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We are off to a busy start of Q4, but not without challenges. Below is a business update, how we are adapting to the trading environment, and some challenges we have worked through:
Market Backdrop: The bear market, and the wider geopolitical backdrop, are important proving grounds. If we can demonstrate product-market fit and the ability to grow in this challenging environment, we will be extremely well-positioned when the market turns. This is exactly what Sovryn has done.
Zero Momentum: We continue to extend and solidify Sovryn's lead as the operating system for the Bitcoin-native economy. Since our last update, we have introduced feature upgrades and new products, including Zero, a fully decentralized protocol for interest-free borrowing without repayment deadlines. Zero has generated tremendous interest from the Sovryn community and beyond. Social media engagement and site traffic recorded double-digit month-on-month increases in the last six months. And over the last four months, early Zero users have propelled a 20% month-on-month growth in TVL to 375 RBTC (close to $8m).
Economic Exploit: On October 4, Sovryn experienced an exploit. The attacker identified a vulnerability in the legacy lending and borrowing protocol and withdrew RBTC and USDT from lending pools. Sovryn developers detected the irregular activity, and the system was placed in maintenance mode. The swift action enabled the team to identify and recover funds not yet withdrawn, limiting the loss to approximately $650,000 (six weeks' OpEx). The recovery effort is still ongoing. Since the Sovryn Exchequer will cover the lending pool losses, user funds are not at risk. The exploit postmortem is available here.
Financials: While we control and manage the business build, we are, of course, also impacted by the developments in the global economy. In Q2, in parallel with the capital raise led by General Catalyst, we acted quickly to retain critical talent and ensure a 24-month runway, securing the roadmap of product deliverables to build the ecosystem and drive top-line growth. At the end of Q3, net current assets totaled $8.2m (equivalent to a 20-month runway), of which 70% were held in USD and 30% of cryptoassets, predominantly BTC. Still, in light of macro developments and the growing interest in Zero, the strategic plan and tactical priorities evolved further in Q3. Consequently, and to manage the impact of the exploit, we expect to continue prioritizing and focusing on a smaller number of critical product deliveries, thereby enabling additional cost savings to re-establish the 24-month runway.
Ecosystem Growth - How you can help: A new project is emerging in the Sovryn ecosystem: 'Sovryn Bank (SB)', a neobank with a difference, combining the convenience and familiarity of fiat with the global availability and security of crypto. SB will provide users with a familiar app experience, including the ability to receive fiat funds as salary, pay with debit cards, and make wire payments in most currencies. Yet the magic is the backend: Funds will be self-custodial, and crypto holders will automatically receive a line of credit against their Bitcoin from the Sovryn Zero protocol, enabling them to put cryptoassets to work without selling and at a 0% interest rate. In addition, SB clients will enjoy a full suite of integrated Sovryn and traditional banking products and services for payments, loans, savings, and investments.
SB will leverage Sovryn's deep industry and technological expertise with its BaaS partner to offer a unique, feature-rich, robust, scalable, and regulatory-compliant platform. The project aims to complete entity-level legal, compliance, and regulatory work in Q4 2022, raise funds in Q1, and launch in Q2 2023. The team is now recruiting a CEO to lead this exciting business. We appreciate your thoughts and referrals for this critical role. Please reach out.
Market Penetration: Sovryn continues to broaden its achievable market, despite current market conditions, with site and dApp traffic nearly doubling over a six-month period (+85%) and new users making up 86% of that traffic. This exponential growth of brand engagement and platform traffic is mainly driven by revised marketing and communications strategies focused on both the Sovryn brand and Zero. This month-on-month trend of growing reach and lead acquisition contrasts to what the broader crypto/DeFi market is experiencing and signals highly positive sentiment towards the brand and our products.
Thanks again for your continued support. As always, I'd be happy to answer any questions you might have.