Sovreign | Frequently Asked Questions
We believe that Store-of-Value assets will Reign supreme in the future, Sovreign is a mechanism that gives everyone a voice on what good Store-of-Value assets are and makes them easily accessible.
As crypto-natives self-sovereignty over assets and decision is the key priority, we are strong believers in the Wisdom of the Crowd and Game Theory as an organisational driver. Sovreign reflects these principles through the DAO Governance and Incentive mechanisms.
By Staking your REIGN tokens into governance, you get a say in how the Sovreign Basket is composed: what assets are included and what percentage of the basket each asset has. It also gives you a voting right on all other DAO proposals.
Ultimately any asset voted upon with a quorum by the DAO can be added to Sovreign, the founding team hopes that the community sticks to the driving principle and mission of creating the best basket of Store-of-Value assets.
Sovreign has two tokens, the SOV and the REIGN. The SOV represents the value of the Sovreign Basket and can at any time be redeemed for the underlying assets. REIGN is the governance tokens and is used as voting power and to pay deposit and withdraw fees.
REIGN has a capped supply, the issuance rate is halved every two years. REIGN tokens can be earned by anyone participating in the protocol by providing liquidity or staking into governance. The REIGN Token gives users voting rights on the basket composition and other DAO proposals. It is also needed to pay for deposit and withdrawal fees.
Sovreign is governed by the ReignDAO, a decentralized community of token holders. Any changes to the protocol or the basket have to be voted on by the DAO. Any expense from the Treasury has also to be voted on by the DAO. Any DAO participant can make a proposal on which all other participants can vote on. If the proposal reaches the required threshold of votes it is executed as a transaction.
Only the ReignDAO can spend tokens from the treasury through proposals that receive a majority of votes.
Any time there is a proposal token holders have a period of time to get informed and discuss the vote off-chain. Afterwards, voting is enabled for a given period of time where votes are cast. There is a period in which a new proposal to challenge the original one can be made (the abrogation proposal). If this does not happen and the proposal is accepted, then it can be executed by any DAO member.
There is a rewards boost for Liquidity Providers that vote on each epoch for basket allocation. There is no additional reward for voting on DAO proposals.
The Smart Contracts have checks to avoid flashloan attacks and the abrogation vote mechanism gives the DAO a backstop mechanism in case of malicious proposals.
Gas fees are an inevitable part of blockchain transactions. Sovreign is actively considering scaling solutions such as layer-2 and rollups to decrease friction and make voting more accessible.
REIGN tokens can be locked in the governance staking to increase rewards. However, locking is optional: token holders can also choose to not lock the tokens, allowing them to withdraw them at any time.
Liquidity Pool Returns
By Providing Liquidity to one of the pools in the Sovreign basket, users deposit the given token into the pool and receive a corresponding amount of SOV tokens. These can be used to farm yield. The Liquidity Providers are receiving a yield. To withdraw liquidity from pools users have to repay a given amount of SOV tokens.
The APY on the pools depends on their size in relation to the other pools. It means that if one is considerably small relative to others, a large amount of tokens will be issued to LPs to incentive recapitalisation of the pool. If on the other hand a pool is considerably large compared to others, no APY will be given and a fee is set for user depositing.
Yes. By providing liquidity to single pools or a subset of pools, a large price change in the assets may require users wanting to withdraw their liquidity to pay in more SVR tokens than what were issued to them.
If liquidity is provided to all pools proportionally, no impermanent loss will be possible as the value of the liquidity always reflects the value of the basket. Therefore, impermanent losses in one pool will be always fully covered by excess gains in another one.
Rigorous security audits will be made by reputable companies before the smart contracts are deployed to mainnet.