The Coming Year for Sovryn

Over the course of the last year Sovryn released Zero, a product with killer app potential. This coming year we should focus on nurturing this potential, and introducing the Sovryn Dollar.

We can expect the coming year to be a year of consolidation. Bitcoin price is likely to move sideways and overall new entrants and market adoption will be modest. Our goal this year should not be rip-roaring growth - rather steady improvements and consistent growth, to set us up for, what may be, a very wild 2024.

Until now, we have focused on the web dapp as the primary user interface for interacting with Sovryn. However, fully decentralised power-user interfaces (that need to cater to all sorts of wallets and user configurations) are too clunky, and appeal only to a very limited set of power users.

The simplicity of centralised services allows them to be far more user-friendly and attract user numbers orders of magnitude greater than what dapps attract. This is true even for very simple dapps such as Uniswap, and is even more significant for relatively complex dapps like Sovryn. It is time for us to shift our focus from building an interface - to building an ecosystem of 3rd party apps and products that can integrate Sovryn.

Primary Focus: Sovryn Dollar

Zero and the Sovryn Dollar are two sides of the same coin. As we grow demand for Zero, so we must also grow demand for the Sovryn Dollar. Of all the things we must focus on this coming year, this should be our highest priority and north star.

While Zero is the relatively easier sell, the Sovryn Dollar is in many ways the more important product. Sovryn Dollar represents a reliable, decentralised, uncensorable and counterparty-free form of Bitcoin that can be used as a currency (MoE, UoA) - going beyond Bitcoin’s current use as asymmetric SoV. Digital dollar demands digital-gold-backed dollars.

That said, the Sovryn Dollar, as a stable asset, does not have in-built fomonomics. Adoption of the Sovryn dollar, therefore, depends on the quality of services and products built around it. Even before a full economy is built, Sovryn Dollar demand and adoption can be kick-started by demand for a truly counterparty-free currency. That must start with us Sovryns. All Sovryns should hold at least part of their short/medium term savings in Sovryn dollar, once it launches - to protect our wealth, to vote with our wallets and to stay sovryn.

In the first half of 2023, we should look to switch to Sovryn Dollar as the canonical stablecoin in the Sovryn ecosystem. This will help protect the Sovryn ecosystem from the risks of these assets and also provide an early demand driver for Sovryn Dollars.

Currently, about 40% of dollars borrowed from Zero are bridged out via Babelfish. We have observed a constant pressure to maintain sufficient reserves of USDT/USDC/BUSD as a result. We have worked with Babelfish to help them to build self-balancing curves that should help alleviate this problem.

We can and should look to reduce this issue further, by encouraging people to bridge out via BTC instead. This will help drive more activity in the AMM and keep the dollars in the Sovryn ecosystem. We can encourage this by making the option obvious in the UI as well as by making it the default way to bridge out directly to fiat via the fiat bridges. Overall, having improved integration with the fiat system will make Sovryn Dollar and Zero more attractive. Even deeper and smoother integration with the fiat world can be achieved by allowing Sovryn Dollars to be spent via the legacy card rails.

Exporting Sovryn Dollar
As the amount of DLLR in circulation grows, it will become more attractive to external protocols to seek to draw some of that liquidity by listing DLLR. That means that Sovryn can look to begin exporting DLLR or XUSD to Ethereum, BSC, Polygon and other chains later next year. At some point, it will also become more attractive for CEXs to list either XUSD or DLLR as well.


We have an extremely important window of opportunity over the course of the coming year. Bitcoin lending and borrowing services managing billions of dollars demonstrated a clearly massive market, and then, suddenly disappeared. Celsius, Genesis, Blokfi, Voyager. These giants were hit by an asteroid level extinction event. The path has been cleared for Zero to fill this ecological niche.

Zero protocol can be expected to generate roughly $6m in revenue for each $1B borrowed. With many billions of borrow demand, so Zero alone can be a significant revenue driver. Currently, very significant scale is required given the thin margins Zero provides - I believe that scale is achievable. However, we not think of Zero origination fees as the primary revenue driver - rather it can be thought of as a revenue leader that builds the userbase and ecosystem. I believe Sovryn has a path to unlocking far greater protocol revenue.

Over the coming year, there are two revenue opportunities that we should look to drive off the back of Zero.

