in this thread I would like to take up the discussion from the Telegram channels and propose the creation of a $SOV lending pool. In addition, i propose to bootstrap the $SOV lending pool with (enter 6 digit number) $SOV from the adoption fund to ensure liquidity.
One-sided markets do not work. Sovryn has already had to painfully realize this.
Zero was such a one-sided market. There was an imbalance due to insufficient liquidity and bridging opportunities. The ZUSD and later DLLR created could not be exchanged for other stablecoins to a sufficient extent. An offramp was therefore not possible. The only option was to buy rbtc. This attacked the peg and caused massive redemptions in Zero.
There is a second example of a one-sided market: it has long been possible to go leverage long $SOV. However, it is not possible to short $SOV. In the past, there have been various long squeezes with a subsequent price crash of $SOV.
One-sided markets tend to be manipulated. We are currently seeing this in the fiat world, for example in the bond market. Free markets, on the other hand, are much more robust. By creating a SOV lending pool, at least this one-sided $SOV market can be eliminated. Stakers are given the opportunity to hedge their $SOV positions.
Sovryn wants to be permissionless. So we should also allow shorting of $SOV and not manipulate the free market with one-sided measures. Who can ever take us seriously if we prohibit shorting our token? We would be no better than various fiat states.
-By creating a $SOV lending pool, there is potentially more protocol revenue (lending revenue and additional trading revenue).
-Shorting allows to hedge $SOV staking positions, e.g. to hold a $SOV price neutral stake and bet that the staking income will exceed the interest payments for the short.
-There are now many $SOV tokens in circulation. Too many to stake them all and get any kind of significant yield. If you could put your $SOV into the interest paying lending pool, this would create another use-case for SOV, which may have a positive effect on the underlying value and provide higher yields for staked SOV.
Happy to hear your thoughts!