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

Introduction

Solv Protocol was established in 2020, aiming to lower the barriers to creating and using on-chain financial tools, bringing a diversified range of asset classes and yield opportunities to the crypto space. Solv Protocol focuses on minting and trading NFTs related to financial ownership certificates. In 2024, with the continuous development of the BTCFi sector, Solv Protocol has shifted its focus to BTCFi, creating the all-chain yield Bitcoin asset SolvBTC, aimed at providing new opportunities and possibilities for Bitcoin holders while establishing an efficient BTCFi ecosystem. Recently, Solv Protocol launched the staking abstraction layer (SAL), aiming to simplify and standardize the cross-chain Bitcoin staking process, abstracting the complexity of Bitcoin staking scenarios so that users and developers can adopt it quickly.

Project Basic Information

Basic Information

Website: solv.finance

Twitter: @SolvProtocol, Followers 272K

Launch time: Mainnet launched in June 2021, Solv Protocol has not issued tokens.

project team

Core Team

Ryan Chow: Co-founder. Graduated from Beijing Foreign Studies University, previously served as co-founder at Beijing Youzan Technology, dedicated to applying blockchain technology to the automotive industry database. In addition, he also worked as a financial analyst at Singularity Financial, researching the integration of blockchain technology and financial regulation.

Will Wang: Co-founder. Created "ERC-3525: Semi-Homogeneous Token Standard. He has 20 years of experience in the financial IT field, having led the design and development of the world's largest bank accounting system based on open platforms and distributed technology, and is the recipient of the "Zhongguancun 20th Anniversary Outstanding Contribution Award."

Meng Yan: Co-founder. Formerly served as Vice President of CSDN, and he is also an active KOL in the Crypto industry.

Financing Status

Solv Protocol has raised approximately $29 million through three rounds of financing.

Angel Round

• On November 10, 2020, announced the completion of a $6 million angel round financing, led by Laser Digital, UOB Venture, Mirana Ventures, ApolloCrypto, Hash CIB, GeekCartel, ByteTrade, Matrix Partners, BincVentures, and Emirates Consortium.

Seed Round

• On May 8, 2021, it was announced that a seed round financing of $2 million was completed, with investment from Binance Labs.

• On August 30, 2021, it was announced that a $4 million seed round financing was completed, led by Blockchain Capital, Sfermion, and Gumi Cryptos Capital, with participation from DeFi Alliance, Axia 8 Ventures, TheLao, CMSholdings, Apollo Capital, Shima Capital, SNZ Holding, and Spartan Group.

• On August 1, 2023, it was announced that a $6 million seed round financing has been completed, with investments from institutions such as Laser Digital, a subsidiary of Japanese banking giant Nomura Securities, UOB Venture Management, Mirana Ventures, Emirates Consortium, Matrix Partners China, Bing Ventures, Apollo Capital, HashCIB, Geek Cartel, and Bytetrade Labs.

Strategic Round

• On October 14, 2024, it was announced that a strategic financing of $11 million has been completed, with participation from companies such as Laser Digital, Blockchain Capital, and OKX Ventures.

During the three rounds of financing, Solv Protocol raised $29 million, and well-known investment institutions such as Binance Labs, Blockchain Capital, Laser Digital, Matrix Partners China, and OKX Ventures made significant investments in it, indicating that the capital sector is quite optimistic about the future development of Solv Protocol.

Development Strength

The Solv Protocol was established in 2020. Key events in the project's development are shown in the table:

From the perspective of key events in the development of the Solv Protocol project, Solv Protocol has been diligently working towards reducing the barriers to creating and using on-chain financial instruments. This has enabled Solv Protocol to quickly issue the wrapped asset SolvBTC after the rise of the BTCFi track and swiftly capture the BTC-based LST market. In terms of the timeline for achieving various key technological milestones, Solv Protocol has completed the development of project technology as scheduled, demonstrating the strong capabilities of the Solv Protocol technical team.

Operating Mode

BTC, as the largest asset in the Crypto industry, has a market value of over $1.3 trillion. However, for a long time, BTC holders have simply held BTC without unlocking its potential value like ETH. Therefore, Solv Protocol advocates unlocking the $1.3 trillion BTC asset potential through BTC staking. In 2024, Solv Protocol shifted its project focus to BTCFi, launching the cross-chain yield BTC asset SolvBTC, which can release BTC's staking liquidity. Recently, it also introduced the concept of Staking Abstraction layer(SAL), marking the beginning of Solv Protocol's aggregation of BTC liquidity.

Integrated Stake Platform

In the Solv Protocol architecture, the staking process is broken down into four key roles, which are closely interconnected through an integrated platform architecture:

• LST Issuers (: Create liquidity yield tokens linked to staked Bitcoin )LST(. Solv is currently the largest Bitcoin LST Issuer in the market. It allows users to maintain asset liquidity while staking Token )LST(, participating in DeFi and other yield activities.

• Staking Protocols ): Manage users' deposited BTC, providing secure returns. Integrated staking protocols such as Babylon, CoreDao, Botanix, Ethena, GMX, etc., offer sources of BTC staking returns. By staking BTC in POS networks, users receive rewards from POS chains.

• Staking Validators (: For example, Ceffu, Cobo, Fireblocks, Solv Guard, etc., are responsible for verifying transactions, ensuring the legality and security of staking transactions, verifying that the staked BTC corresponds to the LST Token, and updating the verification status in a timely manner.