First, Trading - BTC/DLLR volumes, in particular, can grow significantly with more people on/off-ramping, trading and using Sovryn Dollar. The challenge of providing significant liquidity will remain, but Zero offers an avenue for organic growth.

Second, Stability Pool - stability pool liquidations offer a potentially huge revenue opportunity in volatile markets. Based on Liquity’s history, this can generate as much as 6% of the total loan value annually in recurring revenue. This would amount to $60m per billion in ZUSD outstanding.

It is estimated that to provide for smooth liquidation, 15% or more of the entire ZUSD float needs to be available for the stability pool. It makes no sense for 15% of a currency to be held in a stability pool. However, the Sovryn Mynt will own close to 100% of the ZUSD. I would be in favour of transitioning to the Mynt being the main or exclusive provider of ZUSD to the stability pool and reaping the liquidation yield - provided this can be done without introducing significant risk to the Sovryn Dollar peg.

Dogfood, Brand and Ecosystem

We are also seeing growing interest from established projects, wallets and services. We can accelerate this adoption by demonstrating development and usage from within the Sovryn community.

Sovryns must lead from the front. We must eat our own dogfood. We must be the first to hold our savings in Sovryn Dollar and the first to build 3’rd party products on Sovryn. We are seeing very encouraging signs of projects, emerging from the community, that are looking to build on Sovryn Zero and the Dollar.

Early next year, with the launch of the Sovryn Dollar, here are several things we can do to eat our own dogfood.

  1. Sovryn core will look to transition to making all payments in Sovryn Dollar
  2. Svryns can begin to hold short and medium-term dollar-denominated savings in Sovryn Dollar
  3. Entrepreneurial Sovryns can work with the core team to launch independent services that leverage Zero and Sovryn. Several such projects seem to be underway. Reach out to me if joining them, or considering starting one. There is a huge market opportunity that has opened up to us.
  4. Switch to Sovryn Dollar as the primary stablecoin in the Sovryn ecosystem.

Sovryn as a project, a community and a mission has taken a long term view. Our view has been that a Bitcoin world will be built on self-sovryn, decentralized protocols and services. Central to these are basic financial tools like stable currency, lending & borrowing and free market trade. The events of the last year have been painful in the short term. In the long term, they are proving our thesis and have opened up a massive opportunity. We have positioned ourselves to capitalize on this opportunity. With Zero and the Sovryn Dollar, Sovryn is at the right place and the right time - on this we must execute together in 2023.

Stay Sovryn. Grown Sovryn.


I think overall this is a very good strategy and i like this roadmap.

But I have a question related to the Sovryn Mynt that i got when reading your thoughts about revenue generation via stability pool.

My knowledge about the system is this: Let’s say a user borrows against their btc with Zero and creates 1 ZUSD. This 1 ZUSD goes to the Sovryn Mynt and the Sovryn Mynt gives the user 1 DLLR. That’s fine. There’s 1 USD circulating in the system against 1 USD of debt. But if the Mynt now also puts that 1 ZUSD into the stability pool, there are 2 USD in circulation against 1 USD of bitcoin denominated debt. It’s no longer over-collaterized.
There may be significant risk if Mynt gives DLLR to Zero users while also using the ZUSD to generate yield. Any thoughts on that?

The ZUSD collateral in the stability pool does not disappear. If users ever seek to redeem, it can simply be withdrawn from the stability pool. To the extent that I see risk, it is only that the Mynt might find itself liquidating positions at a loss.

I don’t quite follow here, but i certainly don’t have as deep an understanding as you do. I would like to formulate my concern more provocatively for once. I don’t mean that in a negative way, it’s much more about “battle-testing” the idea.

Users give Sovryn Mynt their btc-backed ZUSD. Sovryn Mynt creates a token for users and says it is backed 1:1. Then Mynt puts the users btc-backed ZUSD into a smart-contract to get yield from it. Greetings from the bahamas.

You say the ZUSD collateral in the stability pool doesn’t disappear. The point is that there are 2 USD in circulation (1 USD at the user and 1 USD in the stability pool) for 1 USD worth of bitcoin collateral.

How can you guarantee overcollateralization? To me, this looks like leveraged yield farming.


