SOV Rewards and BitcoinOS as the Canonical Ledger

Sovryn is working towards the introduction of an ecosystem of rollups built on bitcoin, called Sovryn Layer. With the launch of Sovryn Layer, the SOV token will take on new roles and will need to be reconstituted on BitcoinOS. In other words, for SOV to become a native token in BitcoinOS (alongside BTC), the canonical registry of SOV will need to be a ledger secured directly by Bitcoin. Currently, of course, SOV’s native ledger is the Rootstock chain.

The Importance of a Canonical Ledger
Why does it matter where the token’s canonical registry is? Simply put, the main function of a blockchain is to act as a public source of truth for asset ownership - a ledger that can secure ownership and avoid double spending. An obvious example of this is that if you hold a BTC balance on centralized exchange, you don’t actually own the BTC, they do. An even more relevant example are cross-chain bridges. When you bridge an asset to a different bridge you create all sorts of risks - frequently exploited - because there is no single source of truth to prevent double spends (thefts, hacks, rugs).

Coming back to SOV, if it is to be a native, trustless governance token in the BitcoinOS ecosystem, it can’t be bridged from Rootstock and can’t be registered in two places at once.

Transitioning a Canonical Registry
Bitcoin is going through a metamorphosis right now. Unlike sidechains, the systems that are being rolled out - native token protocols and rollups - are not separate chains but part of a new, interoperable, and backwards compatible ecosystem. This is a one-off process. Once we transition SOV’s canonical registry to this system, we will never need to have a forking change again. However, because SOV is currently on Rootstock, transitioning it to BitcoinOS is a forking change.

The question becomes, how can we make this forking change with as little disruption as possible?

First some terminology: For the purposes of clarity, I will refer to BitcoinOS SOV simply as SOV. Rootstock SOV, which is the alpha iteration of SOV and is currently referred to as SOV, I will refer to as rSOV.

We need a plan that accomplishes several things:
When Sovryn Layer launches, SOV will be immediately available to be used for staking and any other purposes required by the new chain.
The value generated by Sovryn Layer accrues to SOV stakers.
We do not create a perverse set of incentives that discourage Bitocracy staking on Rootstock, during this process.

I can envision several ways in which the transition could happen. Just a few examples: We could fork Rootstock to become a BitcoinOS chain (this currently seems unlikely). We could make use of one of the emerging bitcoin-native token protocols, and allow a gradual burn (rSOV) and mint (SOV). We could issue SOV on a Sovryn rollup and allow for it to be bridged back to Rootstock. I’m sure you can imagine other scenarios.

Until Bitocracy decides what the transition process will be, we should proceed such that we keep our options open. That said, we should begin preparing for the transition process now.

To achieve the above requirements, I propose that we institute SOV staking rewards similar to those that were introduced by SIP-24. rSOV stakers will begin to earn SOV. This SOV will be provided in the form of non-transferable placeholder tokens. The advantage of these tokens being non-transferable is that it will provide maximal flexibility going forward. With the launch of Sovryn Layer these tokens will become available, the first canonical SOV tokens to be issued and/or liquid.

I expect to publish a SIP in line with this proposal soon. I look forward to your comments, thoughts and contributions, so I may incorporate them.

8 Likes

why not kill rsov and airdrop sov to all holders/stakers?

3 Likes

I’m not really following this logic. I don’t see why we need to dole out staking rewards again and why that’s related at all to Sovryn Layer?

2 Likes

Which other projects have taken this step and moved from one network to another, whilst maintaining value across chains for token holders?

what repercussions does this have in the sov/rbtc amm pool?

What about staking durations? rSOV staked is locked how can this be transferred? Will we be able to unlock without penalty to transfer/burn whatever to Sovryn Layer?

As for the suggestion of having SOV distributed early to stakers so they have a first mover advantage the staked me would say “bring it on”. As long as it doesn’t dilute rSOV value.

What would happen if SOV rises in value as it has no “hard” lock with rSOV Could there be some kind of relationship as there is with eSOV/rSOV bridge? So we lock an rSOV for every SOV issued then when all are transferred over we just burn the rSOVlock wallet: Thats how I would imagine the transition somehow.

3 Likes

A recent example is Swissborg App Token. The migrated the $CHSB to $BORG (OpenZeppelin ERC-20), maintaining 1:1 ratio, including locked/staked tokens. Automatic conversion took about a week, manual was available via a Web3 Dapp. The purpose was to be more compatible with multi-chain and DeFi applications such as On-Chain staking, to be more decentralized in other words.

