This article explores the natural evolution of DeFi as we know it. Advancing from Ethereum and other pockets of DeFi to a more robust Bitcoin-based solution could allow millions to participate in the most egalitarian redistribution of wealth in history. Bitcoin and DeFi can solve the problem of unbanked people and also provide an alternative to current banking systems, which are not accessible to some.
This series of modules is a sequence that can flow as one excessive article or provide standalone value individually.
This article sheds some light on the current situation of unbanked people worldwide. It points out that an increasing number of people are reluctant even to create a traditional banking account or, more worryingly, do not have access to any banking institutions whatsoever.
As possible alternatives for both of these groups, blockchain, Bitcoin, and DeFi can provide the needed aid, as well as a fresh alternative to the ossified banking establishment by transforming people's smart devices into their own banks.
There are a plethora of DeFi Smart Contract platforms that are pushing this movement forward. Most of them are built on Ethereum but some of them, like Sovryn, are built on the original crypto asset: Bitcoin.
Billions of people worldwide are either completely unbanked (i.e., they cannot or do not want to use a traditional bank) or underbanked (they do not have proper access to financial services). The increasing spread of technology will allow more people to come online, at least for a while each day or when needed, to perform financial operations and to decide what to do with their assets.
Conversely, the use of mobile phones is growing at a remarkable pace. Even in countries like Ethiopia or Sudan, 20-25% of the population has a mobile phone, and this number is expected to double over the next five years.
With mobile phones and the internet connection they can provide, we can expect additional internet users growth, which will be caused by all these currently underbaked and offline people who can't manage their funds on their own.
Sounds interesting? Bear with us as we guide you through the journey of becoming financially Sovryn and, by the end of this article, you will be ready to start using your Bitcoin with its new superpowers.
“Sovryn mission is to unbank banking and make the underbanked financially sovereign. After all, a major part of freedom is being able to freely use your own assets.”
- Mickey Maler, Sovryn contributor
Combining a mobile phone and blockchain technology can remove many of the financial problems that people nowadays face due to their nationality, their passports, their religion, or what ethnicity they belong to.
This is because, with mobile phones and the blockchain, everybody can effectively become their own bank, if that's what they want or need. We live in a globalized digital world in which borders become progressively obsolete.
This does not mean we won't live in a rules-based world - just the opposite. Thanks to crypto economies: we could build a world where everyone, including those who are currently not participating in the global economy, would have access to property rights and free trade.
Internet and blockchain make that happen and as we can sense, the use of the internet will only be increasing from now on and its accessibility will be the key feature for every economy to step up.
Now, what makes me so sure about the additional internet spread and the increased demand for its usage? Just only with the DeFi boom that shocked the world of cryptocurrencies, followed by the rise of the Metaverse phenomenon, the digital and the physical become progressively interconnected using the internet and blockchain as the carry-over medium.
What makes me think that Bitcoin will play its role in this global internet usage for whatever reason? The physical and virtual interconnection I just described would need a shared understanding of value. Bitcoin is perfectly positioned to be this shared link in the future, acting as the money of the internet.
“States and people that embrace this globalization will benefit from the prosperity and freedom it creates. Those who try to halt progress will fall behind.”
- Edan Yago, Sovryn early contributor
The next episode will introduce the primary products of DeFi, compare them to its arguably outdated centralized counterparts, and illustrate the distribution of DeFi users into three primary groups. For each of these three groups, DeFi can provide different aid or an alternative.
With approximately 2 billion unbanked people, there is an opportunity to give much of the world their first-ever access to reliable financial tools built on Bitcoin. Our solution for making more people financially sovereign has started with a smartphone, internet, and blockchain combination.
Yet, the last piece to make this idea work is a bit of fintech education. For example, if a CeFi user would like to generate some passive income, they could create a savings account offered by their bank. How would such an operation look like with DeFi, where we don't have any bank or intermediary that could create such a centralized service?
With Bitcoin, it is very easy. The user might need to buy this Bitcoin on some crypto exchange first, the next step is to withdraw that Bitcoin to a personal wallet, the keys of which are only in the possession of their owner, and from that moment on, the user who holds the keys becomes a master of their asset.
There is no standardized saving account for Bitcoin in DeFi, but users can benefit from other actions a DeFi user could perform such as:
Then, the last piece of this puzzle is education. With the proper technology, easy-to-use tools, and basic financial know-how, the people of this world can become the masters of their assets without the need for using a centralized banking organization.
Of course, most of the working people of America or Europe need to have a bank account to accept their salaries or payments, but current statistics indicate a reducing trend in bank usage.
In countries like Mexico, which is the world's 11th largest economy, only 36.9% of the population have a bank account, but 69% of the population have access to the internet and are active social media users. In the Philippines, only 34.5% of people have a bank account.