I follow your logic, and have the same question. The one ‘dollar’ worth of BTC collateral is locked in Zero, while two ‘dollars’ are being ‘spent’, one by the Mynt and one by the owner of the collateral. What am I missing (a serious question, i’m no expert in these matters)?

So, we’d basically be fractional reserving DLLR. Questions regarding that:

  • Why would I (or anyone) hold savings in a dollar that is fractionally reserved? No upside, only risk. Hard to eat that dogfood, tbh.
  • What happens to SP during BTC price crash? Specifically, there will be a run on ZUSD from both sides. ZUSD will burnt from the SP during liquidations, plus people will rush to redeem DLLR for ZUSD to pay down debt positions. Wouldn’t this cause a magnified run on Mynt?

It truly does taste like actual dogfood.

I have doubts, too, that I wish my salad of words may somehow reflect. Reading the Mynt project, I find it more similar to Luna-Terra than to more recent events. It’s interesting because Sovryn and RSK have the capability of bridging the uncertainties within directly to Btc. This is the opposite path taken by $luna/$ust, which only in the end tried - with bad execution - to “arb” back to Bitcoin.
Now, with Zusd you’re borrowing against your rBtc so you’re putting your bitcoin bag at risk. Ideally, you want a protocol that does not risk any Bitcoin, something that in the end makes you own more Btc once paid back the loan.

  • At the moment the protocols (Zero and Babelfish) seem capable of mitigating risks behind centralized stablecoin. This is one huge step by itself.

But Mynt should make all the steps to not yield anything else than Bitcoin.
With Zero you’re yielding the conversion-redemption. You are right that this just sound looped with Dllr on Mynt. And this really makes me think of $ust.
There you would have used a virtual token ($luna) and the series of incentives behind its platform (very high yield on Anchor for locking their tokens, fees on the blockchain) to mint something pegged to the dollar.
But with Mynt it seems that you have a shadow of all of that. You don’t burn any token. The yield is in a pool with liquidity just from the looped stables: from DoC (btc) to Xusd(tether, circle, paxos), to Zusd(btc). This sounds very complicated given the ingredients.

I believe there are ways to strengthen this if the pieces of the puzzle rebalance the incentives, away from prospected trading/lending fees (that should be left to long term) and more prone to the nature of the collateral.

  • The first part, from (DoC to) Xusd up to Zusd, shall be totally within satisfying its purpose: safe loans against Bitcoin. Something like over-collateralization should not be forgotten, and most of the eventual yield should just be invested in improving the efficacy. I never studied Curve on Ethereum, but that is the kind of potential I’m thinking of.
    What I mean with overcollateralization is that a proportional increase of the needed backing relative to the use is something worth thinking if we want to absorb all the risks of looping centralized stables (Xusd) and inviting holders to borrow against their Bitcoins (Zero). Maybe I’m over-prudent, or maybe the biggest incentive for everybody is protecting defi holders.
    Yes a progressive increase in collateral rate sounds like a Ponzi, but you’re just lending dollars here, no expected gain for any user.

Coming to $Dllr, that would be the other half of the equation. I can only remind there’s talking of yield, looped and miscellaneous collateral and zero organic fees. Trading/conversion fees aren’t organic because they simply stop within the smart contract itself.
Where in the case of Luna, the whole blockchain had that specific use case (I’m pretty bullish on this aspect, but that’s for another talk*) and you were burning the other relevant token on the chain (burn luna to mint ust, burn ust to mint luna).

I don’t know how far I have come with this, and I hope to be not bllshtting anyone, but it looks to me that the elements exist but in a constrictive order: we don’t control RSK fees, but they’re part of Bitcoin miners revenues; we’re just thinking of pegging $Dllr to “gold” (that’s the phrasing by OP Yago :slight_smile: ) or anything but the world does not really have a clear SoV after all, so we could just burn anything to suppose an increase value and wait; and we only have an estimate for the organic “yield” based on all the interest any kind of stable is attracting the crypto industry to.

