Solv Protocol: Exploring the Staking Abstraction Layer and Liquidity Mechanism in the BTCFi Ecosystem

Solv Protocol was established in 2020 with the aim of lowering the barriers to creating and using on-chain financial tools, bringing diversified asset classes and yield opportunities to the crypto space. The project focuses on minting and trading NFTs related to financial ownership certificates. In 2024, with the development of the BTCFi sector, Solv Protocol will shift its focus to BTCFi, creating the full-chain yield Bitcoin asset SolvBTC, providing new opportunities for Bitcoin holders while building an efficient BTCFi ecosystem. Recently, Solv Protocol launched the staking abstraction layer (SAL), simplifying and standardizing the cross-chain Bitcoin staking process, abstracting the complexities of Bitcoin staking scenarios to facilitate quick adoption by users and developers.

Project Basic Information

• Website:
• Twitter: @SolvProtocol, 272,000 followers
• Launch time: Mainnet launched in June 2021, no tokens issued.

Project Team

• Ryan Chow: Co-founder, graduated from Beijing Foreign Studies University, former co-founder of Beijing Youzan Technology.
• Will Wang: Co-founder, creator of the ERC-3525 semi-homogeneous token standard, 20 years of experience in the financial IT sector.
• Meng Yan: Co-founder, former Vice President of CSDN, active KOL in the Crypto industry

Financing Situation

Solv Protocol has completed three rounds of financing, raising approximately $29 million:

• Angel Round: $6 million, led by Laser Digital, UOB Venture, and others.
• Seed Round: $12 million, investments from Binance Labs, Blockchain Capital, etc.
• Strategic Round: $11 million, with participation from Laser Digital, OKX Ventures, and others.

Development Strength

Since the establishment of Solv Protocol in 2020, it has been continuously focused on reducing the threshold for the use of on-chain financial tools. The project’s technical team is strong, and the development of key technical nodes has been completed on schedule.

Operating Mode

Solv Protocol advocates unlocking $1.3 trillion in BTC asset potential through BTC staking. In 2024, the project will shift focus to BTCFi, launching the full-chain yield BTC asset SolvBTC to release BTC staking liquidity, and introducing the staking abstraction layer SAL to begin aggregating BTC liquidity.

Solv Protocol has built an integrated staking platform, breaking down the staking process into four key roles:

1. LST Issuer: Create liquidity yield tokens linked to staked Bitcoin
2. Staking Agreement: Manage the Bitcoin deposited by users, providing secure returns.
3. Staking Validators: Verify the legitimacy and security of staking transactions
4. Revenue Distributors: Ensure that staking rewards are transparently and fairly distributed to LST holders.

By integrating these four roles, the Solv Protocol has built a complete Bitcoin stake ecosystem, achieving seamless interaction between the Bitcoin mainnet and EVM-compatible chains, simplifying the staking implementation for users and developers.

Staking Abstraction Layer (SAL) Staking Abstraction Layer

SAL is a modular architecture designed to facilitate secure and efficient BTC accounting. Its key modules include:

• Staking parameter matrix (SPM): Various settings and parameters for standardized BTC staking.
• LST Generation Module: Simplifies the issuance of cross-chain Liquidity stake Tokens.
• Transaction Generation Module: Automatically generates and broadcasts BTC stake transactions
• Validator Node: Real-time verification of the legality and security of stake transactions
• Profit distribution module: accurately mapping staking rewards to LST holders

SAL integrates multiple staking participants, abstracting and encapsulating complex processes into standardized modules, simplifying the implementation of staking, and promoting more dApp adoption. However, since Bitcoin itself does not support staking, third-party staking may pose security risks, and SAL needs to continuously address challenges related to operational robustness and security.

Advantages Compared to Other BTCFi Projects

1. Security Assurance: Integrating active verification service ( AVS ) to comprehensively monitor stake transactions.

2. Process Optimization: Simplify user stake operations to improve efficiency.

3. Full-chain yield aggregation platform: adopting the CeDeFi model, combining CeFi and DeFi

4. Industry Standardization: Promoting the standardization of the LST industry based on BTC

5. Unified Liquidity: As a unified liquidity entry for the BTCFi industry

Project Model

Business Model

The Solv Protocol economic model consists of two roles:

1. BTC and LST stakers: Stake BTC or wrapped BTC on multiple chains to obtain SolvBTC
2. Cooperative Projects: Deposit users' staked BTC into various DeFi protocols to earn returns.

Solv Protocol revenue source: collect a certain percentage of user profits

Token Model

Solv Protocol has not released any tokens or token issuance plans.

On-chain Data

TVL

The TVL of Solv Protocol has grown rapidly from January 2024 to now, increasing from $1.153 billion to $1.783 billion, a rise of 54.64%.

number of users

The number of SolvBTC users has grown rapidly, increasing from 185,799 in August to 397,324, a growth of 113.85%.

Supported Projects

Multiple public chains and DeFi projects support the Solv Protocol, and its wrapped assets SolvBTC, SolvBTC.BBN, SolvBTC.ENA, and SolvBTC.CORE are adopted across various chains and DeFi projects.

Comparison with Babylon

Solv Protocol and Babylon are closely collaborating in the BTC staking field, but each has its unique positioning:

• Babylon focuses on BTC staking, expanding Bitcoin security to other networks.
• Solv Protocol is a full-chain yield and liquidity protocol that simplifies the cross-chain BTC stake process.

Solv Protocol not only provides BTC staking assets for Babylon, but is also a major liquidity provider in its ecosystem. The relationship between the two should be parallel, with Solv Protocol having greater liquidity and a wider range of application scenarios.

Project Risk

1. Smart Contract Vulnerability Risks
2. Lack of a clear token economic model
3. Challenges of Decentralized Management
4. Liquidity Risk
5. Risks of High-Risk DeFi Protocols
6. Market Acceptance and User Trust

Summary

Solv Protocol, as an innovative project in the BTCFi space, integrates the Bitcoin stake ecosystem through SolvBTC and SAL technology, lowering the participation threshold for users. The project demonstrates rapid growth in TVL and user numbers, gaining support from well-known institutions in the industry. However, Solv Protocol also faces challenges such as security, incentive mechanisms, and user trust. Despite the risks, these risks are common across BTCFi projects. After launching SAL, the development direction of Solv Protocol has significantly differed from merely providing BTC-based LST projects, as it has greater potential in aggregating the overall chain's BTC dispersed liquidity. Therefore, Solv Protocol is a project that is highly worthy of investment and attention.