However, there are 1.59 mobile phones per person, and 67% of the population are active social media users. Vietnam tells a similar story, where only 30.8% of the population have a bank account, but there is almost one phone per person and, again, 67% of the population are active social media users.
Currently, the people of this world can be roughly split into three groups:
(1) Those who are passively using centralized banking services.
(2) Those who cannot access or are not allowed to have a banking account.
(3) Those who are actively managing their own finances.
Each of these groups has specific circumstances and motivations behind their situation:
(1) These people don't care much about what precisely is happening with their assets. The main thing for them is to have them stored somewhere, secured by a trusted institution, and be easily available when needed. The downside of this is that the earnings from classic saving accounts or other banking products are so low that they are always negated by the various fees a user needs to pay every month, not even mentioning the inflation.
The paradox of CeFi is that the bank needs you and your money to survive, not vice versa. However, the bank is authorized to manipulate its users' funds as the bank sees fit, while the actual owners of the money receive very little benefits for this if any at all.
(2) These people don't even have a chance to access traditional banking services, because:
(3) These people have several banking accounts since they use the advantages of each account separately. One account could be good for the funds' management, while the other could be the best option for SEPA or Global payments. These people can also be active in stocks or cryptocurrencies markets. For people of this group, DeFi brings an opportunity to operate with their bitcoin and other crypto assets without a centralized middle man, and, for example, live off of their BTC without the need to actually sell it.
To get the basic idea about being able to live on your Bitcoin, watch Edan Yago's explanation in which Edan talks about a Sovryn method developed for this purpose.
In the current state of this emerging technology, Bitcoin DeFi primarily targets people from the group (3) because of the barriers to entry. These users already have a high degree of accessibility, knowledge, and time. Interestingly, the people who don't need DeFi the most are actually the early adopters and beta testers of these solutions, which builds the foundations on which further developments can be made to cater for the adoption of the first and second groups. A challenge for such a financial application will be to deliver a product that:
The third part of this series will compare the traditional banking system with DeFi and explain the benefits of Bitcoin-based DeFi over alternatives like Ethereum.
Any group of people can potentially say: "Ok, give us your money. We will keep it for you and provide you with something extra for doing so." However, without certification and oversight of some sort, can you be sure that they will just don't run away with your savings?
The Bitcoin network, on the other hand, with full nodes all across the globe and the consensus that is designed to always act according to its code and do the right thing, provides something completely different and revolutionary.
You can be sure that Bitcoin will be here tomorrow since no force can shut down or corrupt the whole decentralized network. On top of that, Bitcoin also has no single point of failure because, even if you shut down all nodes on one continent, your assets will remain on-chain, supported by the rest of the global nodes. The only thing this would cause is a temporary network slow down, but the blockchain as a whole will persist.
The lack of internet network infrastructure can be solved with the internet provided by a mobile phone network which, combined with smartphones, can fix the lack of PCs with a stable internet connection. Then, instead of access to a centralized banking system, people can use their smartphone and mobile internet to access the decentralized application and operate with Bitcoin-based DeFi products.
The combination of DeFi platforms such as Sovryn, Bitcoin, mobile internet, apps, and (minimal financial and technological) education creates a perfect solution for unbanked people - but what will this solution look like in practice?
The mission of Sovryn and Bitcoin is to provide a solution for people from category (2) while offering an alternative to people from category (1), but only if they decide to choose their sovereignty over fee-based comfort and inflation.
For group (3), Sovryn provides a way for one to monetize their bitcoin, without a need to ever sell them, while cutting the centralized party enforcing the Know Your Customer (KYC) policy, keeping the ownership of all funds to their owners.
“What we call “DeFi” today, we will just call finance tomorrow, since it will become the dominant system.”
- Edan Yago, Sovryn early contributor
Speaking about Bitcoin: one of its most beautiful elements is the game theory behind it. While China, for example, is banning it (or at least they say they do), El Salvador has made Bitcoin a legal tender. Now the clock is ticking.
Every country has to think about whether it sees Bitcoin and open finance as a threat to its financial systems or a feasible promise for its citizens' better future. To finish on a similar note, let me quote Edan Yago who discussed this China-Bitcoin-Exit in an interview:
“China didn’t ban Bitcoin. China banned itself from Bitcoin.”
- Edan Yago, Sovryn early contributor
For starters, a person can be free if, and only if, they have the power to make choices about their future and full control over their assets. This, after all, was the reason why Bitcoin was invented in the first place. This means that you should be able to send a financial transaction to whoever you want, no matter the target person or your location while keeping the privacy of the user, who is also the only master of their keys and assets, intact.
But then, the current DeFi state, heavily dependent on the Ethereum network, in which - due to the expensive transaction fees - people are reluctant to use blockchain for anything except trading, is unbearable and screams for a solution.