  1. RSK fees are eco fees, not Sovryn/any other UI volume, and thus empower the peg by making the eco successful.
  2. The peg to the dollar might be conceptually limiting. One of the short coming of Luna was that it didn’t enable forex trading or hard collateral (like tethergold or Mattereum). They just reached the point of trying to arb, deploying more capital steady lads, never executing their original plan of backing a part of the luna-burn-to ust with a fraction of the Bitcoin they bought. What shall we peg to - I had a small conversation with @one_digit few hours ago, I was thinking about what’s happening with $dusd but this is getting long - even if not capped above the $1.10, shall be not only in talk but in constant development. Yes, tether is earning hugely with US treasuries/holding dollars, but already projecting there sounds like too much of an influence from an established centralized stable that will be soon competing with all sorts of cbdc. We shall differ in “what” we’re creating. We know the why. It’s not necessarily or immediately the revenues. What can we hold now against the volatility of Bitcoin? Just dollars? Anything else than a basket of fiat would be too much prone to manipulation?
  3. We should just burn anything else instead of raising a yield in Mynt. Suppose that nothing needs a token. Even rBtc is but a copy of Bitcoin: we should burn these in a way that infallibly raises the stability of the peg against the volatility of Bitcoin (that in my eyes is a feature, perverted by the lack of transparency derivatives have brought to the table, but that’s too for another talk).

We shall really “exploit” and improve other coins’ decentralization shortcomings and arb by burning their wrapped representation. But I don’t know how you improve on so many general purpose blockchains*.

Thankyou and I hope to have said something meaningful.

I wrote to not mix Zero and further developments. But backing with random tokens does not sound good. You need coins that grow organically with RSK, even if not native to it, because there’s no real diversification anyway. And you need to not lend anything for other than Bitcoin, you don’t want to need to systemically dump shitcoins in case of liquidations.

I’d also add to my previous considerations: there have beens discussions over Luna on CT and beyond. While some users like GRB just giga-shorted it, others like Galois Capital added to the critics the intention to give advice to fix the protocol, quite before the debacle. Dude has 50% of their cap stack on Ftx but seems like a good guess to obtain some insights. If we want to think about that model, we need to reframe it.
There are also research groups, such as on BanklessDAO, dedicated to the new paradigm of fractional stables. Curve is about to launch its stablecoin, with long gamma properties. I’d take in account all of these experiments before anything more.

I will try to write an article so that all that I wrote before makes sense.

Yago I have been analyzing what you wrote, the ZUSD stablecoin is meant to be used within RSK, and I don’t think it is meant to exchange into stablecoins that are centralized and in other networks. I think that Zero Dollar needs an AMM for swapping directly into Bitcoin. That should be the next development within Sovryn to add ZeroDollar/rBitcoin AMMs and offer a higher yield and reduce the yield in the other pools to pump up the LP for Zero.

The Mynt dollar either backed by Bitcoin will need an interest rate and will also need a higher liquidation point.

Same if altcoins backed the loan they need an even higher interest rate and higher liquidation point than the Bitcoin Mynt loan.

Mynt dollar is still possible but that loan won’t work with zero interest, it needs a yield to pay for centralized stablecoins LP providers. It must pay at least 0.5% to sovryn holders, some 0.75 to 1% to Mynt holders, and 1% to 3.5% to stablecoin providers. It could be called Mynt Dollar because you will be able to have liquidity in XUSD, USDC, USDT, BUSD, DoC, and others while ZUSD will only be used within RSK, we will need well-founded liquidity to make the move and avoid interruptions.

It should be called Zero Dollar because it is meant to be used within RSK only, those that want to move to other networks should pay a fee.

The Mynt dollar should also have the option for wrapped altcoins if possible down the line once the Bitcoin one is already on test and giving results.

A Mynt altcoin wrapped-backed loan should have an even higher interest loan and liquidation margin than the Bitcoin Mynt loan.

I don’t think using ZeroDollar to back a Mynt dollar will make sense without an interest rate.

If you want to use ZeroDollar to back the Mynt dollar you will need an interest loan, it can’t be zero. This will also remove the need to add an AMM for Zero and Bitcoin. But zero-interest loans for mynt dollar are out of the question, because of the problem of printing out of thin air, fractional reserve, and the liquidity to move into other altcoins.

Pretty much, Mynt Dollar should be created for those who want other stablecoins that are in other altcoins. To avoid one stable USD taking over too much the yield be adjusted so that if too much USDT is provided they remove it into another that is lacking.

You won’t have liquidity issues with Mynt Dollar because that dollar will have a pool of stablecoins that gets equilibrated by incentivizing LP providers with less and more yield.

