Sniper Spotlight with Edan Yago from Sovryn

Credit: Sovryn

Sovryn is a new non-custodial Bitcoin trading and lending platform that’s completely decentralized. On it users can trade, lend, borrow, swap, stake, and earn income on their bitcoin. Currently the largest DeFi project on the Bitcoin blockchain, Sovryn aims to foster financial sovereignty in a manner that aligns with Satoshi Nakomoto’s vision of a censorship-proof, trustless, peer-to-peer money system.

Last week we caught up with Edan Yago, one of Sovryn’s principal developers. He’s been in the Bitcoin space for over a decade and told us how the platform got started, its goals, and what people are using it for now. He believes Sovryn will help people never sell their Bitcoin, and much more.

The following interview has been edition for concision and clarity.

Tell me a little bit about who you are and your role at the company.

I’m Yago, and I’ve been in the Bitcoin space for around fourteen years. I have a pretty unique perspective on what Bitcoin is and why it’s valuable. I’ve started several companies in the space — a remittance company, a payments company, and over the last few years, I’ve been a contributor to Sovryn.

Sovryn is currently the largest DeFi (Decentralized Finance) project on Bitcoin. It’s a community-driven project to provide people with the ability to use their Bitcoin as a live asset which can earn yield, and you can use it to trade, borrow, and lend, and for Bitcoin-backed stablecoins.

Sovryn uses the most cutting-edge technology available that’s secured by Bitcoin proof-of-work, and it’s equally decentralized. We were looking to create an ecosystem around Bitcoin which has the same properties as Bitcoin and provides people with financial sovereignty, which is the basis for all sovereignty.

What’s the origin story behind Sovryn?

When the pandemic happened, global supply lane lines shut down. This had a lot of negative effects, but one of them was the ability to get masks, which were important medical equipment at the time, diminished in a lot of places.

Because global supply lines shut down, and we had a background in Bitcoin, and a bunch of us knew each other from the space, we realized a potential solution would be to create a decentralized network, which would be able to use local 3D printers to create masks and distribute them to hospitals and other healthcare service locations around the world — including Argentina, Europe, the U.S., Thailand, Israel, etc.

To fund this, we wanted to raise capital in a decentralized way through Bitcoin, and so we wanted to be able to provide people with NFTs on Bitcoin for their donations. The group that formed was called the Distributed Collective, and the project around masks was called Block 19.

That got a lot of us looking about how we could do more with Bitcoin, and one of the groups in the Distributed Collective evolved into working on a decentralized exchange for Bitcoin. That was the beginning of Sovryn.

If you look at the Sovryn GitHub, it’s still called the Distributed Collective GitHub. The first DAO was created in late 2020, and that DAO created what today is called the Sovryn Bitocracy, which is the DAO that controls Sovryn. That is how Sovryn came into being.

How many members does the DAO consist of?

Around 17,000 today.

Is there an internal team that’s working on all this stuff more so than the rest of the community members?

Yes, there’s a core team. They receive grants, and the DAO itself earns revenue in the form of Bitcoin from all the activity, such as trading and lending, and this gets distributed to the stakeholders of the DAO. The DAO also raises capital which it uses to provide grants to people who are working as part of the core team.

Why do you believe it’s important to build on Bitcoin as opposed to other chains?

Why are we doing any of this is a decent question, right? You have a lot of different platforms out there, and those platforms change frequently. Some of them have teams that decide on their direction and some have foundations, but they’re constantly introducing upgrades and most of them operate on a consensus model called proof-of-stake, which basically means the richest control the system.

If you look at the last fifteen years in crypto, there’s been a lot of projects that have attempted to build a lot of things. And they have, by and large, come and gone. On CoinMarketCap, the rankings are constantly changing. Very big projects come and then disappear. The only thing that’s been consistent is that Bitcoin has remained the No. 1 project.

And the reason all these other projects exist in the first place is they are all trying to answer the same question: “What can Bitcoin not do?”

