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Sovryn is a decentralized Bitcoin (and other) trading and lending platform. That’s great, but what does that actually mean in the grander scheme of things? What is the Sovryn mission and what is it accomplishing? How is Sovryn spearheading real change? These are all very important questions that require accompanying context; we shall begin at one of the foundations of civilization: property rights.
The great innovation of Bitcoin can be summed up in one sentence: Bitcoin invented digital property rights.
Property rights are a fundamental building block for economic growth and prosperity. The history of bartering dates back to ~6000 BC, built on the premise of fair trade. “I own this, you own that… let’s trade”. Only with private property rights can a free market arise so that that creative effort and entrepreneurial risk-taking are rewarded properly. These free markets have expanded and been redefined over the ages, constantly innovating and finding new means of growth. In recent years, the internet has connected the world to a new global economic frontier. Yet, economic and productivity growth has stagnated over the last 25 years. Why?
The typical answer given by Bitcoiners is that we have a corrupt financial and monetary system, but this tells only part of the story. During the last 20 years, despite the lack of productivity growth, huge digital empires have been formed. They operate like feudal empires, with god-emperors; think of Zuckerburg and Bezos. On the internet, we, the serfs, have no rights. The land barons who control the servers own all the property.
We have married 21’st century technology (the internet) with an Iron Age economic system (feudalism). Ironically, the most innovative part of our economy has been managed with the most primitive social structure. The very part of our economy that should be driving us forwards has taken us backwards.
This is why we have stagnated.
Just like the internet it is built upon, Bitcoin’s property rights are borderless and available to anyone. However, these digital property rights have many distinguishing factors: they are enforced by cryptography, rather than violence. They are globally applicable and they are cheap and efficient to enforce. Bitcoin has allowed us, for the first time, to marry 21st century technology with 21st century social institutions. The result has been the greatest creation of wealth. Ever.
In just 12 years, a two-trillion dollar industry has been created from nothing. 100s of unicorns have been created and individuals have gained wealth at an unprecedented rate. All of this has happened despite the fact that almost nobody, including industry insiders, understands the true nature of the innovation and are still fumbling in the dark. Even the slightest hint of digital property rights, applied in a haphazard way, has created a step-change in productivity.
It makes you wonder, what can we achieve if we explicitly built an economic system to take advantage of digital property?
However, until now, this idea has only been applied narrowly in the Bitcoin system, to BTC - the monetary asset. This is a good start - but is still only a start. The greatest value comes from applying this innovation more generally. Ethereum and the rest of the smart-contract platforms that have emerged around Bitcoin are in an effort to do just this - generalize the idea of digital property to everything. The result has been massive productivity, innovation and wealth creation.
However, these smart contract platforms have been developed without a clear understanding of the fact that the central innovation is digital property rights. Other strange narratives like “world computer” have emerged in the absence of this understanding. The result is that the smart contract platforms have been built in the mold of tech companies instead of being built as foundational social institutions.
Bitcoin is rules without rulers. Ethereum is politics without process.
Only Bitcoin is built to act as a reliable, long-term foundation of these rights, secure now and, most importantly, into the future. The challenge and the opportunity for Sovryn is to build on these most solid foundations. Sovryn can extend Bitcoin so that it creates digital property rights - not just for BTC - but for everything. We have described Sovryn as “DeFi for Bitcoin” because that is an easy-to-understand slogan. DeFi is valuable because it is the financial system for a world of digital rights. But DeFi is only part of the story.
Those who misunderstand the nature of the innovation, also misunderstand where the value lies. The current theory is that value lies in Layer 1 systems - and is expressed by layer 1 utility coins (eg. ETH). However, Layer 1 systems are tools, commodities… and they have weak network effects. Layer 1 systems that are designed to be technology plays are in a race to the bottom. They have value because they generate fees. But they compete to bring these fees down to zero. They are racing themselves into extinction.
If Layer 1 systems are not the locus of network effects, what is?
Do they even exist?
Network effects exist where participants benefit from greater value as the number of participants rises. In the social realm, this translates to participants benefiting from having a larger community with whom they can enjoy the benefits of collaboration. The social system with the most powerful network effects is therefore the social system that creates the widest opportunity for collaboration. This system is called the free market.
The reason the free market generates prosperity is the same reason property rights create prosperity: The market is the network. Property rights are the institution that allows the market to function.
Social institutions rest not on technology, but on communal commons, e.g.:
For Sovryn to generalize Bitcoin’s innovation for many types of rights, it will need to develop and promote these commons. Luckily, Sovryn already has a common currency - Bitcoin. Sovryn also has common governance - Bitocracy. Implicity, Sovryn has the other commons as well. We have a word for a community of people collaborating through a common culture, system of governance and purpose: a Nation.
Conventional nations of today assume shared territory or ethnicity. Hence the “Nation-State” or “Ethno State”. However, in a digital world, borders and ethnicity are irrelevant relics. In a digital world, territory is replaced by networks. We are shifting from the Nation-State to the Nation Network.
Conventional nations claim sovereignty over their members. The nation owns its members. A network nation, built without borders and recourse to violence has no such power. Its members must voluntarily opt-in. The members own the nation. Sovryn is a proto-nation, extending Bitcoin by creating the institutions for free collaboration through digital rights.
El Salvador is the first Bitcoin State. Sovryn is the first Bitcoin Nation.
Bitcoin is a social institution, a commons. Blockchain technology is useful as the tool for enforcing the Bitcoin commons. Sovryn is an extension and continuation of Bitcoin, resting on Bitcoin as the solid foundation. By doing more than Bitcoin, Sovryn requires that members opt-in to a greater set of commons, a broader set of rules. A more general application might appeal, therefore, to a narrower set of members. Accordingly, the most general application of Bitocracy, should require members to opt-in to the fewest set of new rules and institutions.
For this reason, the Sovryn protocol must scale through localized application of new rule sets. The broader the rule-set, the more narrowly it must be applied. The Sovryn Nation structure must therefore be thought of as scaling in layers. Bitcoin is the base layer, applied even more broadly than Sovryn itself. SOV Bitocracy is the next layer up, applied broadly and containing the key primitives of a market and the governance system for the broadest set of rules. More specific institutions - sub-protocols, or subDAOs - are the next layer up. For ease of reference I will refer to these as ‘Guilds’.
Guilds are part of the Sovryn protocol, with a specific remit. They govern themselves in most things, are subservient to Sovryn in few, universal things. Participation in Guilds must be voluntary, opt-in. Sovryn is young. The DNA we create now will unfold over time. Scalability should be baked in now.
Bitcoin invented digital property rights and all rights rest on property rights. Bitcoin is still the only system that reliably protects those rights, now and into the future.
Bitcoin currently applies this innovation in the minimal possible way, creating a reliable store of value: BTC.
Sovryn extends the Bitcoin system and will create a powerful network effect by enabling the nation of the future - the first Bitcoin Nation. This is the path to marrying 21’st century technology with 21’st century social institutions.
The broader the rule-set, the more narrowly it must be applied. Therefore Sovryn must scale through layers. Bitcoin, the currency, and bitcoin the chain are the lowest layers. Sovryn, the Nation, is the next layer. More specific institutions like Guilds are an additional layer up.
Sovryn is a proto-nation, much work remains to be done. Now is the time to build the basic DNA of scalability, that will fully unfold over time. This way we stay sovryn.
Bitcoin is the money of a free market. Sovryn is the free market and the institutions that make the market function. The market is the second most powerful network, after money itself.