Thoughts on a possible direction for Sovryn

I was asking myself what would be my dream scenario for the direction of Sovryn. For me it would not be a new chain, but a token-free Sovryn Beta working as follows:

  1. Token-free and time-based. Let Sovryn Beta be token free, and let Sovryn Beta’s focus initially be entirely on Zero. Let governance within Sovryn Beta (so of ‘Zero Beta’) be through a new staking mechanism, where the staked liquidity is now rBTC. Introduce a time-based restriction of access to this new kind of staking (and hence governance), based on the time spent with the service that is governed. For example, only after having used Zero for 12 months can one stake as much rBTC as kept in Zero over the preceding 12 month period, and only for as long as a corresponding amount is in Zero Beta. The time delay and double stakes (in Zero Beta as well as the staked amount) help defend against certain kinds of attack.

  2. Multiplier on rBTC stake as tokenless incentive. Stakers of rBTC on Sovryn Beta receive rBTC revenue from the use of Zero Beta and slowly earn a multiplier of their ‘stake’ over time the longer they don’t unstake (Edit 28-10-2022, for clarification: so if one has a ‘1.5x multiplier’ on one’s stake and one has staked 1 rBTC, this counts as if it were 1.5 rBTC for the purpose of voting power and percentage of revenue). People can unstake at any moment without financial penalty. If one’s Zero loan would ever come in danger of being liquidated, one could unstake rBTC and add as collateral (of course thereby losing the multiplier). Devs and core team should be granted a starting premium of this multiplier on their stake. Dev work can be rewarded by this multiplier. This ‘multiplier’ can also be sold by the community to attract investors. Of course any multiplier granted to another party dilutes one’s own revenue and voting power, the community has an incentive to be stingy. This ‘multiplier’ can serve many of the functions of a token without being a token, or needing one.

  3. Value to SOV. Current SOV holders are granted ‘early access’ to this new kind of rBTC staking. For example: by sending one’s SOV to a burn address, one ‘buys’ a staking slot of corresponding size in rBTC without having to meet the time-in-Zero requirement. Sovryn Alpha stays as it is; SOV might even do well there, as it is burned by people moving to Sovryn Beta. (Edit 28-10-2022: note that this might create both demand for SOV while burning SOV and reducing supply). The current Sovryn, Sovryn Alpha, functions amongst other things as a launchpad: when another feature is ready to be moved to the token-free bitcoin-only Sovryn Beta, early access will again be given to SOV holders.

  4. Additional benefits. With this design for Sovryn Beta, rBTC revenue to stakers would not have to be high in order for staking to be really attractive, as now staking is a way of hodling rBTC and keeping something on the side to protect against any threat of liquidation. This has a real chance of functioning as a ‘real yield’ DeFi protocol. There is still something like ‘early access’ and benefitting from being early, but it is no longer tied to a token within Sovryn Beta. As there is no AMM or liquidity to incentivize on Sovryn Beta, all fees and revenue generated through Zero Beta can go to the rBTC stakers.

This is roughly what I came to when I asked myself what would be my ‘if anything is possible’ direction for Sovryn. Let me know what you think about this, if you feel like.

(Edits on 28-10-2022: added some stylistic changes to make it clearer, and two additional clarificatory notes).

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Hi Martin,

I may not agree with your proposal, but I appreciate very much that you made it. In a group we can think better than individually. One idea leads to another, and maybe we will get somewhere unintended.

That said, there will be people who do not understand the invisibilization of Sovryn and the sov token. There are people who would never put their bitcoin in stake. I confess that I belong to those two groups.

So, I take this post you brought to let us think together and share another course of action to be analyzed:

How about sov stakers have benefits for the use of ZERO ( and the other products Sovryn offers now or will offer in the future)?

For example, that for different volumes of sov in stake or for longer periods of time (a year) in stake we can access zero at no cost, or credit lines with no minimums (or free/bonus swap, trading…), or any benefit that you can think of that is not rewards in sov…

In this way SOV has a value beyond the price or dividends.

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@Martin_Adriaan - where do you see the value accruing to SOV?

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It’s in the third bullet point: people ‘buy’ a slot to stake rBTC (within Sovryn Beta) with SOV (a slot that is otherwise only available after a long period of using Zero). All this SOV gets burned. If there is an interest to stake one’s rBTC and earn the revenue within Sovryn Beta (and build up time staked), this might make SOV both highly deflationary and in demand in the short to mid-term.

(Edit 28-10-2022: I edited the post to make this clearer and easier to spot).

Hi Lactarius. Trust me I understand very much where you are coming from. In my view there are roughly two routes: (1) increase the utility of SOV (so that TVL translates more neatly to value growth of SOV), or (2) figure out a way to not rely on SOV within a new iteration of Sovryn while fairly rewarding early SOV investors. Your suggestion is along route (1), and I have often thought about this, but it quickly runs against certain bitcoin-oriented principles (namely, don’t want to require people to buy SOV to use features, but also cannot make fees too high as that would make it no longer competitive). So this proposal is along route (2), which has been underexplored in my view.

