A Bitocracy encompasses a self-running, decentralized business where users interact with the Bitcoin blockchain with complete financial sovereignty, enjoying Bitcoin-class security and long term incentives to act in beneficial ways towards the protocol.
The elements of the Sovryn Bitocracy
Voting rights
Sovryn uses a quadratic equation with a mapping system to measure the total amounts of tokens that are unstaked on any given day (stakedUntil). This enables the protocol to compute the voting power of all the tokens staked up to a given point in time. Fee distributions from the trading platform, which could range from BTC to stablecoins, are automatically paid out to SOV stakers in direct relation to the weighting of their staked tokens. Pro-rata preference is given to holders with the longest outstanding staking periods. Staking SOV is a feature that is permissionlessly and openly available to anyone.
The SOV Token
SOV is issued off the rootstock (RSK) smart contract platform, which operates on a Bitcoin sidechain. The token itself does not grant governance rights, which departs from most DeFi protocols of today. Instead, it gives the option for the token holder to stake, which does come with governance benefits.
The token itself is not like an altcoin. SOV is voting power within the Sovryn organization, allowing stakers to make modifications and ratify proposals to the Bitocracy.
SOV distributions can go out to participants for fee rebates, liquidity mining incentives, or referral programs. By incentivizing in these ways, SOV allows each staker to hold a stake in the Sovryn Bitocracy.
Bitrocacy in action
The Sovryn protocol is led by qualified stakers. The difference from other DeFi protocols here is that instead of focusing on a highly decentralized governance model where the more the merrier, the Bitocracy values qualified governance involving participants with skin in the game.
At any time, the Bitocracy may choose to take action to improve or expand the protocol, such as funding a team of developers, issuing a grant, or initiating a bounty. All of these changes would be voted on by the community in a series of steps:
- Participant(s) make a Sovryn Improvement Proposal (SIP), which is written here and iterated in code if approved by the community.
- A vote on the proposal is conducted by staked tokens. The longer the staking period, the more the voting power.
- If the proposal is accepted by a majority of voting weight, then a waiting period of 3 to 7 days is initiated. If people disagree, they have this time to walk away.
In this system, all staked tokens represent a voice in the Bitocracy, but users also have a way to unilaterally exit if they’re unhappy with the direction the protocol is taking. Stakers can exit, but they are charged a fee. The more time left on the 3-year staking period at the time they leave, the higher the penalty, incentivizing them to stay for the duration.
By creating the right set of incentives to promote good governance and minimize threats, Sovryn sets its sights on the long term viability of a Bitcoin-native trading platform. The Bitocracy model ensures that Sovryn can remain a self perpetuating DeFi platform, while granting each user full financial sovereignty.