Ethereum’s answer is Bitcoin can’t do smart contracts, so they did smart contracts. Monero is about counter privacy. And Ripple’s answer is Bitcoin can’t do institutional integrations of banks, so they did that — etc., etc. And then you get second derivatives where Solana will come and say, “What can’t Ethereum do? They can’t do smart contracts cheaply. So, we’re an answer to that.”

The question they’re asking is about what Bitcoin can’t do, but the real question to ask is, “Why do we need Bitcoin in the first place?” If you look at a bunch of systems that come and go, and systems that are constantly changing, and systems that have made sacrifices to decentralization, what you see is that there’s this weird binary.

On one hand, you turn right and you’ve got Bitcoin. And then all the projects that have come afterwards have tried to be less Bitcoin than Bitcoin. No project has tried to be more Bitcoin than Bitcoin — more decentralized, more reliable, more unchanging. I think that’s because they completely missed the point.

The reason we need Bitcoin in the first place is because we’re constructing rights. We’re constructing property rights that are protected by cryptography asymmetrically, where a single guy living in a basement somewhere can protect his property rights against a coalition of the world’s largest nations. That is an amazing asymmetry, and to do it without any violence.

The thing about property rights is they are something that you want not just for you, but you want to be able to pass them on to your family and children. You want to be able to use them to build businesses and to make investments that you can hold forever. These are very long-term, and they are fundamentally a promise of reliability on a generational level, and only Bitcoin provides that.

And so why build on Bitcoin? Because Bitcoin is the only system that is successfully generating reliable property rights. Everything else is a game of speculation — a casino based on an early misunderstanding of why any of this exists in the first place.

What if I have some Bitcoin and I want to use Sovryn to get a loan? How does the process work for someone like me?

I can show you. This is the Sovryn app. This is the frontend that you can use and download to your computer. You can click to connect your wallet, and once you’ve done that, you can go to borrow and choose how you’re going to proceed. So, you can borrow Bitcoin, or you can borrow Sovryn Dollars, which is a Bitcoin-backed stablecoin.

It’s just a few clicks. For example, take your Bitcoin, use it as collateral, and you’re good to go — so you can borrow stablecoins. You can also lend your Bitcoin and earn yield on it, and you can trade with it. There’s a self-explanatory user interface which makes it possible to do all these things in just a few clicks from your wallet, with no intermediary.

I imagine some people worry about lending their Bitcoin to another protocol. What kind of security measures are in place to keep people’s Bitcoin safe?

First, anyone who’s concerned about risks is right. The minute you start doing more things with your Bitcoin, you are taking on more risk. I don’t have all my Bitcoin in Sovyrn. I have some, and some Bitcoin — my retirement Bitcoin—in cold storage that doesn’t move. But at Sovyrn, we have a Bitcoiner attitude to a lot of things in the world and one of the key things is security.

We are probably one of the most security-conscious communities in crypto. We have a huge number of tests and automated testing that we write. We have a lot of people reviewing each piece of code, and there’s been many audits of the various systems. There’s also an ongoing million-dollar bug bounty for anyone who can find bugs in the system.

All the code is open source, so that everyone can review it and bugs can be more easily found. And there’s a monitoring system that allows us to potentially intercept any exploit that might happen.

Great. I also saw something about a new Bitcoin OS whitepaper that you guys released. Can you tell me a little bit about that?

Yes, so as I said, we’ve always tried to work with the most cutting-edge technology available for Bitcoin. When we started, we were developing almost everything on a side-chain to Bitcoin called Rootstock. But Rootstock has many limitations, as does any platform today. There’s no way to really write a smart contract system, or scale Bitcoin, or allow permissionless development or rollups or dApps on Bitcoin that are truly Bitcoin native.

We recognized the limitations from the beginning, and in the same way that we pioneered DeFi for Bitcoin, we also pioneered the research and development of rollup technology for Bitcoin. Because we recognized that the Holy Grail is the ability to have rollups for Bitcoin.