A solution that will transform those fees from their current state of "I'm so frustrated I need to vent about this to my friends over a beer" to "I know about them and I'm okay with them". This is the current situation on the Ethereum network and you can read more about it here.
Another thing to consider is the indomitable spirit of Bitcoin. In Bitcoin, there is no CEO, CTO, CMO, or owner. It is a technology created by the people for the people.
It was conceived by an anonymous author (“Satoshi Nakamoto”), who chose obscurity over glory and let the technology evolve in an open-source environment with 21 million of bitcoin, or Two quadrillion and one hundred trillion Satoshis (SATs).
A SAT refers to the smallest denominable unit of bitcoin (BTC), where one SAT is equal to 0.00000001 BTC, or one hundred millionth of a bitcoin.
Bitcoin is a reformation and revolution for financial freedom, often dressed up as a "get rich quick" scheme, which sparked the fire and created momentum. There are high hopes for the future of Bitcoin - from those who believe in the idea of it, as well as those who have already profited from it.
As the “mother of all chains”, Bitcoin is the power behind all cryptocurrency markets. When bitcoin rises, everything else prospers as well. When bitcoin surges downward, it drags everything down with it. It draws the attention of big governments and lures the biggest investors of all time.
It is an unkillable, uncensorable, unstoppable element, which even has a web page dedicated to recording how many times in Bitcoin history people called it a bubble and an officially dead technology leading nowhere. It is an open-source digital splendor that motivated Vitalik Buterin to create Ethereum, and Bitcoin’s platform enables it to embrace all these other technologies created across all the other chains.
Everything that runs on Bitcoin is secured by its Proof of Work (PoW) consensus that has no match on the security-level playfield.
Sovryn has a mission to create a global, autonomous rules-based financial operating system, which takes a different approach from the current "free-for-all" DeFi ecosystem.
Sovryn is a DeFi ecosystem with global rules for all players in the system. In the same way that Bitcoin is a global monetary regime, Sovryn aims to be an international financial layer.
This financial layer won't be enforced by laws or force. Instead, it will attract users and activity by building the most minimal, effective, and useful rules that create the best environment for trade, transactions, and freedom of activity.
Before you read about Sovryn, which demonstrates such a Bitcoin-DeFi platform for this article, maybe you have one last Bitcoin-related question. Bitcoin shows unquestionable systems in terms of an investment profit and counter-inflation method, but what about the price fluctuation it could have?
Yes, it could happen, but experts from Sovryn found a solution called bitcoin-backed stable coins. This solution will first be applied in El Salvador, where the local population can use their bitcoin to mint bitcoin-backed dollars.
Without going into too much detail, see this video explanation of Sovryn’ Edan Yago.
The next episode will provide an introduction to the one Bitcoin-based DeFi platform, Sovryn, its ecosystem, and the team behind it.
Sovryn is a unique decentralized infrastructure powered by Bitcoin. It allows for Bitcoin to be used in its native ecosystem, in which side chains are used as enhancers for the functionality of the main chain. This is all without a need to change the main chain, but instead simply by adopting other blockchain technologies.
The combination of Bitcoin and Sovryn DeFi creates what was missing on today’s internet: a homegrown economy based on scarcity and a decentralized, permissionless, borderless financial-economic system.
Sovryn's Bitcoin-native protocol, already supported by users in 17 countries across the globe, advances financial sovereignty in a way that aligns with Satoshi Nakamoto's vision of a trustless, censorship-resistant, and peer-to-peer system of money.
The founding team created the platform by expanding on proven technological advancements from Ethereum-based DeFi applications while improving on the known risk elements. The end result is a self-sustaining platform for trading, leveraging, and lending that runs on the Bitcoin-native RSK network, an Ethereum Virtual Machine (EVM) compatible Bitcoin side-chain - meaning anything that can be built on Ethereum can be brought over to Bitcoin, the chain with the deepest liquidity and strongest security.
Every future movement is openly discussed on Sovryn’s social channels and flows through the decentralized governance system, the Bitocracy. Sovryn Improvement Proposals (SIPs) are discussed within the community, then moved to the official forum, then, should they receive enough interest, consensus, and 1% of voting power to push the idea to the next stage, moved to the Sovryn dApp governance system, where each staker has the right to vote to approve or reject the SIP.
In this process, SOV tokens are used for incentive-aligned protocol governance; the more “skin in the game” a staker has, the more weight will be added to their votes. Stakers help build decentralization, which in turn improves security and helps to stabilize the price, and are therefore eligible to obtain rewards.
Sovryn created a DeFi platform with an oracle-based, automated, decentralized token exchange that provides a spectrum of financial built-in primitives such as:
On top of that, Sovryn is a non-custodial and permissionless smart contract-based system in which DeFi users can buy the Sovryn token (SOV) with RBTC, then swap and trade with various options.