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I want to clarify that my approach is the implementation of benefits (advantages, rights, discounts, freebies) to sov stakers. I do not promote raising costs for non-sov stakers. It should not be necessary to stake sov to operate in Sovryn or Zero.

In any case, I love the research you are doing with the other way. Let’s await further comments.

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I like this very, very much. Sovryn (and many other defi projects like) would just be better tokenless.

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i wouldn’t be defi , it’ll be fintech

Interestingly someone recently posted a thread on Twitter asking which protocols require tokens. The conclusion was most if not all protocols do not technically need a token. But I don’t find it to be a viable path. It’s like can a company exist without equity and stock? Well yah it could for sure but it would massively hamstring the business. A token allows the parent entity to leverage it’s entity and that’s hyper valuable.

Unfortunately I think this would be us attempting to bend to the will of maxis who won’t use any of these products anyways. At the same time I’m not ready to go full on token utopia and issue tokens for everything. Balance is key.

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I am on the side of the fact that the Maximalist Bitcoiner is becoming increasingly scarce.

We MUST pay attention to a few facts:

1.Bitcoin market share is decreasing - currently at 40% and it doesn’t look like it will get to 50% and up anytime soon or if ever

2.Out of those 40% only a very small minority are actually maxi’s

3.The token and its value proposition is the most or at least the second most important thing in a functional DAO that operates in crypto! That is the truth, whether welike it or not!

If we focus on pleasing a small minority of bitcoiners that are unlikely to change their mind about DAOs we are missing out and are not addressing the vast majority of the market.

Sovryn is not for MAXIs , that is for certain and I would even go as far as saying it is not built even for bitcoiners.

Sovryn is a world built on Bitcoin and is for EVERYONE! NOT JUST FOR BITCOINERS! This is the WAY!
(At least that is how I see it) Thats why our strategy should be focused at everyone not just bitcoiners.

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I think I need to clarify two things.

(1) The proposal is not to remove SOV.
Nothing would change to Sovryn Alpha (= current Sovryn) except that Zero moves on to a newly envisioned Sovryn Beta. Sovryn Alpha continues to exist and SOV continues to be used to incentivize liquidity in the pools and as rewards to SOV stakers in Sovryn Alpha. Think of it this way: SOV gets a new use case, namely early access to a new feature: rBTC staking. If this is popular, it would burn a large amount of SOV while creating demand for it, which is exactly the sort of thing needed to breathe life into SOV.

(2) The aim here is to come up with the most sustainable version of Sovryn.
This is not motivated as an attempt to please Bitcoin Maxi’s. After having fulfilled the role of fundraising (token sales) and bootstrapping liquidity (in LM pools), tokens tend to become a liability to DeFi protocols that rely heavily on them. Either issuance is maintained with a risk of creating too much supply, or issuance goes down and liquidity leaves; in bear markets, token prices plummet and community leaves, and so on. We see that within Sovryn, but it is a general issue faced by DeFi protocols in general. The bitcoin-oriented focus makes this even more difficult for SOV as it puts severe constraints on what can be done to support the value of SOV. I think this requires more of a creative approach than just tinkering with supply and fees. The sketched 'stake multiplier’ within Sovryn Beta can fulfill many of the roles of a token, without suffering from the problems that attach to having a token (as it doesn’t itself have a valuation or issuance, yet it can work as an incentive by boosting one’s income). There is already the realization that DeFi has to be based on ‘real yield’ instead of token issuance to be sustainable, the problem here is that the real yields are often not attractive enough to offset the risk of a typical altcoin. Real yield on rBTC strikes me as a solution to this. Anyway there is a lot more to say here, and perhaps I should write a long form post but this gives maybe some sense of where I’m coming from.

For me the motivation is not to please Bitcoin Maxi’s and remove shitcoins or anything like that, it’s to come up with the strongest and innovative version of Sovryn that I can think of, in line with the bitcoin-oriented focus.

I actually agree with much of what you write. Maxi’s are a small minority, and they shouldn’t be our focus. Contrary to what many bitcoiners believe, our aim with Sovryn should be to innovate, build and think ahead.

I only disagree with your point 3, that tokens and their value are essential to a DAO. I think one can already see cracks appearing in this way of thinking (see the thread linked to by dseroy above, I agree with much of Ignas.Lenster’s analysis). The proposal sketches a possible way of organizing governance and building a community that partly does away with reliance on a token and its value, which seems to me exciting, sustainable and future-proof.

I see what you mean!

But honestly, why replace SOV with RBTC in goverrnance? Is it not for the purpose of pleasing a particular set of ideas/ideals?

you don’t need SOV n order to use the protocol, in the current form

I don’t see anything wrong with the SOV token It has a very well defined function within the protocol.

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But honestly, why replace SOV with RBTC in goverrnance? Is it not for the purpose of pleasing a particular set of ideas/ideals?

First, just to avoid misunderstanding, SOV staking would remain in place within Sovryn Alpha – which would be for any features that rely on the issuance of SOV. Zero is not such a feature, but others (still) are.

To answer your question, I have a long list of reasons, but here are a few:

  • Longevity. The fate of a part of Sovryn would become independent of what happens to SOV, or its tokenomics. The strength of this is easily underestimated. (For example: regulatory attack on alts? Sovryn Beta would be unfazed.)

