SIP-0048 - Strategic Investment in Sovryn

SIP-0048: Sovryn Strategic Investment Proposal


General Catalyst (GC) is proposing to lead an investment round in the Sovryn protocol. The investment round is expected to draw strategic investors who share in Sovryn’s mission and wish to partner with the protocol for the long term.

By building decentralized finance on Bitcoin, the Sovryn project is working to develop the operating system for individual sovereignty and a world built on Bitcoin.


The internet protocol was built to enable the transfer of information across space and time, which led to incredible innovation and huge companies. While it solved the problem of transferring information across space and time, it did not solve the problem of transferring value across those dimensions. Bitcoin, as both an asset and a network, solves this problem in the following ways:

Space: Prior to Bitcoin, all transactions that happened on the internet relied on legacy rails (with multiple intermediaries), and while many companies glued together the internet protocol with traditional payment rails to make this work, nobody solved the problem of transferring value online natively. The simple way to think about this problem is that you can directly email someone words, but you can’t directly email someone money (without using traditional rails). The underlying reason for this is every time you email someone, it creates a copy of the sent email; this would create a huge problem with money, which requires the value to be truly transferred and not duplicated (aka “the double spending problem”). This is what the Bitcoin network solves.

Time: This dimension is a more complex one as it’s less relevant for the transfer of information and very applicable for the transfer of value. Over the last decade, the increase in the money supply of the United States Dollar (“USD”) has led to questions around how the USD will preserve its value over time. The decisions around monetary supply are driven by central banks with a long-term inflation target in mind, but with various priorities taking near-term precedence. Bitcoin takes the first step to separate money from the state (central bank), which is critical to preserve the value of “money” over time. A practical analogy is how the world operated prior to the 1970s with the Gold Standard being used for checks and balances around monetary supply. At that time, if a country wanted to increase its money supply, it would need sufficient gold reserves to back the supply or risk its fiat currency being devalued as compared to gold. When we shifted away from the Gold Standard in the 1970s, we shifted the backing of the USD from gold to “trusting” the central bank and the United States itself to preserve the value of the USD over time. This trust has been violated at an unprecedented scale and this is what Bitcoin the asset potentially solves.

To summarize: Bitcoin as an asset solves the problem of value transfer over time, and Bitcoin as a network solves the problem of value transfer over space. While we are excited about Bitcoin as an asset, we think there could be an incredible opportunity to pursue investments in projects that enable and build around Bitcoin the network.

Bitcoin recently had its most significant upgrade since 2017 called Taproot. While there are several incremental improvements to the protocol, the most exciting update is the improvements around the programmability of Bitcoin (aka “smart contracts”). Typically, Ethereum is associated with smart contracts (and Solana more recently); the core reason behind this is that over the last decade, while Bitcoin was focused on proving stability and decentralization, many other projects leapfrogged into making it easy to program smart contracts and build “dApps” on forked versions of Bitcoin. In essence, these projects have attempted to trade-off decentralization to enable faster throughput and complex programming. This has resulted in the large swath of “cryptocurrencies” we see today, many of which are much more hype than substance once you dig into the actual projects.

While the Bitcoin smart contract ecosystem is still early, we believe the team at Sovryn has the technical ability and community to enable many interesting products that could actually fulfill the promise of DeFi. [As the infrastructure improves further, scale into proper DeFi applications which non-Bitcoin networks have promised, but are yet to achieve]. We believe it was necessary for Bitcoin to become the unanimous settlement layer over the past decade for higher-layer protocols to flourish.

Why now?

As we have learned from most technological shifts, the path and the sequence matter. For example: it was very hard to build a big SaaS company without AWS or to build a mobile app without an App Store. Similarly, it is very hard to make Bitcoin the network successful, without Bitcoin the asset succeeding first. Bitcoin is the ultimate savings asset, and while we believe it still has significant room to grow as an asset, we are finally at the watershed moment where Bitcoin the network can flourish.

