Ultimate magazine theme for WordPress.

How to make a yield farm “on Bitcoin” with Sovryn

Last update:

June 26, 2023, 6:53 a.m. EDT | 4 minutes read

Source: Adobe/artiemedvedev

Yield farming was the hottest crypto trend of 2020, contributing to the decentralized finance (DeFi) hype on Ethereum (ETH) last year. However, what you may not know is that you can also make a yield farm “on Bitcoin (BTC)”.

Read on to learn how you can start a yield farm “on Bitcoin.” RSK-backed DeFi protocol Sovryn.

What is Sovryn?

Sovryn is a decentralized, non-custodial and permissionless protocol for borrowing, lending and trading BTC. In addition, it is the first DeFi application that allows you to earn a yield farm “on Bitcoin” by providing liquidity to the Dapp (decentralized application) liquidity pools.

On Bitcoin? Yes, but not directly on the Bitcoin blockchain.

Sovryn works with the Bitcoin sidechain Rootstock (RSK), which is compatible with Ethereum's Virtual Machine (EVM). This allows smart, contract-based dapps to be built on RSK that benefit from the security of the Bitcoin network. Transactions on the Sovryn app are merged with Bitcoin to leverage Bitcoin's security model.

The Sovryn Dapp does not take custody of your coins and gives you complete financial sovereignty while you borrow, lend, trade or farm. In addition to decentralized lending, Sovryn enables trustless trades and swaps. This is made possible through the use of an Oracle-based Dynamic Automated Market Maker (DAMM).

Sovryn's DAMM is an on-chain liquidity protocol that enables automated decentralized token swaps while mitigating temporary losses (a loss when your funds are still in a liquidity pool) and multi-asset risk by allowing liquidity providers (LPs), to invest unilaterally liquidity.

Yield farming “on Bitcoin”: Yes, it’s possible!

By providing RSK-backed liquidity pools for decentralized trading, Sovyrn opens the harvest season for Bitcoin.

Yield farming is the act of providing liquidity to a decentralized trading pool (or lending pool) in exchange for trading fees (or interest) and liquidity mining rewards, usually paid out in the protocol's token. In many cases, this approach has been very lucrative for yield farmers, albeit risky, as DeFi protocols are still nascent.

While this yield generation model is primarily found in the DeFi market on Ethereum (and a handful of other smart contact chains), you can now also run yield farms on RSK with Bitcoin support.

Sovryn provides liquidity pools for token swaps where liquidity providers can deposit assets to earn trading fees and farming yield rewards.

However, unlike other AMMs that require liquidity providers to deposit two or more assets, Sovryn does not require this for all of its pools. On Sovryn, users can offer liquidity to a pool of their choice with a single token and still maintain 100% exposure in that token only.

For example, a liquidity provider in the RBTC.RUSDT pool can choose whether to offer only RBTC or only RUSDT as liquidity to this pool. The liquidity provider can still earn both fees and liquidity mining rewards. This type of pool is called a V2 pool.

However, Sovryn also has various double-sided liquidity pools such as SOV/RBTC, XUSD/RBTC, ETHS/RBTC for LPs who prefer to deposit two assets in one pool.

How to farm on Sovryn

Now that you have an idea of ​​what Sovyrn offers, let's take a look at how yield farming works with this leading Bitcoin DeFi app.

To use Sovryn, you need to set up a wallet that is compatible with the Rootstock chain. Some Web 3.0 wallets that you can consider if you don't already have one are already included metamask, RefinedAnd Portis.

Once this is done, access the Sovryn dapp. Click the “Engage Wallet” button in the top right corner. Remember that you need to add a wallet before you can access the Sovryn dapp-to-yield farm.

Next, you need to convert Bitcoin to rBTC. To do this, click on “Buy SOV”, where you will find the “Top up wallet” section.

Source: A screenshot

There you can send Bitcoins, which will automatically be converted into rBTC. Click “Reload Wallet” and “Generate Deposit Address” and send your coins to exchange for rBTC.

Source: A screenshot

Once this is complete, you can exchange your rBTC for SOV or other tokens available on the platform.

Source: A screenshot

Once you have the assets you want to deposit into a liquidity pool, select “Finance” from the navigation menu and then select the “Yield Farm” option.

Source: A screenshot

The next step is to select the liquidity pool you want to provide liquidity to. After selecting an asset pool, click the “Deposit” button on the right side of your screen. For example, you can select the SOV/rBTC pool.

In the pop-up window, enter your deposit amount, confirm the entered entries and then click on the “Deposit” button. For this pool, the deposit must be made in a 1:1 ratio between the two pooled assets. So in this case you need SOV and rBTC in your wallet. Confirm the deposit with your wallet by signing the transactions.

And that's it! They are now yield farming “on Bitcoin”.

Your deposited assets and yield farming rewards paid in SOV will be displayed in the pool's dashboard under Balances and Rewards.

Enjoy the harvest, but remember that every investment comes with risks.


Learn more:
– NFTs “on Bitcoin”: Yes, that’s a thing!
– DeFi on “Road to Recovery” after Strong Quarterly Growth

– “DeFi or DoxFi” asks the community about the Compound founder’s statement
– High returns attract institutions to DeFi, but hurdles remain

Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers

Comments are closed.