
As explained in the blog post, Sovryn Mynt will be the protocol that “mints the Sovryn Bitcoin-backed stablecoin; $MYNT.” The contract will aim to “aggregate different methods of creating BTC-backed stability.”
Various Bitcoin-backed stablecoins will be “deposited and held by the contract, which will mint the aggregated stablecoin,” the update noted while adding that this coin will also be “redeemable for the Bitcoin stablecoins held in the pool or Bitcoin.”
There are two significant advantages to an aggregator of this kind:
- Greater Stability – any single method of “creating stability has situations where it may become volatile in comparison to its peg.” In those circumstances, it can “end up trading above or below the peg. Having a system backed by multiple, different methods of achieving stability dampens that effect, providing greater overall stability.”
- Concentrated Liquidity – As we have already seen with XUSD and ETHs, concentrating the liquidity of, “what would otherwise be, many different tokens representing the same asset means one deep pool of liquidity, instead of many shallow ones.” This “allows for smoother, lower-cost trading and reduced transaction frictions.”
The first BTC-stability protocols that will feed into the Sovryn Mynt are Money on Chain (MoC) via the DOC token and Zero via the ZUSD token.
As noted in the update. Zero serves as a protocol for creating BTC-backed stability that will “feed into the Sovryn Mynt.” It also offers holders of BTC the option to “borrow stables (i.e. dollars) at zero interest rate.” This means that HODLers never “need to sell Bitcoin again, as they can borrow against their Bitcoin for indefinitely long periods,” the update noted.
Zero-interest rates could potentially be a game-changer since the two main concerns HODLers currently have are:
- That they will be “constantly exposed to potentially very high-interest rates when borrowing against their Bitcoin.
- That they will be “handing their Bitcoin over to a centralized service provider with all the risk and loss of privacy that entails.”
Zero aims to address these issues “with a zero-interest rate and a decentralized borrowing service.”
Sovryn Mynt and Zero will be the most recent expansions of the Sovryn ecosystem (if both improvement proposals get passed). They should be able to “demonstrate how Sovryn makes Bitcoin ever more useful, accelerating hyperbitcoinization.”
As noted in the update, Zero and Mynt also “demonstrate the ability to create subprotocols, expanding Sovryn into a platform not just for Bitcoin DeFi but for an entirely new Bitcoin-backed, self-governing jurisdiction.”