Investment Structure

  • Participants in the round will purchase SOV at a 30% discount to the 30-day TWAP of SOV/XUSD on the Sovryn protocol, prior to posting the SIP. The SOV purchased in the round will be subject to a four year vesting schedule, with a one year cliff and then three years of linear vesting on a monthly basis. The SOV/XUSD 30-day TWAP on the Sovryn protocol, as of May 10, 2022 is $3.05. With the 30% discount applied, the purchase price of SOV will be set at $2.14.
  • Investors in the round will have full “Bitocracy” voting rights while they vest but will not be eligible for staking rewards (in line with SIP-0024) until the one year cliff has passed, at which point investors will be able to receive vesting rewards on unvested SOV that has been restaked.
  • A maximum of up to 6,250,000 SOV will be approved to be sold in this round, with the final amount sold to be determined by the Exchequer Committee.
  • The SOV will be sold to GC and other investors by a company incorporated under the laws of the British Virgin Islands, acting as a facilitator of the transaction on behalf of the Sovryn community.

Strategic Benefit to Sovryn

The Sovryn project is working to develop the operating system for individual sovereignty and a world built on Bitcoin. This is an ambitious goal. To achieve it, Sovryn will need patient capital and long term-focused partners with significant weight.

GC is one of the world’s leading venture capital firms. We have helped many ambitious companies build businesses that have significant financial and societal value. This means more than just providing capital. It also means helping founders benefit from our experience, network, and resources.

We have been following Sovryn since early last year and were excited when the opportunity to participate came up. At GC we believe that the Bitcoin ecosystem is one of the most significant untapped opportunities in crypto. Bitcoin has the largest network, is the most liquid, reliable asset, enjoys leading mind share, and offers unmatched security. Bitcoin is also a unique and differentiated system, with no real competitors for the title of neutral reserve asset. Yet despite this, the vast majority of funding has focused elsewhere.

We at GC are philosophically aligned with the goals of the Bitcoin and Sovryn networks to empower people, promote individual freedom, and achieve broader financial inclusion. As a fund manager, we are in the business of making investments we believe have the potential for outsized returns. But we also believe we have the opportunity to make investments that are in the long-term interests of society. We believe investing in the Bitcoin ecosystem is such an opportunity. We intend to make significant investments across the Bitcoin space, and can envision opportunities to help develop mutually beneficial partnerships between our portfolio projects. We believe that the Sovryn protocol could be a cornerstone of this strategy. As an open source protocol enabling Bitcoin-native financial products and tools for individual sovereignty, we believe that future investments in the Bitcoin space could benefit from integrating and leveraging the Sovryn platform.

Additionally, we believe that during the coming years the broader world, possibly including some of our partners and portfolio companies, could seek to integrate with the Bitcoin ecosystem. We believe that Sovryn is building the tools to make this possible.

Our intention is to help grow the Sovryn ecosystem, actively participate in Bitocracy, and become useful members of the Sovryn community. We think we have much to offer and are excited to get started.

Expected Outcomes

  • The Sovryn protocol Treasury will secure sufficient capital to fund operations of the protocol for a minimum of 24 months.
  • Sovryn will be the first Bitcoin-focused portfolio investment for GC. As the Bitcoin ecosystem grows, the potential for partnerships with various innovators grows with it.
  • GC has worked with the Sovryn Exchequer Committee to include additional investors in the round that can provide significant strategic support for the protocol in terms of adoption, liquidity, and partnerships.
  • The closing date for the round will be on or around the 25th of May, 2022.

About the Lead Investors

Kyle Doherty, managing director at venture capital firm General Catalyst, focuses on investing in large, greenfield opportunities in consumer internet, software, and crypto/Web3 companies. Prior to GC, Kyle worked with Coatue Management where he helped conceive and launch the firm’s private investment practice and grew it into a leading private technology investment platform. Before Coatue, Kyle spent time as an investor at Morgenthaler and as an equity analyst. Kyle earned an MBA from Harvard Business School and studied economics and finance at MIT.