I think Zero Dollar still needs XUSD because it is new but once Mynt dollar has been created that conversion into XUSD will be removed and instead add an AMM with Zero/rBTC.

The risk with mynt dollar will be that it needs centralized stablecoins while zero-dollar doesn’t have that risk.

I am pretty sure right now XUSD is having issues bridging to other stablecoins because they don’t have incentives to pay for stablecoin LP providers from the public.

A competitive Mynt loan will provide a liquidity incentive. And that loan could be backed by zerodollar or bitcoin too. But it need an interest rate.

Removing the swap from zusd/xusd and adding a zusd/rbtc AMM pool will incentives LP providers to take zero loans to provide liquidity. And the money will stay with in RSK only.

Adding a Mynt loan with competitive interest rates that print a Mynt Dollar that can be converted into other stable coins could provide LP providers an incentive to add stablecoins to a pool not only from RSK but other networks as well. Those loans will have an interest rate and could be backed by either Bitcoin or even ZeroDollar, the interest rate will justify ZeroDollar usage and compensation for the risks, the interest will also pay for USD stablecoin outside network fees and LP.

With interest rates and liquidations much higher than zero we could fix the FTX issues fractional reserve and printing money out of thin air.

It doesn’t have to be 100% zusd of mynt holdings going to the SP.
around 30% would do the job, no?
As the mynt protocol makes profit from liquidations, an insurance fund should be built in case there is a zusd bank run in order to protect the LoC.
This ~30% (ZUSD to DLLR) would be our dogfood to guarantee DLLR existence.


Does the proposal to have the Mynt perform stability pool liquidations create a fractional reserve, leverage, or the risk of a run on the bank?

Short answer: no.

Longer answer: it depends on implementation.

Part One: The Short Answer

The balance sheet tells the story. This is the Zero balance sheet., if there was $100 of ZUSD lending and 200% collateral ratio. As you can see below, it is over-collateralized by $100.

Assets Liabilities
BTC $200
ZUSD $100
End Balance $100

This is the balance sheet of the Mynt. The end balance of $0, mens that assets perfectly match liabilities. 100% collateralization.

Assets Liabilities
ZUSD $100
DLLR $100
End Balance $0

Ok, so what happens if part of the ZUSD owned by the MYNT is parked in the stability pool?

Assets Liabilities
ZUSD $50
Stability Pool ZUSD $50
DLLR $100
End Balance $0

As can be observed, the collateral ratio of Mynt has not changed. The Stability pool is not a counterparty. It is simply a different pool. ZUSD can be pulled from that pool at will. So, for example, if someone wants to redeem a Sovryn Dollar for ZUSD, they can do so at any time, nothing has changed.

Ok, but what about a scenario where liquidations need to occur. First let’s look at the simple (and somewhat naive implementation). Here the ZUSD is sold for BTC. We can expect each ZUSD liquidated to acquire $1.08 in BTC on average. In the below scenario, $10 of ZUSD had to be liquidated.

Assets Liabilities
ZUSD $50
Stability Pool ZUSD $40
BTC $10.8
DLLR $100
End Balance $0.8

The Mynt balance has grown from $0 to $0.8 - in other words, Mynt went from being perfectly collateralized to being over-collaterlized. IMynt made a profit - but it did not become a fractional reserve.

However, it did take on risk. What risk? Mynt is now exposed to the volatility of BTC. So what Mynt needs to do is get that volatility off it’s books. To do so, the Mynt sells the BTC for Sovryn Dollars.

Assets Liabilities
ZUSD $50
Stability Pool ZUSD $40
BTC $0
DLLR $10.8 $100
End Balance $0.8

The DLLR balance is in italics because it is a bit silly. The Mynt now holds debt ($10.8) that it owes to itself. In practice, this doesn’t make sense. So instead, the DLLR that Mynt acquires is simply burned:

Asset Liabilities
ZUSD $50
Stability Pool ZUSD $40
BTC $0.8
DLLR $0 $90
End Balance $0.8

Now you can see that in the end balance the Mynt winds up with excess BTC. It is up to Bitocracy to decide what to do with that excess.

Part Two: It Depends on Implementation

As mentioned above, there is risk. The risk is naked exposure to BTC volatility. There are a million ways to hedge this - but we probably don’t need a million. We just need one simple trick that works.

