19 Jul 2021

Over the past months, Bitocracy members have been coordinating the direction of the protocol and strategic partnerships through active voting participation in several Sovryn Improvement Proposals (SIPs). These foundational votes for contract upgrades and Origin platform token sales have established firm ground upon which to build the future of Bitcoin Defi. Now it’s time to take another step toward solidifying the mechanisms behind incentivizing Bitocracy participation, which will take the community closer to fulfilling our vision of a global financial operating system.

The Bitocracy model intends to facilitate decentralized coordination of the Sovryn protocol via educated votes from incentivized parties. This involves the staking of SOV - skin in the game - and frequent participation to encourage votes that are both well informed and of the best interest of the protocol. Naturally, aside from security, the most important aspect of Bitocracy is, by design, its voters: SOV stakers.

Since the SOV token began trading on April 13th this year, there have been many lucrative earning opportunities from arbitraging a favourable trade or lending for a safe return, to heavily profitable loot drops on the AMM yield-farming pools. While these events are beneficial to the platform and its users, they do cast a shadow over the relatively unsung heroes staked in Bitocracy. The opportunity cost of locking SOV into governance has thus far been very high and has rightly caused concern in the community, stemming primarily from the low financial recompense from staking and the inability to exit without slashing.

Therefore, after many community suggestions and thorough discussion on the forum, SIP 24 has now been put to a vote in Bitocracy. Here are the details:

SIP 24 - Liquid SOV distribution for voluntary stakers:

Sovryn Stakers have requested a solution to the low rewards currently being received by SOV stakers and SIP 24 is the answer.

In what would be a first for Sovryn, SIP 24 looks to distribute liquid (not vesting!) SOV to voluntary Bitocracy stakers biweekly, for the full duration of the committed stake. The SIP proposes an initial duration of 6 staking periods (~3 months). The tokens will come from emitted Adoption Fund SOV and will be distributed on a bi-weekly basis to provide a fair APR, variable based on the time left on the stake.

For the technical details, see the full SIP here.

First came 21M Bitcoin, now comes 21% SOV APR!

The maximum APR will be set to 29.75%. This APR is used for the maximum staking duration of 1092 days. 28 days later the APR decreases to 29.73%, 1 year later to 26.78% until only two weeks are remaining, with an APR of 3.66%.

This setting leads to an average APR of 21% over 3 years, where the return on average is:

See the full Sovryn Staking Rewards Model calculations here.

Your crypto, your control

The reason the SIP authors proposed liquid SOV rewards instead of vested SOV as with other Sovryn rewards programs is to reward voluntary stakers with more control of and mobility for what they earn. Stakers now can, on a biweekly basis as rewards are paid out, choose to:

-Compound SOV earnings

Since the program pays out liquid SOV every two weeks at the APY that the stake is entitled to, if you were to take the liquid reward SOV from the first two week period and add it to your stake during the next two week period, extending the stake for another 2 weeks to maintain the max 3 year APY, and continue doing this every 2 weeks until the program ends, you’re compounding your earnings at the max APY continuously. This is valid for any length of stake extended during the rewards program period.

-Participate in Liquidity Mining rewards.

Sovryns with long time preferences but higher appetites for risk can alternatively choose to deposit the liquid reward SOV into Liquidity Mining reward programs to earn potentially higher returns paid out in 10-month vested SOV,

-Sell at spot and treat themselves to a limbo party.

Ramifications of SIP 24

This SIP is designed to both reward existing early long-term stakers, as well as to incentivize additional early long-term stakers.

If SIP 24 passes a Bitocracy vote successfully, after the initial 3-month trial, the Exchequer will have the authority to cancel or extend the incentive program for additional 3-month intervals, until it is determined such incentives are no longer meaningful.

This SIP will bring SOV staking into line with other earning opportunities on Sovryn, offering a higher return than most lending pools and a relatively equal or just under return to yield-farming. Considering yield-farming SOV rewards are not guaranteed over the long term and are vesting for 10 months, staking now offers a reasonable alternative.

To clarify, there will be no retroactive rewards on staking from the previous few months before this SIP. The possibility of stakers being able to vote themselves retroactive SOV is a precedent that the authors of the SIP want to avoid, to continue healthy incentivization of staking and the wider Bitocracy model. Being able to vote oneself a lump sum of liquid SOV for past events could result in conflicts of interest that deviate from the balanced and fair system Sovryns thrive upon. Whilst the general consensus appears that this type of event would likely never happen, the design of SIP 24 intentionally stewards away from retroactive rewards of any kind.

As outlined above, voting for SIP 24 is now live. Cast your vote and have a say in building Sovryn’s Bitocracy to be the best governance model in the sector here.

But wait, there’s more!

The Sovryn community has also offered other ideas that, after a lot of discussion on the forum, will be implemented by Sovryn’s Code Mages in the near future, including:

Removal of vesting SOV from staking:

One community suggestion that has proven itself logical and favourable to the Bitocracy model is the removal of vesting SOV tokens from the fee-sharing contract. This would mean that the fees earned by the protocol would be distributed solely to voluntary SOV stakers and not to any vesting tokens. Reducing the amount of protocol fee-sharing beneficiaries in this way will increase the earnings of each voluntary staker significantly. It is key to point out that vesting SOV will preserve its right to voting power.

Adding swap fees to protocol fee collection:

Another request from the community is the addition of swap fees to what the protocol collects and distributes to stakers. Up until now, the protocol has earned fees from margin trades and loans. Adding swap fees will increase the total amount of fees collected, in turn increasing voluntary staker earnings. With this upgrade, the protocol will begin earning 0.15% on every swap in future.

Origin platform airdrops

The SIP for the Babelfish token sale (SIP 18) passed on May 14th and with it came the commitment to airdrop a percentage of sale tokens to SOV stakers. Whilst this is not a mandatory requirement for launching a token sale on the Origins platform, it does set a precedent to do so. Airdrops from new projects using Sovryn’s launchpad are another benefit to staking that will be realized over the next few months.

Once again, voting for SIP 24 is now live on the Sovryn Bitocracy page. Cast your vote here and remember:

Stay Sovryn!