It has only been 3 days since the LINKPAD funding proposal passed (thank you to everyone who voted) and we’ve been moving at lightspeed to execute on our vision of building the first-ever community-based decentralized venture capital fund, owned wholly by those staking YFL tokens in the V2 governance vault.
The past day has been historic for Bitcoin, with the benchmark cryptocurrency setting fresh all-time highs, and we feel that there is no better time to announce LINKPAD’s investment in Sovryn, a decentralized platform for trading and lending Bitcoin.
As of now, the burgeoning DeFi ecosystem has existed almost entirely on Ethereum, but there is a growing trend of migration towards other chains.
Sovryn is the first DeFi-application to be fully built on the RSK Bitcoin side-chain, allowing users to lend and trade Bitcoin on a decentralized platform, all while using native Bitcoin — no need to wrap the tokens using a bridge like Wrapped Bitcoin or renBTC.
Sovryn provides users with three main services:
- Margin trading and swaps
- Borrowing and lending
- Liquidity providing
On their margin trading platform, which is already live on mainnet, users can trade with up to 5x leverage, borrowing funds from lenders. The system is structured identically to that of centralized margin trading platforms like BitMEX, with an insurance fund protecting lenders against undercollateralized loans.
Lenders get the obvious benefit of earning funding payouts on their loaned Bitcoin, while maintaining full custody of it and not having to migrate it onto the Ethereum blockchain.
Our Investment Thesis: Why We’re Bullish on Sovryn
The trend of utilizing Bitcoin while also tapping into DeFi incentives is growing at a rapid pace, with nearly $2.5 billion worth of Bitcoin being directed to Wrapped Bitcoin (WBTC) and another roughly $300 million in renBTC.
In many ways, wrapping your Bitcoin through a centralized provider who stores and manages the native Bitcoin collateral (in the case of WBTC, that would be BitGo) runs counter to the entire premise of a trustless, permissionless, system.
With Sovryn, lenders can now maintain full custody of their Bitcoin without having to migrate it to other chains, while still being able to tap into DeFi incentives.
Furthermore, creating an easy-to-use decentralized margin trading structure is more relevant than ever, with global governments cracking down on centralized trading platforms that offer traders access to leverage.
Via Sovryn, users from all over the world can margin trade their Bitcoin without having to take on the risks of using a centralized platform — including KYC proceedings, IP bans, funds being locked, etc.
We’re proud to have contributed $20,000 to Sovryn’s latest fundraising round, which took in a total of $2.1 million from a handful of notable funds in the space, including Greenfield One, Collider Ventures, Monday Capital, Multicoin Capital, and others.
We are also in talks with the Sovryn team to host an exclusive listing of a wrapped version of their governance token on LINKSWAP upon its public launch, so that Ethereum users will be able to tap into their liquidity providing incentives.
What This Means for YFL Holders
Per the proposal 23, LINKPAD’s profit distribution structure makes it so that YFL governance stakers are entitled to 70% of all realized profits made from any investments — this, of course, includes our position in Sovryn.
Because we are structuring distributions on a quarterly basis, all YFL staked within the governance vault as of January 15th, 2021, and held through the end of Q1 will receive a share of all the profits generated by this investment. Any and all profits will be used to market-buy YFL on LINKSWAP, and will then be distributed proportionally to holders in the YFL governance vault.
We will share more details regarding this process in a later post, and keep you updated on further investments we make in the weeks and months ahead.
Onwards and upwards!
The LINKPAD Core Team 🐸