The team at Sovryn, a Bitcoin native app for decentralized lending, notes that we’re currently in the middle of an unprecedented transition from a global economy relying on fiat and dominated by the USD to an economy based on BTC transactions.
This gradual transition, from the legacy system to the crypto-based one, is taking place in a fast yet “uneven” manner, the Sovryn team explains. The majority of economic activity, even in the crypto and blockchain space, is denominated in US dollars and depends heavily on fiat on-ramps.
Centralized digital currency exchanges are considered fiat gateways. Meanwhile, centralized stablecoins can also serve as gateways. Both are actually points of centralized control and capture by the outdated legacy financial system.
However, truly decentralized, BTC-backed stablecoins could potentially serve as the single most important tool for the ongoing transition and paradigm shift away from the fiat monetary system. These financial instruments offer consumers with international access to money that’s stable enough to use for daily payments. They’re basically just like dollars, but uncensorable if you use Bitcoin-based stablecoins.
According to the Sovryn team, these cryptos are Bitcoin; however, they aren’t volatile. They are able to reduce our dependence on the centralized gateways and can effectively limit the ability of the legacy financial system from controlling the permissionless nature of decentralized finance (DeFi).
As noted by the Sovryn team, the US dollar is a currency that most consumers and businesses are familiar with, and it does not require lengthy explanations or convincing. Millions of individuals who might be reluctant to try using Bitcoin may feel comfortable using stablecoins for conducting everyday transactions.
At the time of the gold standard, individuals would hardly ever perform transactions with the precious metal itself, as they preferred to transact with gold-backed paper notes.
Notably, banknotes had been the main mechanism to help the gold-backed economy to eventually move to the fiat-based economy. Now, it’s quite possible that stablecoins are the primary mechanism by which we will transition from fiat to digital gold (aka Bitcoin).
The Sovryn protocol will reportedly launch two subprotocols that should help with promoting the adoption of BTC-backed stablecoins. As noted in an update from Sovryn, these subprotocols will be the Sovryn Mynt and Zero.
Sovryn Mynt has recently raised $8.5M and will serve as the protocol that issues the Sovryn BTC-backed stablecoin; $MYNT. The contract will bring together various methods of maintaining Bitcoin-backed stability.
Several Bitcoin-based stable assets will be deposited and also held by the contract itself, the Sovry team explained. This contract will then issue the aggregated stablecoin, which may be redeemed for the Bitcoin stablecoins held in the pool itself or BTC.
The other protocol introduced by Sovryn is called Zero. It is one of the methods of issuing or minting Bitcoin-backed stability that will be used to feed directly into the Sovryn Mynt. The Zero protocol also offers BTC holders the option to borrow stables (for example, US dollars) at zero interest rate. This basically means that HODLers won’t have to sell Bitcoin ever again, as they’ll be able to borrow against their holdings for extended periods.
As mentioned in the update, Sovryn Mynt and Zero may be the latest additions to the fast-evolving Sovryn ecosystem, provided that these improvement proposals are passed. They should show how Sovryn makes Bitcoin a lot more useful, which could further accelerate the trend towards hyperbitcoinization.