S15 E5: Edan Yago on Sovryn, Bitcoin DeFi & Challenging the Orthodoxy

Edan Yago is a core contributor to the Sovryn project: a decentralized finance (DeFi) layer that’s built on top of Bitcoin’s Rootstock (RSK) sidechain. In this interview, which we recorded on November 10th 2023 at the 11th annual edition of Labitconf in Buenos Aires, Yago speaks candidly about topics which may baffle the fabric of Bitcoin orthodoxy.

Sovryn is a service which allows anyone to take fiat loans against their bitcoin. This practice is fairly common in the legacy financial world, where executives of big companies regularly avoid selling their shares by borrowing money from third parties who are interested in potentially owning the shares if the loan doesn’t get paid back. The goal is to not affect the market, but also not trigger a tax event.

However, instead of using paper money and banks, Sovryn makes use of stablecoins and contracts. It’s certainly a novel approach for Bitcoin, though many observers would point out to its origins on Ethereum – after all, Bitcoin’s Rootstock sidechain is 100% EVM-compatible and capable of porting applications and smart contracts with little to no changes. However, all the economic activity is entirely backed by BTC which gets locked on the base layer and issued on the second layer. This isn’t about tokens that anyone can print out of thin air, there’s real Proof of Work behind everything.

My conversation with Edan Yago had much more depth than presenting a product or projecting what a vocal side of the community would say about it. He expressed his thoughts on the role that Bitcoin would play in the future of humanity, and went as far as comparing the decentralized internet money with the advent of democracy. Yago referred to Bitcoin as “permaware”, something that goes beyond software thanks to its predictability and reliability over time.

If you’re interested in discovering how Sovryn is integrating this financial use case on top of Rootstock, then you should definitely take a look at their website. The project’s mission isn’t to remain stagnant or merely copy functionalities from Ethereum – as stated in the documentation, Sovryn aims to become a full-stack financial operating system which integrates new research in cryptography and computer science. Currently, Zero Knowledge (ZK) rollups are being researched as a more efficient way to scale and gain some privacy.

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The philosophy behind building on the Roostock Bitcoin sidechain (00:01:31) Edan Yago explains his view of Bitcoin as the next step for humankind after democracy, emphasizing its reliability and permanence.

The potential of Rootstock (00:03:59) Edan Yago discusses Rootstock as a platform for achieving full self-sovereignty with Bitcoin, and its role in building a world on Bitcoin.

Features and security of Sovryn (00:07:54) Yago explains the features of Sovryn, including financial tools, governance, and the Bitcoin-backed stablecoin, and addresses its security and risk factors.

Technical aspects of using Sovryn (00:26:28) Edan Yago provides information on how to get started with Sovryn, explaining the user interface and the process of interacting with the smart contracts.

Improving User Experience (00:27:42) Edan Yago discusses the improved user interface and the ease of use of Sovryn, including his mother’s experience using it.

Refining Use Cases and Infrastructure (00:28:38) The focus on refining existing use cases, enhancing user interface, improving liquidity, and building the new infrastructure for rollups to Bitcoin.

Contributing to Sovryn (00:30:20) Yago encourages developers and entrepreneurs to reach out to contribute to Sovryn, providing contact information and ways to get involved.

Bitcoin Orthodoxy and Social Change (00:32:28) Edan Yago challenges the Bitcoin orthodoxy, emphasizing the need for building an economy around Bitcoin and advocating for social change and sound finance.

Stablecoins and Digital Gold (00:37:06) The importance of Bitcoin-backed stablecoins in making Bitcoin a reserve currency and enabling its use as digital gold by a wider population.

The Philosophy of Bitcoin and the Promise of Rootstock

Yago shared his vision of Bitcoin as the next evolutionary step for humanity, akin to the advent of democracy. He spoke passionately about Bitcoin’s voluntary nature and its resilience against majority control, likening it to “permaware” and the only trustworthy foundation for our future. I couldn’t help but draw parallels to a constitutional republic, where the core principles of Bitcoin stand firm against the whims of the majority.

Rootstock: Building a World on Bitcoin

The concept of Rootstock (RSK) was a central theme of our discussion. Yago outlined it as a platform that enables the creation of decentralized applications on Bitcoin, without intermediaries, fostering trustless transactions. He detailed Sovryn’s ambitious three-phase plan, which includes building a financial operating system, transforming Bitcoin into an operating system itself, and ultimately, constructing a world on that operating system. The incremental approach to this vision and Rootstock’s role as a proof of concept for the future were underscored.

Sovryn: A Financial Operating System for Bitcoin

Our conversation then shifted to Sovryn, a project that aims to create a financial operating system allowing users to leverage Bitcoin without intermediaries. Edan Yago highlighted the open-source nature of Sovryn, its community-driven development, and the functionalities it offers, such as swaps, trades, margin trades, borrowing, lending, and earning yield on Bitcoin and Bitcoin-backed stablecoins.

The Mechanics of Borrowing and the Role of Stablecoins

Delving into the lending aspect of Sovryn, Yago explained the mechanics of borrowing against Bitcoin and earning yield. He clarified that the yield is generated from the interest paid by borrowers and discussed the potential for leveraging Bitcoin without the need to sell it. The conversation also touched on the usability of stablecoins, with Yago emphasizing their role in enabling payments without direct fiat interaction.

User Experience and Security: Sovryn’s Approach

Addressing the user experience and security concerns, Edan Yago acknowledged that while Sovereign may not offer the same level of security as the Bitcoin network, its decentralized nature and resistance to rug pulls set it apart. He compared Sovryn’s security to other platforms and discussed the advantages and potential risks associated with its scripting language and smart contract pool.

Sovryn’s Governance and Future Enhancements

The concept of “ocracy,” Sovryn’s governance system secured by Bitcoin, was introduced along with the vision of creating a world on Bitcoin. Yago also shared insights into the project’s focus on refining existing use cases, improving the user interface, and building rollups for scalable transactions with Bitcoin-level security.

Edan Yago’s Recommendations On Getting Started with Sovryn

For those interested in getting started with Sovryn, Edan Yago recommended visiting the Sovryn website and exploring the user-friendly interface that simplifies interaction with smart contracts. He also invited developers, code reviewers, and entrepreneurs to join the Sovryn community on Telegram, Discord, or GitHub to contribute to the project’s growth.

Edan Yago’s Personal Note on Sovryn’s Accessibility

Edan Yago made a compelling statement about Sovryn’s accessibility by mentioning that his mother, who is not particularly tech-savvy, uses the platform. This serves as a challenge to all listeners, highlighting the platform’s ease of use and the team’s commitment to continuous improvement based on user feedback.

The Future of Bitcoin Beyond Orthodoxy

In a candid moment, Edan Yago expressed his views on the Bitcoin orthodoxy, advocating for the development of an economy around Bitcoin that goes beyond simply holding it. He emphasized the need for Bitcoin to become a currency, supported by an economy with diverse assets, and the importance of building Bitcoin-backed stablecoins to achieve this goal.

A Call to Action for the Bitcoin Community

Our discussion concluded with a reflection on the current state of cryptocurrency adoption in Argentina and the missed opportunity for Bitcoin to serve as a sound financial alternative to Tether on Tron. Yago’s insights serve as a call to action for the Bitcoin community to build and support initiatives that can bring sound money and finance to those who need it most.