The Migration was announced months in advance, with lot’s of communication on social media, blog posts explaining the mechanics and email newsletters.

For Sovryn a lot of communication will be key because of the decentralized nature, some holders believe it or not do not check on it daily or even monthly.

I believe the migration itself should be as fast and coordinated as possible, favoring a 1:1 complete burn&mint, not gradual if possible. Perhaps some devs could weigh in on the pro’s and con’s?

6 Likes

how is Rootstock itself preparing for Bitcoin mutation?

One way to handle this is simply to let rSOV, Sovryn governance, and the various pools and contracts live on on Rootstock. Once SOV is issued on Sovryn Layer, we would have two governance systems, one in each place. Over time, the ownership/staking record of the two systems would diverge. The advantage of this is that everything would continue on Rootstock without disruption for anyone who wanted to continue using the contracts and profiting from the use of the protocol.

1 Like

OIP
:grin:

3 Likes

is the SOV token transferred or duplicated? the 100M cap has to maintain.
stakers will become the bagholders of the weakest fork.
we better get compensated for that.

There really is no such thing as transferring without duplicating. The straightforward approach is simply to map the holding and the staking 1:1 onto the new layer. That way you have the full value of both the old rSOV and the new SOV, however that shakes out.

But Bitocracy will decide how it’s ultimately handled.

1 Like

I’m very interested in seeing the plans for BitcoinOS develop.

About token migration, I have stated my preferences earlier, and they have not changed. Let SovrynLayer/BitcoinOS be without its own token. Let SOV =rSOV and let it remain on Rootstock. Define a set of roles and privileges on BitcoinOS (such as the role of securing the layer, governing the layer, being a market maker, and so on) some or all of which are accessible by burning rSOV on Rootstock. rSOV can continue to accrue value on Rootstock as more roles get defined or the roles come to be in increasing demand; making rSOV scarcer and vehicle for fresh demand.

Having two tokens, migrating, it’s liable to create confusion and its unnecessary. There will be zillions of rollups that need to have a token to fund their development; Sovryn has an advantage by being a first mover but the advantage is precisely that it doesn’t need to have a token on the new layer; let’s make use of that advantage or risk becoming just one of many.

  1. For me, it would be particularly important that the max supply of 100 million continues to be adhered to. Regardless of whether it is rSOV, eSOV or SOV. This has always worked in the past and must remain a fundamental rule in the future.

  2. Sovryn generates revenue on rootstock. Even if it is not much, it is still noticeable for stakers and gives the rSOV token a fundamental value. We shouldn’t abandon it anytime soon. at least not until the staked SOV revenue from the Sovryn layer is greater than the staked rSOV revenue on rsk.

  3. The transition from rSOV to SOV should also be possible for staked rSOV. Each rSOV/eSOV holder should be free to decide when to transfer their rSOV/eSOV into SOV on the new system. The duration of the stake in the new system should correspond to the duration of the rSOV in the old system.

3 Likes

This should be a value creation event for token holders. Insofar as rollups are in the works and being built for sovryn there are two value propositions here, the rollups and whatever system is built for bitcoinOS and served to the market - and all of our existing work on Rootstock which continues to grow in momentum even as we make plans to move off it. No transfer event should be necessary here, a new token should issued 1:1 and a whole new ecosystem with new rules and incentives and value drivers etc around it will grow, meanwhile i dont think rSOV should go away. Offer a dapp option on RSK and dev resource to maintaining it and keep the option of value creation for stakers even after the rollups launch - arent serious challenges and no doubt some limitations expected in our initial bitcoinOS offering? Isnt there going to be a wait then for other projects to build enough on bitcoinOS for a stack to form? Keep RSK going in the background if possible would be my proposal

Experimenting with our tokens while we explore how to navigate the transition is pretty obviously not going to be without serious compromises, but surely if rSOV continues to accrue and distribute value to token holders it can stay stable while bitcoinOS launches

2 Likes

Once we have the rollup working, the liquidity pools can’t be copied (unlike rSOV), all pools/Zero/Dllr will be moved to the rollup, yes people can still provide liquidity on rsk but it will be residual. the massive spread will discourage people to keep on trading on rsk. With no significant fees, rSOV becomes valueless, the only usecase will be the only thing that doesn’t use liquidity to work ie bitocracy.
Stakers will be the last ones on rsk since the liquid rSOV holders have sold long before the pools have moved.

