13 Jan 2021
In the world of crypto, amidst the throes of DeFi degens and relentless flows of longs and shorts, lies a quietly amassing dragon: Bitcoin layer 2. This benevolent beast is being stoked by the Sovryn protocol, which promises to release the dragon to all the people worldwide who dream of financial security, financial privacy, and full financial sovereignty.
What is Bitcoin Layer 2?
Before we get into what layer 2 is all about, let’s first cover our favorite layer 1 - the Bitcoin Blockchain. This epic invention by the mysterious Satoshi Nakamoto has unleashed a decentralized, censorship-resistant, and secure monetary system for all to use without anyone’s permission.
Bitcoin has, in the past ten years, performed like a virtuoso compared to every other asset on the planet. Its reputation as a treasured store of value and hedge against the inflatable fiat regime is unparalleled in today’s volatile world markets.
However, while Bitcoin is sovereign money, it cannot scale independently as a platform for decentralized financial applications.
That’s why the layer 2 dragon must emerge after many months and years of incubation. Its rise from the caves of sleepless developers is imminent.
Layer 2 Definition:
A blockchain’s “layer 2” is made up of other protocols that operate on top of the blockchain, as in the example of “sidechains”. Layer 2 has been under construction for years as innovators have sought to bridge blockchains together and increase scalability.
The construction of layer 2 has long been underway to solve the challenges of layer 1, namely transaction speed, fees, and scaling to the masses. Layer 2 protocols that are in the emergent phase include Taproot, Lightning Network, and Rootstock (RSK), which is a foundational element of Sovryn’s Layer 2 solution for bringing DeFi into Bitcoin’s monetary sovereignty.
What’s behind these technological initiatives is the essence of what Sovryn aims to extract:
Bitcoin is sovereign money, we can all agree on that. But is it sovereign money once we enter the world of DeFi?
With Bitcoin’s glorious layer 1 blockchain environment, we have the keys to monetary freedom. But how can those keys unlock the financial services we need and use every day, like payments, lending, and trading, without reverting to centralized wallets, exchanges, and platforms? Must we risk our financial sovereignty when participating in financial services based on Bitcoin as the global reserve asset?
Bitcoin, RSK and the Sovryn mission
Sovryn introduces the path to trustless financial services to expand Satoshi’s vision of monetary sovereignty beyond peer to peer money to all things financial. Its layer 2 solution creates an open source operating system for building financial products connected to Bitcoin’s Proof of Work verification system through the Rootstock (RSK) Bitcoin sidechain. Scaling of transactions is possible through sidechain technology without foregoing the financial sovereignty and security afforded by Bitcoin.
The full stack financial operating system designed by Sovryn integrates smart contract capabilities and ensures that bridges between the Bitcoin Blockchain and other blockchains like Ethereum can be built for DeFi applications to take Bitcoin to the next level.
Why does DeFi need Bitcoin?
The current DeFi landscape, as vibrant and exciting as it is, largely excludes crypto’s most massive and liquid coin: Bitcoin. Centered around the Ethereum Blockchain, this system of DeFi has also run into extremely high transaction fees due to network congestion, making DeFi more of an exclusive club for whales and less a decentralized financial system available to all.
Today, Sovryn already enables users to lend, leverage, and trade while retaining full financial sovereignty, in a system secured by the Bitcoin Blockchain. With low transaction fees and the potential for mass scaling, the next generation of DeFi is awakened on layer 2.
In the future, Sovryn’s solution will become a self running, full stack DeFi suite. It will provide everything needed for Bitcoin-native DeFi, including Bitcoin-backed stablecoins, automated market making, flash loans, and much more. The future of DeFi is here and it’s on Bitcoin layer 2.