06 Oct 2020
DeFi is still a growing industry with new products and innovations. Sovryn is decentralizing trading and lending for Bitcoin, with a Bitcoin-native DeFi platform. Sovryn aims to enable decentralized applications for Bitcoin, a truly decentralized cryptocurrency in a way that is as native to the Bitcoin blockchain as possible.
In this explainer, you will learn how to perform leveraged trades in BTC permissionlessly and without selling your soul aka custody of your coins to a centralized middleman. So you have found your NFT allowing you entry to Sovryn’s test phase and enabled the RSK Mainnet on your Web3 wallet. Now it’s time to try out the Sovryn trading platform. Make sure that you acquire some rBTC via an exchange or through our Fast BTC Relay. What this does is allow you to onboard your BTC to the RSK Mainnet.
You will arrive at the following UI. Take note, while it looks very solid thus far, we have many interface improvements underway. Kudos to the team for their hard work.
How to perform a Long/Short leveraged trade
Select between Long and Short. Long is for trades that win when the price of BTC goes up, and Short is for trades that win when the price of BTC goes down. According to the level of leverage you take, the Liquidation Price will adjust. If for example you wished to Long BTC at 2x leverage, your Liquidation Price will be further from the current price of BTC than it would if you were to do 5x leverage. It works similarly for leveraging Short, but in the opposite direction.
Interest is paid upfront at the specified rate in 28-day periods when taking a position. Should you close your position earlier, the unspent amount will be refunded. If your position gets rolled over after 28 days, you’ll pay again the interest for the next period in advance.
To place a trade, simply input the amount of BTC you wish to execute the trade with and click Place Trade. Accept the transaction through your Web3 wallet, and your trade should be visible below.
Reading your Trade Activity
Here you will see the current status of the trade you performed. Under Current Margin, the number equates to how much percentage above the liquidation price you are currently sitting at. The green number next to it in this example shows how the price has changed since I took my position.
Interest APR means this is what I am paying annually in BTC for taking this position. The Start Price pretty clearly serves as a record for the price of BTC at the very beginning of your position. Renewal Date means the date after 28 days where your position gets renewed and you paid a portion of the % APR.
You can choose to Top-Up your position by adding more BTC. Finally, if you are ready to exit your position, click Close. The Sovryn protocol takes a .15% fee for each leveraged trade.
Two Ways to Lend Bitcoin
In the Lend section of Sovryn’s trading platform, you can lend Bitcoin on the other side of these leveraged trades to passively stack sats. The Interest APR is the % you can expect to gain annually for lending your BTC. Keep in mind, this is entirely non-custodial and you are free to withdraw at any time. This is the most faithful platform for lending true Bitcoin and earning sats without having to entrust your holdings to a centralized custodian or a multi-sig that issues digital IOUs for your Bitcoin. The % APR will change according to the demand for borrowing BTC on the permissionless Sovryn platform.
Interest payments made by borrowers are distributed to lenders. The Sovryn Protocol collects 10% of interest for the insurance fund, which exists to protect lenders in the possible case of a loan defaulting.
The second way to earn on BTC is providing liquidity to Sovryn’s AMM. Pretty soon, users will be able to swap between the Dollars on Chain (DOC) stablecoins and Bitcoin. Liquidity providers will be able to earn from trading fees as well as earn yield from Sovryn’s future liquidity mining program. Unlike other AMMs that only accept a 50/50 ratio among a pair of cryptocurrencies, you would only need to deposit one in order to start earning swap fees. The fees will start at 0.1% per swap per coin for liquidity providers.
Hope this guide was helpful. Sovryn is eagerly looking for feedback on its trading application. Please join the Discord if you wish to meet the community. They also have calls every Friday at 4pm GMT.