Nick van Eck, helps lead General Catalyst’s efforts in hatch, early-stage, and late-stage investments across the Crypto/Web3 ecosystem. Nick primarily focuses on DeFi and Infrastructure opportunities. Prior to GC, Nick worked at JMI Equity as an analyst focused on enterprise software. Nick earned a BA from the University of Virginia where he studied history and economics.


  • To approve the sale of up to 6,250,000 SOV under the terms specified herein.
  • To authorise the Exchequer Committee to determine the total size of the investment (up to the limits set in this SIP) and to take any necessary steps to ensure that the resolutions approved by this SIP are executed.
  • To authorise , the incorporation of a company under the laws of the British Virgin Islands, to negotiate and sell the SOV tokens to investors on behalf of the community in accordance with the resolutions approved by this SIP and to take any necessary steps to ensure that the resolutions are executed.
  • The SOV acquired in this investment round will be deposited into an irrevocable vesting smart contract designating the syndicate’s RSK address as the recipient. The SOV will vest over four years with a one year cliff.

This SIP will be subject to the Admin Governor voting settings as described here.


I support this SIP. I think it’s very exciting and will go a long way in buying us enough run-way to hopefully get on a roll-up and build through any sustained bear market. We need the ability to comfortably launch re-brand, Perps, Zero, etc through any potential sustained bear market. GC is also very well respected in traditional VC.

It’s also important to point out the tokens used in this round will come from already unlocked tokens in the Adoption (or development fund I cannot recall). This will help alleviate a major point of contention on the tokenomics which was emission schedule and lock-up. We’re taking a major portion of circulating supply and re-locking them for four (4) years.


Interesting read about you General Catalyst. Would it be possible to provide some more information on the quotations below:

From my side some of the questions I have for you are the following:

-What areas of Sovryn you believe need support right now and how you intend to contribute towards those areas?
-What kind of partnerships you can bring to Sovryn?
-Can you give us examples of your short term/medium/long term plans you have in mind on how to bring value to Sovryn?


I like the SIP… I do however wish the vesting and cliff was a bit longer just in case price increases too much. If SOV price goes to $25 and Investor dumps entire vest every month that would be like $3mil the market would have to eat.

Also, how does the voting power work on The SOV? Is it just 6 mil voting power? Or is it extrapolated due to vesting? How much voting power will you get exactly?



dear GC,

what is your take on the ponzinomics of sovryn? the emission are to much and there is no buying pressure. The community sees a not ending death spiral of the sovryn price. there are other sips discussing this topic. whats your take to fix this? the sovryn team is burning funds without results, whats going to change when you can buy these Sov tokens?

This is very exciting news! I really appreciate your confidence in this project and would look forward to having you on board.


I support this sip
Looking forward going to a vote


To clarify this company is being set up by GC or by Sovryn? What are the reasons for setting up a company and asking us to approve it? Im not sure this is the way things worked with previous investors eg Pomps syndicate.


I support this SIP, I’m excited for the next phase of growth. I look forward to the final version with input from the community. Great times are ahead


In general I would be happy to see Sovryn secure funding for the next 24 months and have partners that can actually help it grow however I have a few questions (as a non-sophisticated investor)

1- Its great that GC is “philosophically aligned” with Sovryn but since it is based in the US so when the regulators come knocking and ask for KYC/AML implementation, may I ask how would GC vote in the Bitocracy with their 6 million or so $SOV?

Not saying that GC has any ill will but is Sovryn opening itself up to some risk here with American investors? (I know anyone can buy $SOV and become a stake holder and the previous “Strategic Investment” round was also by US nationals but I would like this questions to be addressed)

2- Some people take the view that some crypto tokens are unregulated securities, what is GC stance on this subject especially if the SEC decides to “protect investors”?

3- As someone previously asked, would be great to have some details as to how GC plans on helping Sovryn’s growth, if the vote goes through.

I would like to change “could be” to “will be” so the community can hold you accountable :wink:

4- After or during these coming four years, will GC view Sovryn as a source for “stacking sats” or just exit at some point? Would just like to hear what happens in the long term.

