# [CODEC] - $soBTC CODEC Analisys

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### $SOBTC - Sollet Wrapped BTC

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**Overview of the Protocol and Metrics**

## **Protocol Summary**

The Protocol Summary should provide a brief introduction to the underlying protocol of the asset and its token mechanics:

- Peer-to-peer or peer-to-liquidity pool lending protocol: Peer-to-peer
- Asset type - native or wrapped: Wrapped
- Asset (token) use - Sollet Wrapped $BTC or $SOBTC is a SPL token that represents bitcoin on the Solana network. $SOBTC provides a way of using bitcoin in smart contracts and makes bitcoin accessible on decentralized exchanges.
- And a high-level history of the project and token:
- In its native ecosystem, $BTC works as a peer-to-peer payment system, as well as a coin to pay fees for transactions. Categorized as the oldest cryptocurrency, it is considered as a reserve of value as well as the inspiration for the rest of the blockchain networks in the entire ecosystem.
- Project Serum was originally created by FTX founder Sam Bankman-Fried and supported by Alameda Research and FTX employees. Project Serum is a decentralized exchange and liquidity infrastructure platform for DeFi built on Solana. The project was founded under the “Incentive Ecosystem Foundation” by FTX and Alameda Research group in order to segregate employees contributing to Serum with it’s own legal structure. The foundation manages the development fund treasury, and is a vehicle to compensate contributors. Project Serum will be used interchangeably with the “Incentive Ecosystem Foundation”, and “the foundation” in this report.
- [Sollet.io](http://Sollet.io) is a browser extension that was developed under Project Serum for the launch of their decentralized exchange on Solana. The Sollet wallet and it’s smart contracts are released as open source. At launch, the wallet also provided a solution for bridging assets from their native chain to the Solana network as a wrapped SPL token whose price is pegged to the underlying asset.
- Sollet Wrapped $BTC or $SOBTC is an SPL token representing $BTC where the native $BTC asset is stored in an address on the Bitcoin blockchain, and an equal amount representing the stored $BTC is minted on Solana as the $SOBTC-SPL token. The $SOBTC token then allows users to use their bitcoin assets on the Solana network for DeFi or other use cases.
- Founding members: [Sollet.io](http://Sollet.io) was developed and released by Project Serum as open source software.
- Fundraising History: (As associated with the launch of $SOBTC) N/A
- Public ICO date: $SOBTC did not have an ICO. Token distribution began by users bridging their native $BTC to the Solana network for $SOBTC.
- Initial Price & Valuation: N/A - $SOBTC is pegged to the price of native $BTC.
- Capital Raised (Crypto & USD ): N/A
- How much of the ICO raised was converted into fiat (described in both terms of that fiat currency and the amount of tokens? : N/A
- What is the legal structure of the protocol (LLC, Association/ Foundation, DAO?): **
- *No organization holds formal control over the Bitcoin blockchain. It can be argued that Bitcoin was the first DAO in existence.*
- *Sollet is an open source project launched by Project Serum. Project Serum is currently operating as a Foundation for treasury and contributor related duties, and a DAO for governance.*

## Tokenomics

Purpose: To understand circulating supply of the token, as well as how its mechanics might impact the supply in the future.

- What was the way of issuing and distributing the tokens? What is the current token distribution?: Users that wished to use $BTC on Solana must bridge their native $BTC to Solana in order to mint $SOBTC. The token currently has 7,538 holders holding 16,149.99 $SOBTC.
- Pre-ICO Investors: N/A
- Proportion of tokens held by the project team versos investors versus public, etc.: N/A
- Has the token distribution changed over time?: Yes, the number of holders over time has increased. The chart below shows a 2x of the amount of holders over the past 7 months.
- Decrease or increase of the token supply over time?: Supply has increased over time due to the demand of being able to use $BTC on Solana’s Defi ecosystem and dapps.
- Is the project able to mint more tokens in the future?: The project is only able to mint $SOBTC tokens when users stake their $BTC tokens on the Bitcoin blockchain, 1-to-1.
- Future issuance mechanism:

*Bitcoin supply has increased since the genesis block and will do it until the year 2140. The last block that will generate coins will be block #6,929,999. The total number of coins in circulation will then remain static at 20,999,999.9769 BTC. In order for new $SOBTC to be minted, $BTC from the native Bitcoin blockchain must be bridged.*

Source: SolScan

- Staking Mechanism: N/A
- Slashing Mechanism: N/A
- Tokens on vesting schedule + Schedule + related vesture limitations: N/A
- Are any tokens allocated for specific purposes or issuance schedules ? ( Liquidity mining ? ): N/A
- Are any tokens allocated for specific purposes or issuance schedules ? ( Liquidity mining ? ): N/A
- Active addresses / users holding the asset:

*Sollet Wrapped Bitcoin addresses: 7,242 (average)*

Source: SolScan

- Details and amounts of fees generated by the protocol: *Sollet does not charge any extra fees for the service than the Solana network fees.*
- Other protocol/product specific fundamentals: *Bitcoin’s blockchain reward halvings are a well documented event of increased price volatility for not only $BTC, but the entire crypto ecosystem, across all chains.*

## **Audits**

- Is the protocol audited? : *Project Serum quality process has been audited [by DefiSafety](https://www.defisafety.com/app/pqrs/380). This wasn’t a code audit.*
- Are the audit firms reputable?: *DeFiSafety has done more than 140 protocol audits through 14 different chains. Trusted by companies such as Nexo and CoinGecko, DeFisafety could be considered as one of the biggest in the crypto scene.*

## DEX volumes + liquidity (native and bridged assets)**

Trading volumes of the asset in DEXs. The analysis should only cover trading pair of the asset with USDC.

It is recommended to compare the daily volume / deposits ratio of reputable and suspicious exchanges to understand the size of real v. fake volume.

- Daily aggregated trading volume in USD >> 7 day trading history
- at least 21M over the last 7 days.
- Does the asset have liquidity on Serum?
- Liquidity depth >> Resting orders on Serum order book

*Sollet Wrapped Bitcoin have liquidity on Serum.*


Source: Serum

## Oracles
- Which Oracles monitor the asset? How many feeds are available? *[Pyth -](https://pyth.network/markets/#Crypto.BTC/USD)*
- Is it on Pyth network? Are there 5 or more price components quoted by Pyth? (provide link to Pyth market feed) [*Yes.*](https://pyth.network/markets/#Crypto.BTC/USD)
- **Downside Risks**
- How often the asset drops significantly in price in comparison to SOL (SOL has dropped significantly over its lifetime)? : *Sollet Wrapped BTC is attached to BTC price, therefore it has drop significantly once since launching 2021.*

Source: Messari

- Stablecoin: has it ever lost the peg? If yes, what was the reason?: N/A

Availability of historical data needs to be taken into account for new coins: N/A

## Bridges
- Which bridges are used? Are they custodial or non-custodial?: *Sollet - non-custodial .*
- If non-custodial, have the bridges been audited?: *Sollet has not been formally audited, however the source code is open-source and available for anyone to audit it.*
- **DeFi Presence**
- Does the token have utility outside of its protocol?: *Sollet Wrapped Bitcoin only has value outside Solana Ecosystem after being unwrapped to its native chain.*
- The protocols into which the asset is integrated: *The asset could be find in [Serum](https://hackmd.io/https://projectserum.vybenetwork.com/#/tokens/9n4nbM75f5Ui33ZbPYXn59EwSgE8CGsHtAeTH5YFeJ9E/),
[Jupiter Aggregator ](https://hackmd.io/https://jup.ag//), [Raydium](https://raydium.io/swap/) , [Orca](https://www.orca.so/), among others.*
- The amount of asset liquidity that exists in those protocols: *In [Serum,](https://projectserum.vybenetwork.com/#/tokens/9n4nbM75f5Ui33ZbPYXn59EwSgE8CGsHtAeTH5YFeJ9E) we can find the following pairs.* 

- The drawbacks or benefits of the asset (e.g., the asset is not integrated into DeFi protocols because it is complex): *SOBTC is dependent on a bridge. Any asset that requires a bridge will have inherent risk.*

## Summary of notable risks or red flags

Examples of red flags include:

- The team behind protocol holds the admin keys (a clear centralization risk): N/A
- The value proposition of protocol (the likelihood of the project being successful) isn’t promising. For example:
- A novel project or technology that hasn’t been validated or isn’t seeing much adoption: N/A
- A high competitive landscape suggests it might not be successful long term: *There are several competitive BTC bridges in development, and also mainstreamed bridges such as Portal Bridge wrapped by Wormhole, RenBridge, Apyswap, among others. Scenarios where offer services exceed user’s demands could lead to failed usage in the long run.*
- Issues around profits or fees suggest it might not be sustainable: N/A
- The asset is mainly traded on a single exchange, suggesting a single point of failure risk: N/A
- The stablecoin asset has regulatory and counter-party risks and/or risks of blacklisting or frozen tokens: N/A
- Considerations: N/A

**Legal Specifications**

- Token issuer: *[Sollet Bridge](https://www.sollet.io/)*
- Regulatory status of the token (based on legal opinions, prospectuses, public disclosures, filing documents, etc.) : *Several public disclosures about missing [proof of reserves](https://bitcoinmagazine.com/business/proof-of-reserves-industry-standard) mechanisms for backed soBTC, as well as unwrapping or redemption mechanisms.*
- Jurisdiction(s) in which the token was issued : *N/A*
- Was the token issued as part of a regulatory process (e.g., securities offering)? : *No*
- Was the token issued as part of the fundraising process? If yes, who are the investors and how much equity do they respectively hold? : *No*