Solv Protocol: Exploring the staking abstraction layer and liquidity mechanism in the BTCFi ecosystem

Solv Protocol is a project established in 2020, aimed at lowering the barriers to creating and using on-chain financial tools, bringing a diverse 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 SolvBTC asset, which offers new opportunities and possibilities for Bitcoin holders while establishing an efficient BTCFi ecosystem. Recently, Solv Protocol launched the stake abstraction layer (SAL), aimed at simplifying and standardizing the cross-chain Bitcoin staking process, thereby abstracting the complexities of Bitcoin staking scenarios, allowing users and developers to adopt it quickly.

Project Basic Information

Basic Information

Website:

Twitter: @SolvProtocol, 272k followers

Launch time: June 2021 mainnet launch, 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 automotive industry databases. In addition, he also worked as a financial analyst at Singularity Financial, researching blockchain technology integration 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 and has led the design and development of the world's largest banking accounting system based on open platforms and distributed technologies. He is a 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 Situation

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

Angel Round

• On November 10, 2020, it was announced that a $6 million angel round financing was completed, led jointly by Laser Digital, UOB Venture, Mirana Ventures, ApolloCrypto, Hash CIB, GeekCartel, ByteTrade, JD Capital, BincVentures, and Emirates Consortium;

seed round

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

• On August 30, 2021, it was announced that a $4 million seed round financing had been completed, co-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, Spartan Group, and others.

• 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 was 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 USD, and well-known investment institutions such as Binance Labs, Blockchain Capital, Laser Digital, Matrix Partners China, and OKX Ventures made significant investments in it. This shows that the capital sector is quite optimistic about the future development of Solv Protocol.

Development Strength

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

From the perspective of key events in the project development of Solv Protocol, Solv Protocol has been working hard to lower the threshold for creating and using on-chain financial tools. This has enabled Solv Protocol to quickly issue the wrapped asset SolvBTC after the rise of the BTCFi track and rapidly capture the BTC-based LST market. In terms of the timeline for achieving various key technical milestones, Solv Protocol has completed the project technology development 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 USD. However, for a long time, BTC holders have merely held onto their BTC without unlocking its potential value like ETH has. Therefore, Solv Protocol advocates for unlocking the 1.3 trillion USD potential of BTC assets through BTC staking. In 2024, Solv Protocol shifted its project focus to BTCFi, launching the cross-chain yield BTC asset SolvBTC, which can release the staking liquidity of BTC. 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 architecture of the Solv Protocol, the staking process is broken down into four key roles, which are closely linked together through an integrated platform architecture:

• LST Issuers (LST Issuers): Create liquidity yield tokens (LST) that are pegged to staked Bitcoin. 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 (Staking Protocols): Manage users' deposited BTC, providing secure returns. Integrated staking protocols such as Babylon, CoreDao, Botanix, Ethena, GMX, etc., provide sources of BTC staking rewards. By staking BTC in POS networks, users receive rewards from POS chains.

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

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

By integrating these four key roles, Solv Protocol has built a complete Bitcoin staking ecosystem. It achieves seamless interaction between the Bitcoin mainnet and EVM-compatible chains by integrating staking protocols, LST issuers, validators, and yield distributors, simplifying the staking implementation for both users and developers. The staking protocol provides the source of yield 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 legality and security of staking transactions, and yield distributors are responsible for transparently distributing the yields 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 the LST generation module, transaction generation module, validation nodes, and yield distribution module, all of which rely on SPM to define transaction rules, validation standards, and yield calculations. These components together form a framework that ensures the security, transparency, and efficiency of BTC accounting and LST issuance, enabling 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 standard 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 role of the LST generation module is to simplify the issuance of the cross-chain liquidity staking Token ( LST ). The issuance process for cross-chain staking Tokens has been standardized and automated, allowing users to avoid manually engaging 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 purpose of the transaction generation module is to automatically generate and broadcast BTC staking transactions. In simple terms, the job of this module is to automatically create and send staking 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.

Verification Nodes: Real-time verification of the legality and security of stake transactions. The role of verification nodes is to ensure that all stake transactions are legitimate and secure. When users stake, these nodes will check and verify the correctness of the transactions, ensuring that there are no issues before confirming the transactions.

Yield Distribution Module: Responsible for correctly mapping staking rewards to LST holders. When users earn rewards through staking, the yield 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 the integration of 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 functionalities 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 instance, 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

As an LST project in the BTCFi track, Solv Protocol faces many projects in the market with a high degree of homogeneity, such as Bedrock, Lombard, Lorenzo, Pell Network, PumpBTC, and Stakestone, each of which has a high similarity to Solv Protocol. After Solv Protocol launched SAL and began to focus on integrating BTC's Liquidity, Solv Protocol has a significant advantage compared to other projects.

Security Guarantee

Solv Protocol ensures the security of staking transactions by integrating the Active Verification Service (AVS). The AVS system comprehensively monitors all aspects of staking transactions, including target addresses, script hashes, staking periods, etc., to ensure the validity and security of 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 perform staking operations more conveniently. Users only need to deposit Bitcoin into the platform, without needing to perform any other on-chain operations, which ensures user safety while improving staking efficiency and allows them to earn returns.

All-in-One Yield Aggregation Platform

Solv Protocol is a full-chain yield aggregation platform that adopts a CeDeFi model, combining CeFi and DeFi to provide transparent contract management services. It achieves precision through the multi-signature contract address of Gnosis Safe and Solv Vault Guardian.