  • Sustainable economics. Eventually you want to be able to rely on revenue created by use of the protocol. A key thing about the proposed design: revenue within Beta wouldn’t have to be high to be competitive. People are more than willing to hodl BTC without gaining any interest, they would gladly do it for 1% APR + building up a larger share of any future revenue. (Not so with SOV, there are many alts where I get >10% APR on staking). This means that there is no pressure to prop up revenue (such as by higher fees), and so Sovryn Beta would have intrinsic advantage over any competitor.

  • Power of simplicity. It’s generally good practice to strip anything unnecessary or risky from a design. As an investor: what does SOV staking give you? Well you are early, if revenue and price of SOV go up, you get a larger share of the revenue because you were early. This potential benefit needs two things to happen: revenue needs to go up + SOV needs to go up (if SOV goes down, you are actually at a disadvantage compared to later joiners). Compare the sketched Sovryn Beta: being early with rBTC staking makes you earn a multiplier on your stake, which only goes up and means a higher share of future revenue compared to people who come in late. Only one thing needs to happen for this benefit to take effect: revenue needs to go up. There is no risk of late comers getting a better deal. Again this is a poweful concept, and easily underestimated.

  • Unique. rBTC staking would also be a new feature on itself: I’m unaware of a non-KYC staking feature for BTC. This could be as exciting as Zero. There would be a nice synergy with the Zero feature: when it comes to borrowing against your bitcoin it is prudent to have bitcoin on the side. (Not so with SOV kept on the side, and the current staking mechanism).

I could go on. On the continued list there would be smaller things, such as the potential of simpler UX, and, yes, also the benefit that it can speak better to a group of people, moderately hardcore bitcoiners, that are currently harder to draw in. Then, stepping back, it also fits better with a hyperbitcoinized world that I believe (hope) we might be heading towards. But if these things don’t speak to you, I think there are many other reasons to motivate this. And, to repeat this once more, as special access to Sovryn Beta would be given to those who burn SOV, if the sketched Sovryn Beta would do well, SOV within Sovryn Alpha would really do well too, this is not parasytic on SOV, it is supportive.

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So we rode down SOV to almost Zero to then be able to trade this useless POS to RBTC without any hope to ever reclaim our value… This is not how this works sir… Lot of us made a bad investment and are still hoping to at least recoup some of the value at a further point - your suggestions says “your money is gone forever”… not at all cool not getting my vote… SOV needs to stay as main Sovryn governance and staking coin for the time being.

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For you to have a chance to earn back invested value, Sovryn needs something that causes waves. I believe introducing rBTC staking could be a development that causes waves – in much the same way that Zero is causing waves (and appealing to the same kind of audience). SOV would provide early access to it and would be burned in the process (see bullet point 3). Depending on how popular it would be, this could really boost the value of SOV. I’d buy more SOV, speaking for myself.

Have you done any research on how would that rbtc staking would be received?
Based on what we see in these responses it would not perform very well. I struggle to see a world where bitcoiners are willing to stake btc rather than sov, which is the equity of the protocol and so it is the natural thing to do

Fair question. I have not looked into this (as it’s very hard to gauge this), I’m just brainstorming on this atm. I have however looked into rates and the sort of competition that would be out there. Take Binance, they have a “BTC Earn” program, and the rate for more than 0.5 BTC = 0.10%. At Kraken they have something they call ‘BTC Staking’ (technically incorrect, there is no such thing), where the APY is supposed to be 1%, but with qualification. Then of course there was Celsius, Blockfi. There are many parties that offer interest on BTC but the interest rate tends to be low, and it is risky (as behind the scenes they are typically lending and/or leveraring that BTC). So yeah this seems definitely something that we could realistically compete with: we could get to similar rates, with less risk, without KYC and earning a multiplier of one’s stake in future revenue, no lockup, and giving access to governance. That would be super attractive imo; I would go so far that even with lower interest rates than competition (so lower than 0.10% of Binance), people might be interested. The fact that so many parties offer this also suggests that it is something for which there is demand and understandably so, it’s attractive to earn while hodling anyway.

Note however: we would want it to be very much in demand, but the key is that contrary to existing staking mechanisms, it is not freely accessible, only through long time use of Zero or through SOV (and that is where it would boost SOV).

I struggle to see a world where bitcoiners are willing to stake btc rather than sov

I’m a little puzzled about this. Surely bitcoiners will be willing to stake rBTC, if there is an ok incentive (nothin major needed), and they are much less willing to invest in a low cap altcoin and then lock it up, if you ask me?

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Do you see this driving yield?

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Do you mean whether it would generate yield for SOV stakers in particular? Because then, no, it wouldn’t. I see it only as creating demand for SOV, for as long as SOV provides (quicker) access to rBTC staking.

I proposed that an rBTC staking slot is bought by burning SOV, which seems to me the simplest approach, but of course there are others variants that could be explored (could consider instead the idea that any SOV staker deserves an rBTC staking slot the size of the BTC value of the staked SOV, for example).

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