• Yield Distributors ): Ensure that staking rewards are transparently and fairly distributed to LST holders, guaranteeing that users can timely receive their staking returns. For example, Babylon, Pendle, Gauntlet, Antalpha, etc.

Solv Protocol integrates these four key roles to build a complete Bitcoin staking ecosystem. By integrating staking protocols, LST issuers, validators, and yield distributors, it achieves seamless interaction between the Bitcoin mainnet and EVM-compatible chains, simplifying the staking implementation for users and developers. The staking protocol provides the source of returns for staking Bitcoin, LST issuers issue liquid staking tokens, allowing users to maintain asset liquidity during the staking period, validators are responsible for verifying the legitimacy and security of staking transactions, and yield distributors are responsible for transparently allocating the returns generated from staking to LST holders. This provides users with a more convenient, safer, and more attractive staking experience.

Staking Abstraction layer(SAL)Stake Abstraction Layer

Staking Abstraction Layer (SAL) is a modular architecture designed to facilitate secure and efficient BTC accounting through key components that interact with the Staking Parameter Matrix (SPM). The key modules of SAL include LST generation module, transaction generation module, verification nodes, and yield distribution module, all of which rely on SPM to define transaction rules, verification standards, and yield calculations. These components collectively form a framework that ensures the security, transparency, and efficiency of BTC accounting and LST issuance, allowing users to maximize returns while minimizing risks associated with the accounting process and cross-chain interactions.

Staking Parameter Matrix ( SPM ): The role of the SPM module is to standardize various settings and parameters for BTC staking. SPM provides developers with a simple and standardized set of rules, allowing them to more easily integrate BTC staking scenarios into their applications without having to design complex systems from scratch.

LST Generation Module: The function of the LST generation module is to simplify the issuance of cross-chain liquidity staking Token ( LST ). The process of issuing cross-chain staking Tokens has been standardized and automated, allowing users to avoid manual participation in complex cross-chain operations. This module enables LST issuers to quickly and conveniently issue liquidity staking Tokens and distribute these Tokens to users.

Transaction Generation Module: The function of the transaction generation module is to automatically generate and broadcast BTC stake transactions. In simple terms, the job of this module is to automatically create and send stake transactions to the BTC mainnet. Previously, users had to manually perform many steps, but now this module will automatically help users complete most of the work, making the staking process much simpler.

Validator nodes: Real-time verification of the legality and security of stake transactions. The role of validator nodes is to ensure that all stake transactions are legitimate and secure. When users stake, these nodes check and validate the correctness of the transactions, confirming them only after ensuring there are no issues.

Revenue Distribution Module: Responsible for correctly mapping staking rewards to LST holders. When users earn rewards through staking, the revenue distribution module is responsible for correctly distributing these rewards to the users' LST Tokens. Users can receive corresponding staking rewards based on the proportion of LST Tokens they hold.

In summary, SAL serves as a staking abstraction layer, characterized by integrating multiple staking participants ( including Bitcoin staking providers, yield acquisition, and DeFi scenario unlocking ), encapsulating these complex processes into standardized modules. This enables developers to quickly integrate Bitcoin staking functionality into their own applications and allows users to initiate staking in a comprehensive manner. SAL is simplifying the implementation of staking to facilitate the adoption of more dApps. For example, DeFi applications or wallet applications only need to integrate SAL to provide a range of staking options for their user base. However, since Bitcoin itself does not support staking, all third-party staking may pose certain security risks, and SAL is no exception. As SAL integrates staking-related solutions, the technical complexity and compatibility behind the integration may also introduce new security risks. Therefore, SAL needs to continuously address challenges related to operational robustness and security.

Advantages Compared to Other BTCFi Projects

Solv Protocol, as an LST project in the BTCFi track, has many projects in the market with a high degree of homogeneity, such as Bedrock, Lombard, Lorenzo, Pell Network, PumpBTC, and Stakestone, each of which is quite similar to Solv Protocol. After Solv Protocol launched SAL and began focusing on integrating BTC liquidity, it holds a significant advantage compared to other projects.

( Security Assurance

Solv Protocol ensures the security of staking transactions by integrating active verification service )AVS(. The AVS system comprehensively monitors every aspect of staking transactions, including the target address, script hash, staking duration, etc., to ensure the validity and security of the transactions, thereby avoiding errors or malicious behavior. This comprehensive monitoring and verification mechanism provides reliable protection for users' staking transactions.

) Process Optimization

Solv Protocol optimizes the staking process of the project while integrating BTC liquidity, allowing users to stake more conveniently. Users only need to deposit Bitcoin into the platform, without having to perform any other on-chain operations, ensuring user safety while improving staking efficiency and earning returns.

Full-chain Yield Aggregation Platform

Solv Protocol is a full-chain yield aggregation platform that adopts the CeDeFi model, combining CeFi and DeFi to provide transparent contract management services. By utilizing Gnosis Safe's multi-signature contract address and Solv Vault Guardian, it achieves refined permissions and conditional execution, ensuring asset security and efficient system operation.

( Industry Standardization

After launching SAL, Solv Protocol aims not only to integrate BTC liquidity but also to promote the industry standardization of BTC-based LSTs. As a standardized staking process that regulates BTC staking procedures and parameter systems, establishing industry standards can facilitate cooperation and communication among all parties in the industry, promote healthy industry development, and provide users with a more stable and reliable experience.