Sovryn to use Bitcoin-backed stablecoins to expand financial inclusion
The team of Sovryn, a native Bitcoin app for decentralized lending, notes that we are currently in the midst of an unprecedented transition from a global fiat-based, USD-dominated economy to one based on BTC transactions.
This gradual transition from the existing system to the crypto-based one is happening in a fast but “patchy” fashion, the Sovryn team explains. The majority of economic activity, even in the crypto and blockchain space, is denominated in US dollars and relies heavily on fiat ramps.
Centralized digital currency exchanges are considered fiat gateways. Meanwhile, centralized stablecoins can also act as gateways. Both are in effect centralized control and capture points by the old, obsolete financial system.
However, genuinely decentralized and BTC-backed stablecoins could potentially serve as the most important tool for the ongoing transition and paradigm shift away from the fiat money system. These financial instruments provide consumers with international access to money that is stable enough to be used for daily payments. They are basically like dollars, but not censurable if you are using Bitcoin based stablecoins.
According to the Sovryn team, these cryptos are Bitcoins; however, they are not volatile. They are able to reduce our dependence on centralized gateways and can effectively limit the ability of the existing financial system to control the unlicensed nature of decentralized finance (DeFi).
As Sovryn’s team noted, the US dollar is a currency that most consumers and businesses are familiar with, and it doesn’t require lengthy explanation or conviction. Millions of people who might be reluctant to try to use Bitcoin may feel comfortable using stablecoins for day-to-day transactions.
In the days of the gold standard, individuals almost never transacted with the precious metal itself, as they preferred to transact with paper notes backed by gold.
Notably, banknotes had been the primary mechanism to help the gold-backed economy eventually transition to the fiat economy. Now it is quite possible that stablecoins will be the primary mechanism by which we will move from fiat gold to digital gold (aka Bitcoin).
The Sovryn Protocol would apparently launch two sub-protocols that should help promote the adoption of BTC-backed stablecoins. As noted in an update to Sovryn, these sub-protocols will be Sovryn Mynt and Zero.
Sovryn Mynt recently raised $ 8.5 million and will serve as the protocol that issues the stablecoin backed by Sovryn BTC; $ MYNT. The contract will bring together various methods to maintain the stability supported by Bitcoin.
Several stable Bitcoin-based assets will be deposited and also held by the contract itself, the Sovry team explained. This contract will then issue the aggregate stablecoin, which can be exchanged for Bitcoin stablecoins held in the pool itself or BTC.
The other protocol introduced by Sovryn is called Zero. This is one of the Bitcoin backed stability issue or strike methods that will be used to directly power the Sovryn Mynt. The Zero Protocol also offers BTC holders the option to borrow stables (for example, US dollars) at zero interest. This essentially means that HODLers will never have to sell Bitcoin again, as they will be able to borrow against their holdings for long periods of time.
As mentioned in the update, Sovryn Mynt and Zero may be the latest additions to the rapidly evolving Sovryn ecosystem, provided these improvement proposals are adopted. They should show how Sovryn is making Bitcoin much more useful, which could further accelerate the trend towards hyperbitcoinization.