What a rollup would do is provide a way of taking transactions, aggregating them, and turning them into a Bitcoin transaction. What that means is that you can massively scale the transactions. You can have them occur in an execution environment where you can do anything. So, you could have an execution environment like a rollup chain that is EVM, and it would have all the capabilities of Ethereum. Or it would have all the capabilities of SVM on Solana.

You would literally be creating a neighborhood in Bitcoin — the Ethereum neighborhood or Solana neighborhood, or whatever. But it would no longer be a separate environment, a separate ecosystem. And that’s where we wanted to get to, and we’ve made a lot of progress. The whitepaper that we published now is a project coming out of the Sovryn community — BitcoinOS (BOS). BitcoinOS’s goal is to bring this to reality.

With the paper we published, we presented BitSNARK, which is a system for verifying ZK Proofs (zero-knowledge proofs), or SNARKs, on Bitcoin. The reason that’s important is because it allows you to take the transactional activity happening off of Bitcoin, roll it up into a Zero-Knowledge Proof and have it verified on Bitcoin. And the Zero-Knowledge here means the participants on Bitcoin (Bitcoin itself — the chain) don’t need to know anything about what’s happening on other chains. So, you can do all this compressing into Bitcoin.

Then, Grail is a system built that allows for the creation of rollups and for bridging Bitcoin in and out of these rollups. Our ultimate goal is to have a whole world of these different rollups fully interoperable, so that when you are using Bitcoin and using these rollups, it feels like one chain. You don’t feel like you have a large number of different ecosystems. So, the whole thing becomes composable and interoperable.

And we’re getting pretty far ahead now. Our goal is to have the first rollups running before the end of the year.

Can you tell me about any success stories with Sovryn?

One of the most powerful things that we’ve built is a bitcoin-backed coin called the Sovryn Dollar (DLLR), which always maintains its peg to bitcoin. It doesn’t have the risk of Tether, where an organization can freeze your funds, or run away with the money, or get it confiscated by our government. It doesn’t have the risks of Terra, where there’s nothing backing the money. Or the risks of DAI, where it’s a sort of half-decentralized, half-centralized ethos.

It’s a pure-play stablecoin backed by bitcoin, and it always maintains its peg to the dollar because the Sovryn dollar is always redeemable for one dollar worth of bitcoin. The reason it’s always redeemable for one dollar worth of bitcoin, is because the way Sovryn dollars get created is if you have Bitcoin, you can go to a protocol like Zero and it allows you to take out a zero interest loan.

You pay an origination fee, and then you can borrow against your bitcoin and get Sovryn dollars. Effectively, you’re borrowing from yourself. There is no party in the middle that’s issuing these stablecoins to you. It’s you who are issuing them on the basis of your bitcoin.

This creates an environment where people don’t need to sell bitcoin. That is becoming a thing of the past. Our goal is to make it unnecessary for anyone to ever sell bitcoin. If you want to buy a house, you borrow against your bitcoin.

And we’ve seen people do this. There’s a guy I met at a conference who lives in Miami who told me he bought two houses in this way. Initially, he was planning to buy one house, but then the price of bitcoin doubled, so he bought two.

And then there are other people who are using it to refinance loans. One of the first users sent me a DM around the day that it launched and said he’d successfully refinanced a loan for a motorcycle. He was in Argentina, where they were paying about 30% interest and he refinanced it to 0% interest…Being able to refinance loans is a big deal for people, so I think that’s really cool.

Is there anything else we didn’t cover that you’d like to talk about?

One thing to mention is that if you go to the Sovryn app, we’re on two chains. One is Rootstock and one is BOS. If you go to BOS, you can start earning fees. You can provide liquidity and earn extra fees right now. Also, it’s an opportunity to be one of the first people to look at the Runes market, which could prove to be one of the most substantial markets in crypto.

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