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Sova Protocol

💲 StableCoin

The Sova Protocol introduces a decentralized collateralized debt position (CDP) system to issue stablecoins across multiple blockchain platforms, with a focus on the CAT20 token standard. CAT20 stablecoins are central to Sova’s ecosystem, offering a robust and transparent way to mint stablecoins backed by Bitcoin and RUNE. The protocol’s key stablecoins include Sova•Bitcoin•Stablecoin•USD (Sova•BTC•USD), pegged to the U.S. dollar and collateralized by Bitcoin and RUNE. This approach eliminates the need for centralized intermediaries, leveraging the security of Bitcoin’s blockchain and Ethereum for governance.

Key Stablecoins

  • CAT20 Stablecoins: CAT20-compliant stablecoins form the backbone of the Sova Protocol, designed to operate across different DeFi platforms.
  • BRC20 sousd: A Bitcoin-based stablecoin issued as a BRC20 token.
  • Sova•Bitcoin•Stablecoin•USD (Sova•BTC•USD): A cross-chain stablecoin, pegged to the USD, backed by Bitcoin, and issued through a CDP model.

Collateralized Debt Position (CDP) Overview

The CDP model allows users to lock up Bitcoin (BTC) and RUNE as collateral to issue stablecoins. This mechanism provides a decentralized way for users to borrow stablecoins while maintaining their exposure to Bitcoin.

How It Works

  1. Collateralization: Users deposit Bitcoin or RUNE into the Sova Protocol as collateral.
  2. Stablecoin Issuance: Based on the collateral value, users can mint Sova•BTC•USD or sousd stablecoins, which can be used across DeFi ecosystems or traded.
  3. Debt Repayment: Users can repay the stablecoins to unlock their Bitcoin collateral.
  4. Liquidation: If the collateral value drops below a certain threshold (e.g., collateral-to-debt ratio falls below 150%), the protocol liquidates the collateral to maintain system stability.

Collateral Mechanism

  1. Bitcoin: The primary collateral asset in Sova Protocol, ensuring stability and trust, thanks to its widely accepted value and security.
  2. RUNE: Supplementary collateral that offers additional flexibility to users. RUNE-backed stablecoins, due to RUNE’s liquidity and integration within the BTC ecosystem, provide cross-chain functionality.
  3. CAT20 Tokens: These native stablecoins enhance the flexibility of collateralization, offering more dynamic financial instruments in the decentralized ecosystem.

Governance: CAT20 Sova Token

Governance in the Sova Protocol is powered by Sova tokens (CAT20), which are used for decentralized governance, including voting on protocol upgrades, stability fees, liquidation ratios, and other critical changes. Sova holders can influence the future of the protocol and participate in decision-making processes, ensuring the protocol remains community-driven.

Stability Mechanisms

To ensure the peg of Sova•BTC•USD and sousd, the protocol employs a series of stability mechanisms:

  • Over-collateralization: Users must over-collateralize their loans to ensure system stability during market downturns.
  • Liquidation Auctions: When collateral value falls too much, it is automatically liquidated to maintain stability, ensuring all debt is adequately backed.
  • Stability Fees: Borrowers pay a stability fee, a dynamic interest rate charged for minting stablecoins, which governance can adjust to ensure peg stability.

Cross-Chain Compatibility

The Sova Protocol’s use of RUNE facilitates cross-chain compatibility, enabling stablecoin issuance and liquidity pooling across various blockchain ecosystems. This allows stablecoins like Sova•BTC•USD to operate on multiple platforms, enhancing liquidity and use cases in the DeFi space.

Use Cases

  • DeFi Integrations: Sova’s CAT20 stablecoins, along with Sova•BTC•USD and sousd, can be used across decentralized finance platforms for lending, borrowing, and trading.
  • Remittances: Stablecoins are ideal for cross-border transfers, offering low volatility and fast transaction speeds.
  • Store of Value: Users can hedge against Bitcoin volatility while maintaining exposure to decentralized assets by using Sova Protocol stablecoins.

Roadmap

  1. Phase 1: Stablecoin Launch
    • Launch CAT20 stablecoins, Sova•BTC•USD, and sousd.
    • Ensure secure collateralization through Bitcoin and RUNE.
  2. Phase 2: Governance Token
    • Introduce CAT20 Sova token for decentralized governance.
  3. Phase 3: Ecosystem Expansion
    • Expand DeFi protocol integrations for lending, borrowing, and trading.
    • Extend cross-chain functionality to more blockchain platforms.
  4. Phase 4: Cross-Chain Stablecoin Issuance
    • Explore further cross-chain issuance of stablecoins and liquidity pools.

Conclusion

Sova Protocol leverages CAT20 tokens, Bitcoin, and RUNE to provide a decentralized and collateral-backed stablecoin ecosystem. By using the CDP model and decentralized governance, Sova ensures a robust and transparent stablecoin system, empowering users and creating a more reliable financial infrastructure across blockchain ecosystems.