5- The other investors in this round, were they recommended by the Exchequer or GC, are they private entities/individuals or other VC’s, what does the $SOV distribution among the Syndicate look like? Since only 1 RSK address is mentioned so only a single entity (i.e GC) vote in the Bitocracy for the whole Syndicate? Some details would be helpful here.

6- Yago in his tweet mentioned,“GC and the other investors will also split a small minority share of the tokens between them, maintaining Sovryns decentralized Bitocracy”, this should be part of the SIP if GC already agreed to it with the details asked in the previous question.




Interesting proposal - I am waiting for some answers to the questions asked by @Bon, @Walker377, @Phrygian12 and @SOV_HOOLIGAN.


Dear @General_Catalyst thanks for proposing this SIP and for investing in Sovryn at this specific time! Building on @SOV_HOOLIGAN question re partnerships - do you envision (perhaps even already advocate?) for your portfolio companies to use upcoming Sovryn products like Zero, Perps and Droppr NFTs? Have you solicited any intent from some CEOs? The reason for asking is that being a non-crypto-specific VC, what is the ‘smart’ in smart money you can bring to the table?

While it is great to have VCs investing in the project I can see we are doing the same mistake with the vesting schedule. I think if vesting schedule is 5 years with 2 years cliff it would be better for the project. As a retail investor I have my SOV staked for 3 years (SOV that I bought at $18). VCs have long term view and it should not be difficult for them to have longer vesting schedule if they believe in the project. Overall I support the SIP except for the vesting schedule. Stay Sovryn!


They are buying bucketloads of Sovryn and providing funding for the next year.

I support the SIP

The tokens will eventually get into circulation, whether it is a 9-month lock up or 5 years.

Give them the tokens with the 9 month vesting.
They are less likely to dump. If they do, it won’t be at a loss from their buy-in price, which is already multiple times higher than current market rate.


This is an Interesting proposal. Great to see a reputable investor like GC is willing to support Sovryn protocol.

However, I’m concerned with the proposed 4-year vesting and 12-month cliff period.

We all know that Sovryn to be fully developed and reach to adoption by wide range of communities and nations, if not mass-adoption, will take long time. Personally, I’m not expecting this would happen within next 5 years. I believe that Sovryn is 10 years, 20 years project to fully developed.

If GC is here to support Sovryn for long term, I want them to commit at least double the length of vesting and cliff. 12 month will come very quick. I don’t want to see another whale has their huge amount of liquid SOV in hand so soon.


I don’t know necessarily that we need 10-20 years to fully develop. And I think we’ll be evolving even then too. We can certainly get to a point where we have a seamless suite of financial products with easy onboarding in the next 4 years that earn considerable revenue. It’s a great opportunity for us to have the runway necessary via this round for this crucial development period.


Finally read through the SIP. I support this SIP.


I agree with comments about the duration of vesting. This must not intervene with current staking contracts, so I’d like to see this (or a part) with longer vesting.

Then a one year cliff is really short. I think it would bring pressure to early investors who currently hold or stake their SOV. Especially if there are no significant changes in tokenomics made in the near future. Main concern is the amount of monthly SOV that gets liquid after that cliff. It’ll just be more SOV circulating, making early investors nervous. I’d like to see a major part of the investment have a significant higher cliff.

Therefore I’d like to suggest and invite the new investors to do a partial market buy if they seek to invest in Sovryn. Invest in Sovryn, invest in the community. Like discussed before, price is very important for new investors (not GC) to join or not join a project. That’s why I would see it beneficial for all parties if GC made some investment buying SOV from current supply.

I also have one question for GC, I’d like to hear how the new investors feel towards The Gimp Package SIP proposal, to fix the current situation with inflating tokenomics. Could you please respond to this?

Furthermore, I’d like to thank my fellow Sovryns for all the good questions raised. Looking forward to see a reply on all of them :slight_smile:


Another great question.

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I definitely support this SIP !
Clever move considering the context.
Will vote for it.