Fully with you here especially point 3!

I’ll try to address three themes from the thread:

  1. What examples of something similar can we point to?
  2. Should we just split the tokens? Or have no token?
  3. What is the purpose of Staking rewards?

1. Other Projects that have Introduced New Tokens or New Chains.

  • Probably the most significant example is Ethereum, which switched both chains (forking to PoS) and as a result the token (still called ETH). Prior to the ‘Merge’, staking ETH with non-transferable rewards was introduced.
  • Another example, currently in the works, is MakerDAO. They plan to launch a new chai and token and are taking a different approch. You can read about it here: Overview - Maker Endgame Documentation
    See the sections on tokenomiks.
  • A third example, which saw a new token but not a new chain was Aave, originally $LEND. The original platform was called ETHlend but, for various reasons, was not successful. To address issues, the founders completely revamped the platform and relaunched it as Aave. The migration ratio was set at 100 LEND tokens for 1 AAVE token. For instance, if you had 100 LEND tokens, they would be converted into 1 AAVE token. The total supply of AAVE tokens after the migration was capped at 16 million. Out of these, 13 million AAVE tokens were allocated for redemption by LEND token holders, and the remaining 3 million AAVE tokens were directed into the Aave Ecosystem Reserve.

2. Should we just Split the Token? Have no Token?
@one_digit suggests that perhaps the Rootstock dApp suite should, over time become a separate project, with a separate token. @Martin_Adriaan suggests that BitcoinOS does not need a token.
Martin is correct, BitcoinOS is a framework, and will not need a token per se. However, Sovryn will have BitcoinOS rollups and a role to play in the BitcoinOS ecosystem. There are likely several important functions that must be decentralized and hence will require a token. One Digit makes a good point that there will be a split between infra and apps, and the best thing - to avoid conflict of interest - is to have a token split along those lines.
Right now, I think it is too soon to say exactly how the transition should occur and what it should look like. I think we benefit from maintaining a level of flexibility. However, I want to make sure that the value, however it is ultimately represented, accrues to SOV stakers. We need to maintain the value of SOV staking as we make this transition. Therefore, I think we should operate in a way that concentrates attention and value of SOV staking.

3. Reasons to Provide SOV Staking Rewards
Over the coming months the path towards Bitcoin OS takes shape. I expect that we will see moments of uncertainty, even rancor. There will, at once, be some added uncertainty and a need to make decisions. The uncertainty could lead people who otherwise would be staking, to stay on the sidelines - the exact opposite of what we want. At the same time, the price of SOV is very likely to begin to rise, perhaps sharply. This will reduce the relative value of staking rewards and without a counter-weight reduce staking. The current community has kept the project alive and stuck through the ups and downs. We, who are here now, are the true believers. It is exactly this group that I would think we should reward and empower.

At the same time, this is an important marketing opportunity - if we play our cards right there will be strong and growing interest in Sovryn because of BitcoinOS and Sovryn Layer. We should leverage this interest to drive more users to Sovryn, SOV and the upcoming launch. We can play an incredibly important role in bringing people from the altcoin universe back into Bitcoin. One way to do this is to allow them to buy and stake SOV on the chains they are currently on. This kind of staking, while it would not earn protocol revenues, could earn SOV (non-transferable) SOV and can play a strategic role in growing the Sovryn community.

With all this, we need to make sure that we are incentivized to continue staking on Rootstock, so that decision are made in the lead up to Sovryn Layer launching and the dapp remains secure afterwards as well. The value created by Sovryn Layer should accrue to SOV stakers and we should make sure that staking SOV has visible and consistent upside. For all these reasons, I think we should provide SOV rewards.

3 Likes

I agree with the SOV staking rewards, maybe before we go this way, now would be a good time to run - A TRADING COMPETITION - only to stakers, we would incentive the increase # of stakers and then increase everyone’s holdings.

1 Like

What are your primary goals in encouraging staking – particularly by offering SOV rewards – in light of the shift to BitcoinOS?

  1. to soak up rSOV supply and drive price up
  2. to make sure that stakers profit most from having the highest SOV holdings on the new chain
  3. to make sure that current stakers have the most governance influence on the new chain
  4. to accomplish other goals I haven’t listed
1 Like