Using the Dapp
Frequently Asked Questions About the Use of Sovryn Platform
Sovryn will allow you to trade Bitcoin against USD stablecoins. The offer will increase in the future.
No, there is not an orderbook. Sovryn uses an automated market maker (AMM) that automatically adjusts fees in accordance with supply and demand.
Margin trading has two main aspects: trading with leverage and shorting. In trading with leverage, a trader borrows assets to increase the amount of assets they are trading. By doing so, they magnify the gains or losses of their trade. The borrowed assets are known as a margin loan. To obtain the margin loan, the trader puts up assets that serve as collateral. The terms of the margin loan specify a collateral-to-loan ratio. If the trade falls below the specified ratio, the trade is liquidated and the lender is made whole using the trader’s collateral.
Margin trading also includes shorting. In shorting, a trader essentially sells assets they do not own. The short investor borrows an asset and sells it on the expectation that the assets will lose value. When the trader's expectation was correct and the asset did drop in value the short can be closed. At that moment the trader buys back the asset to repay the loan and the surplus is profit. However, if the price of the asset did increase, the trader will have to buy back the asset at a higher price which would create a loss.
Sovryn allows for up to 5x leveraged trades at this moment, but this will be increased in the future.
On Sovryn, you receive a margin call when you approach the margin maintenance threshold of 15%. If your margin slips below 15% your position will be partially liquidated.
Since Sovryn is built on RSK (a Bitcoin side chain), it benefits from lower block times which average 30 seconds compared to the Bitcoin average block time of 10 minutes.
No, it is not possible to place a limit order. Sovryn uses an Automated Market Maker(AMM) to allow trading, similar to Uniswap. This design does not allow for an orderbook hence there are no limit orders. In the future, conditional orders will be added which will serve a similar purpose.
Sovryn currently uses an oracle called Money-on-Chain along with an aggregate of multiple exchanges to tether the price to the market price of Bitcoin. Soon Chainlink will also be used as an oracle.
The difference between borrowing and lending is that you can redeem everything you ever lent to the contract at once, but in case of borrowing you can only close one position at a time. Hence, the difference at handling them on the page.
There are different types of fees depending on your interactions with the Sovryn Dapp. You could be trading, swapping, borrowing or lending assets.
The Sovryn protocol collects a fee on each trade that is performed. This fee is currently set at 0.15% on each position opening, but there is no fee on closing.
Liquidity Providers can provide liquidity to the Sovryn Swap AMM. Unlike most other AMM’s, such as Uniswap, LP’s are not required to deposit both assets into a pool, they can add only one or both if they prefer. Sovryn Swap uses oracles to rebase the ratio between tokens, eliminating most of the possibility for impermanent loss. Sovryn Swap collects a fee on each side of the swap, which is distributed to the LP’s. Currently this fee is set at 0.1%
The interest rate paid by borrowers to lenders is set dynamically based on supply and demand - the ratio of supply to loans. The Sovryn protocol collects an origination fee on every loan, currently set at 0.09%. If you lend money to a liquidity pool, there is a small lending fee of 0.1% on top of the gained interest, but not in the moment you lend, only in the moment you withdraw. Therefore, you don’t pay a fee for lending your money. You share a portion of what you’ve earned. 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 FastBTC relay is constructed by Sovryn. It allows users to bridge their Bitcoin seamlessly from any Bitcoin wallet. This system will continue to improve as the technology matures and is optimized. One of the greatest challenges in extending Bitcoin's capabilities has been the difficulty in bridging Bitcoin trustlessly to other chains or layer-2 systems. The FastBTC relay solves this issue. It is a service to rapidly convert your BTC into the native RSK coin: the rBTC. This process is called the “Peg-In”.
For the Peg-In service of the FastBTC, Sovryn platform collects a fee of 0.15%. All these fees will be destined to the distributed governance of the platform.
We require at least one confirmation for all transactions. For most transaction sizes, even this is overkill. For very large transactions, we will require more confirmations on a risk-adjusted basis. Only the very largest transactions would require more than 3 confirmations.
The FastBTC relay is indeed centralized right now. This will change as soon as we add a federation and then further steps to decentralize it. In particular we will be linking it with lightning network, so that transfers can happen instantaneously.
Don’t panic! You haven’t lost money. Your lending screen will be showing you two different currencies or tokens. There are what we call “iTokens” and “Underlying Tokens”. Underlying token is the form in which your funds are sent to a liquidity pool as a lender. The iToken is what you receive in exchange as proof of loan. The “i” in iToken stands for interest, that you will earn as a lender; it's a token representing the share you will have in the pool. So if you have 1.0 i-RBTC and there are 10 RBTC in the pool, it means you own 1.0 RBTC. If the pool accumulates interest and now contains 10.1 RBTC, your 1.0 i-RBTC are now worth 1.01 RBTC. If now somebody else lends another 1.0 RBTC, he obviously doesn't receive 1.0 i-RBTC, but approximately 0.99 i-RBTC, because the value in the pool is bigger than the sum of all the deposits.
When you want to close a position, you have the option to close it partially. You will have the option to specify how much of that position you aim to close. The position is denominated in dollars for that reason.
The MetaMask wallet is by default using the Ethereum gas settings instead of the RSK gas settings. Gas price on RSK is currently 60.000.000 RSK Weis, or 0.06 GWei, while in the Ethereum network it is oscillating strongly between 20 Gwei and 200 Gwei or more. Let's bring it back to the basics and use a car trip as example. You need to fuel the car to drive, but you only have 10 liters of fuel, that would be your limit of total consumption (gas limit). Also, you looked for a specific price for that fuel (gas price). If you reach your destination earlier than reaching an empty tank, you only spend a partial amount of fuel (gas used). A transaction fee is based on gas price x gas used up to success or the gas limit. Let’s suppose that a transaction in Sovryn is around 1.800.000 units of gas. If by any chance the gas price is allowed to be set to 200 Gwei, it means that the transaction fee will be set to 0.36 RBTC, which is worth of 0.36 BTC or in other words, more than $5.000 in transaction fees. Such a transaction shouldn't be, by the time this guide is written, more expensive than 10.800 sats, or a couple of dollars, in the worst case.
In order to avoid this situation, it is recommended to set the MetaMask wallet to “Advanced gas controls” so you as a user will be always asked for the gas price adjustment. This allows you the chance to check and verify the correct settings. Please see below for the 4 easy steps to adjust your gas settings. Step 1: When you are logged into your MetaMask, open the settings window by clicking on the account symbol in the top right corner.
Step 2: Now a new window pops up. Click on “Advanced”.
Step 3: Scroll down until you see the “Advanced gas controls” section. Here you want to make sure that the toggle switch is set to "ON".
Step 4: Every time when you prepare a transaction on your MetaMask, the window of confirmation should appear. This window allows you to set your preferred Gas Price and Gas Limit. At the time of writing this guide, on the RSK network, the Gas Price should be around 0.06 Gwei for a proper transaction price and experience.