How Sovryn is offering unsecured DeFi to Bitcoin holders

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Intelligent contract platform on Bitcoin

To date, access to DeFi services for Bitcoin holders has required the handover of Bitcoin in exchange for an IOU on Ethereum. Now Sovryn wants to change that with its native Bitcoin DeFi platform, with an emphasis on trading, leverage and lending.

This new decentralized exchange is permissionless and does not require custody, so users have full control over their funds.

An introduction to Sovryn

Although the DeFi industry has seen strong growth in recent months, Bitcoin holders have had no way of getting fully involved. The only way to explore DeFi as a Bitcoin holder is to convert BTC into an Ethereum-wrapped asset.

This intermediate step introduces a level of centralization that goes against the ideals of the community, not to mention the security risks and the extra fees that come with it.

Sovryn takes a different approach, with decentralized trading and lending for Bitcoin. It’s a bitcoin-based decentralized financial platform that doesn’t require any permissions and that never holds your coins. Instead, it offers some core features that can take decentralized finance to a whole new level.

Safe trading

At the heart of Bitcoin’s economy are merchants and lenders, who typically rely on centralized platforms and services. Sovryn would like to highlight the decentralization aspect of Bitcoin as well as user sovereignty. In this way, it endorses the original vision for Bitcoin of a global, permissive currency as designed by Satoshi Nakamoto.

Thanks to the simple integration, the functionality of Sovryn can be used in the backend of exchanges around the world or experimented via Web3 portals.

This vision is based on Solidity smart contracts designed specifically for Bitcoin users. These contracts were audited over a three month period and continue to be monitored by multiple auditors and bug bounty programs.

Combined with secure oracles for greater decentralization and an insurance fund that protects against undercollateralised loans, the service ticks the right boxes. More importantly, Sovryn is completely open source so anyone can review the code at their own discretion.

Benefits that everyone can enjoy

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

No Account Required / No KYC / No User Tracking

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

No token swaps or packaged assets required

Deepening the decentralization of the Bitcoin economy

Make Bitcoin More Versatile

All of the aspects outlined above will illustrate why Bitcoin was designed for decentralized funding, even if it was mostly overlooked up until this point. There are several ways to make money with Bitcoin without giving up control of your private keys.

Exploring Sovryn Lending

Unlike other DeFi solutions on the market, Sovryn offers not one but two options for lending Bitcoin over the protocol.

The non-custodial APR

The first option allows users to lend BTC on leveraged trades to start “stacking sats”. None of the funds need to go through an intermediary to consider this option.

The APR will fluctuate based on the demand for BTC bonds. All interest payments are distributed to the lenders, with 10% of the interest being charged by Sovryn to build the insurance fund.

AMM liquidity provision

Option number two is similar to what DeFi enthusiasts have gotten used to over the past few months: providing liquidity for the AMM protocol. Users can switch between Dollar on Chain Stablecoins and Bitcoin. Those who provide liquidity earn trading fees and returns from future liquidity reduction programs offered by Sovryn.

However, the AMM implementation of this protocol differs from other DeFi solutions. Users don’t need to provide 50/50 liquidity for both sides of the order book. Instead, they just need to deposit one asset – in this case bitcoin – and earn swap fees. These fees are 0.1% per exchange per coin.

Sovryn’s leveraged trading

Sovryn takes the trading aspect and risk appetite of Bitcoin holders into account and introduces leveraged trading solutions. The basic concept of either going long or short gives experienced traders a familiar feel. Positions can be used up to 5x, allowing users to borrow leverage from the credit pool.

This pool of credit is filled by Bitcoin holders who are ready to lend their BTC holdings to margin traders and borrowers. In return, the liquidity providers receive interest based on their position and liquidity. Being able to make money by lending otherwise dormant BTC to margin traders opens up new sources of income and doesn’t get stuck in the process.

A crucial aspect of leveraged trading with Sovryn is interest. Traders partially pay this interest in advance at the rate set for the next 28 days. If a position is closed before this 28-day period expires, the difference will be refunded. Interest must be paid again in advance for any position that is extended for a further period of 28 days.

A fee of 0.15% is charged for every leveraged trade executed via the Sovryn protocol.

The fast BTC relay

The third main component of Sovryn is access to FastBTC. The FastBTC Relay is a solution for the quick switch from Bitcoin to rBTC (RootstockBTC) in a trustworthy way, in which everything is done via Atomic Swaps with the Smart Contract as the counterparty.

With Sovryn taking advantage of Rootstock to bring DeFi to Bitcoin, getting involved in rBTC can prove beneficial. Each rBTC is a Bitcoin in the RSK sidechain that is used to participate in smart contracts for the Bitcoin blockchain. In addition, it is used natively by Sovryn in all of its functions and services.

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