Sovryn does not require you to send your Bitcoin to a centralized company, like Coinbase or Binance, in order to trade. With Sovryn, you send your BTC to a smart contract that allows you to keep custody of your private keys, allowing you to withdraw your funds at any time. Sovryn is permissionless in the sense that no one can censor a transaction, ban your account or require you to undergo KYC before trading.
Each team is represented as a special unit called Circle.
SOV is the coordination token for the Sovryn Protocol. It is used to assign decentralized governance powers and the resulting financial recompense to stakers, as well as provide further utility across the platform via collateralization and token sale usage. It is key to point out that one does not need to own the SOV token to interact with the Sovryn Protocol in any way. Fees on RSK (and Sovryn) are paid in bitcoin.
Staking SOV provides:
Additional SOV usage:
In the last episode of this series, you will be provided with a step-by-step procedure that will help you to start your Bitcoin-DeFi journey through Sovryn.
These prerequisites are required for all possible interactions in the Sovryn platform.
Get ready with the steps below:
1. Navigate to the Sovryn app the https://live.sovryn.app/ and Sign in to your wallet.
2. Check if you are on RSK Mainnet and not on the default Ethereum network.
3. Connect the Sovryn app with your wallet.
4. Before you engage any further, check if your RSK Mainnet wallet contains a little bit of RBTC by clicking the Portfolio tab. RBTC is needed to trigger all Sovryn smart contracts. You will also need it for trading, buying SOV, staking, voting, and providing liquidity.
4a) Don't have any RBTC yet? Use Sovryn's quick method of getting you started using FastBTC. As little as 0.0004 RBTC, which is the minimum amount a user can send over the FastBTC protocol, will be good enough for managing several operations and trades! Still, to make a decent purchase of Sovryn tokens, you will need a bit more! So, choose the volume of your deposit wisely! Do this using the official Sovryn FastBTC guide, or follow the steps below:
4b) In the top menu, click the Portfolio tab.
4c) The first displayed asset on this page is RBTC (the RSK native token and 1:1 equivalent to the standard BTC). Click the FastBTC button in the same row and Generate a deposit address using the dedicated button on the right. This BTC address is uniquely bound to the address you engaged the Sovryn platform with. To this address, you need to send your BTC from another exchange or wallet (never send BTC to the RBTC address in your Metamask or another wallet directly, always use the FastBTC function).
4d) Log in to your other wallet or exchange where you hold some BTC and withdraw your assets from your wallet/exchange to the deposit address that the FastBTC protocol generated for you in the previous step.
Now you are able to trade, swap, provide liquidity in yield farming pools, lend your Bitcoin, and buy SOV tokens for participating in Bitocracy.
Need help with any of these steps? Get on Sovryn Discord and ask for technical support.
DeFi on Bitcoin starts as a decentralized exchange, but the message behind it is stronger than that. In the future, we will witness a complete change in how regular people operate with their money and build their own financial independence.
Bitcoin is a way of introducing competitive governance around money. It is a way for users to put more trust and responsibility towards themselves instead of pushing all the trust and money to a centralized exchange or third parties.
These users, or early adopters, not only pave the way for later participants, but also help shape the future of the platform as a whole. The presence of early adopters is important since it creates the feedback needed to enhance the platform for the second wave of users, who could be less tech-savvy but still idealistically oriented. It is true that early adopters have to use imperfect GUI and a suboptimally documented process, but they are rewarded for their struggle in a way that makes the more play-it-safe later adopters green with envy.
However, in the wider technology industry, it is not always the early adopters and first-comers who win the race. Historically, the second runners are the most successful ones, since they are those who followed, observed, and learned from the flaws and mistakes made by the pioneers.
That is also where Bitcoin and projects around it can benefit from being able to adopt every part or new technology from any other chain and bring them to Bitcoin in the form of a layer 2 permissionless side-chain.
Ultimately, much like Saturn and its rings of celestial bodies, Bitcoin can play the part of the center of gravity in a universe built from technologically rich sidechains, which extends Bitcoin adoption.
These, in turn, can create an ecosystem that encircles the blockchain like a digital decentralized panoply that creates possibilities for independent economics.
Even though many people still do not realize this, our generation has been provided with a special opportunity to participate in the most egalitarian redistribution of wealth that humankind has ever experienced. It is only up to you to seize the advantage of being alive in this century.
You already have everything you need to participate since the requirements for buying Bitcoin are identical to those for reading this article.
With DeFi powered by Bitcoin, you can use your BTC to its full potential and mitigate potential confiscation. Your assets are deposited in a trustless way, where the owner maintains all control, and everything happens on a platform that is as uncensorable as Bitcoin itself.
As a word of goodbye, don't be afraid of the volatility in the crypto market and buy when the assets are on sale, not when everybody wants to buy them. Each massive up-move has a correction, and each “bullish” cycle enters its consolidation phase and possible reversal, the same way as other markets have for the last 200 years.