Our one simple trick is atomicity. Atomic transactions are transactions that have many parts, but all these parts occur together or not at all. In our case, we want to liquidate positions if, and only if, we are able to profitably convert the full amount of ZUSD into DLLR.

The transaction has several parts:

  1. Liquidate LoC
  2. Burn N ZUSD
  3. Receive BTC
  4. Sell BTC for DLLR - IFF we receive > N DLLR
  5. Burn N DLLR

This is all a single transaction but Step 4 is the critical step. If the condition in step 4 is not met, the entire transaction should fail. In other words, our ability to do this profitably lies mostly with the depth of liquidity in the DLLR/BTC trading pool.


Thank you for this guidance. I also like @666SOV comment. Of the Mynt total ZUSD holdings, how much should be held in the Stability pool, and how much should be stashed away without generating yield? 15-30% for SP sounds like a reasonable number.

This model is definitely appealing. If there is this chance of revenue, we should make sure that this extends the runway for exchequer/dev team.


I have the following question. If it’s a silly question I beg you to answer it anyway.

Using the example data, let’s imagine that I open a LOC in ZERO of 100 ZUSD, depositing 200 btc of collateral.

If I can’t touch the 200 btc because they are blocked to guarantee my debt, why MYNT could use the 100 ZUSD that only I can use?

If I lose them it is my problem, but what if there is an exploit that empties the SP?

Thanks for the walkthrough. Interesting idea. The example did a good job explaining the concept. Couple of questions if anyone can answer.

  1. Zero was pitched as a loan against yourself. If a ZUSD loan creates a DLLR liability, doesn’t that count as another entity using the value of your Bitcoin? Will it be possible in the future state to take a Zero load without DLLR, like it is today?
  2. I understand DLLR liabilities will fluctuate with the price of bitcoin. Does this have any impact?
  3. Can you explain the long answer: it depends on implementation with what is poor implementations?
  4. On the topic of exporting, is lightning on the radar? dollars on lighting is a huge market opportunity which removes the need for a crypto L1
  5. Has this been tried before in the crypto ecosystem?

@lactarius - for you ZUSD is an asset. For the protocol it is just an accounting fiction. Think of it as the protocol simply liquidating your position and burning an equivalent amount of ZUSD. You can’t do that since you are the user. Only the protocol can do that.

@trustno1 -

  1. ZUSD should become an internal account system for Mynt. Users usually won’t need to touch them. For the user it make almost no difference if they hold ZUSD or DLLR. Its the same thing.

  2. The liability is fixed to the dollar, does not change.

  3. non-atomic implementations allow for more risk.

  4. Yes. DLLR should be the native dollar of LN and Taro.

  5. To the best of my knowledge, no.


There’s a fundamental tradeoff here: either we require that the sale must happen at a profit or fail, in which case Zero risks holding bad debt because a liquidation wasn’t triggered when it otherwise should have been; or we require that the liquidation must happen whether the sale happens at a profit or not, in which case DLLR risks losing its 1:1 backing.

The only way to make this work is to have a sufficiently liquid DLLR/BTC trading facility to liquidate the BTC for DLLR at a profit or at least breakeven; “sufficient” meaning “liquid enough to absorb, at a profit or breakeven, the maximum amount of collateral that we can imagine being liquidated within a given period of time (say, 24 hours)”. There could be black swans that move outside of the anticipated boundary, but any losses incurred there might be offset by profits from other liquidations – however, this is by no means guaranteed, and one really bad day could put the protocol in a hole for a very long time (maybe permanently, depending on how such an event affects usage of the protocol and the value of other treasury assets that could be used to close the hole).


I think that’s there is a question of construction. there are two tiers of risk here. We could limit Mynt participation to Atomic swaps and allow others to participate without that limitation. Of course, they would need to take on additional risk, but we can offset that with higher upside.

Double-entry bk ftw. It seems that buying token/rBtc is not bad after all. Food for thoughts for $Sov.

Anyway assume always the worst case. Nothing should stay in the path of liquidations. Bitcoin volatility shall be seen as a feature (like Curve is doing with their long gamma crvUSD)…and selling btc for a stable pegged to the dollar seems a bit stretched!

My comment refers only to the risks associated with Mynt’s participation in the SP. I assume that normal users will be unrestricted in their participation, as they are today, or completely excluded from participation, as you have proposed elsewhere.