Solv Protocol: Exploring the stake abstraction layer and liquidity mechanisms in the BTCFi ecosystem

Introduction

Solv Protocol was established in 2020 with the aim of lowering the threshold for creating and using on-chain financial instruments, bringing diverse 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 shifted its focus to BTCFi, creating the all-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 complexity of Bitcoin staking scenarios, making it easier for users and developers to adopt quickly.

Project Basic Information

Basic Information

Website:

Twitter:

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 the automotive industry database. Additionally, 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", has 20 years of experience in the financial IT field, led the design and development of the world's largest bank accounting system based on open platforms and distributed technology, recipient of the "Zhongguancun 20th Anniversary Outstanding Contribution Award".

Meng Yan: Co-founder. Formerly served as Vice President of CSDN, 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, it was announced that a $6 million angel round of financing had been completed, led by Laser Digital, UOB Venture, Mirana Ventures, ApolloCrypto, Hash CIB, GeekCartel, ByteTrade, Jingwei Ventures, BincVentures, and Emirates Consortium.

seed round

• On May 8, 2021, it was announced that a seed round financing of $2 million was completed, funded by an investment institution.
• 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, Spartan Group, and others.
• On August 1, 2023, announced the completion of a $6 million seed round financing, with investments from a Japanese bank investment institution, UOB Venture Management, Mirana Ventures, Emirates Consortium, Jingwei China, Bing Ventures, Apollo Capital, HashCIB, Geek Cartel, Bytetrade Labs, and others.

Strategic Round

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

During the three rounds of financing, Solv Protocol raised $29 million, and several well-known investment institutions made significant investments, indicating confidence in the future development of Solv Protocol in the capital sector.

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 development of the Solv Protocol project, the project has been dedicated to reducing the threshold for creating and using on-chain financial instruments, which has enabled Solv Protocol to quickly issue the wrapped asset SolvBTC after the rise of the BTCFi track, and rapidly occupy the BTC-based LST market. In terms of the timeline for achieving various key technical milestones, Solv Protocol has completed the development of project technology as scheduled, demonstrating the strong capabilities of the technical team.

Operating Mode

BTC, as the largest asset in the Crypto industry, has a market value exceeding $1.3 trillion. However, for a long time, BTC holders have merely held their assets without unlocking their potential value like ETH. Therefore, Solv Protocol advocates for unlocking the potential of $1.3 trillion in BTC assets through BTC staking. In 2024, Solv Protocol will shift its project focus to BTCFi, launching the full-chain yield BTC asset SolvBTC, which can release the staking liquidity of BTC. Recently, it has 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 connected through an integrated platform architecture:

• LST Issuers (LST Issuers): Create liquidity yield tokens pegged 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) and Bitcoin, participating in DeFi and other yield activities.

• Staking Protocol (Staking Protocols): Manage users' deposited BTC and provide secure returns. Integrated staking protocols such as Babylon, CoreDao, Botanix, Ethena, GMX, etc., provide sources of BTC staking returns. 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 verifying transactions, ensuring the legality and security of staking transactions, verifying that the staked Bitcoin corresponds to the LST Token, and updating the verification status in a timely manner.

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

The Solv Protocol has built a complete Bitcoin staking ecosystem by integrating these four key roles, achieving seamless interaction between the Bitcoin mainnet and EVM-compatible chains, and simplifying the staking implementation for both users and developers. The staking protocol provides sources of income 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 the income distribution party is responsible for transparently distributing the income generated from staking to LST holders. This provides users with a more convenient, safer, and more attractive staking experience.

Staking Abstraction layer(SAL)Staking 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, 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 yields 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 cross-chain liquidity staking Token ( LST ). The issuance process of cross-chain staking Tokens is standardized and automated, allowing users to avoid manually participating 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 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 easier.

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 verify the correctness of the transactions, ensuring that there are no issues before confirming the transactions.

Earnings Distribution Module: Responsible for accurately mapping staking rewards to LST holders. When users earn rewards through staking, the earnings distribution module is responsible for correctly distributing these rewards into 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 generation, and unlocking DeFi scenarios ), abstracting and 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 continually address challenges related to operational robustness and security.

Advantages Compared to Other BTCFi Projects

As an LST project in the BTCFi track, Solv Protocol has many projects in the market that are highly homogeneous, 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 focusing on integrating BTC's Liquidity, it has a significant advantage compared to other projects.

Security Assurance

The Solv Protocol ensures the security of staking transactions by integrating active verification services (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 stake more conveniently. Users only need to deposit Bitcoin into the platform without having to perform other on-chain operations, ensuring user safety while improving staking efficiency and earning rewards.

All-Chain 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 refined permission and condition execution through a certain multi-signature contract address and Solv Vault Guardian, ensuring asset security and efficient system operation.

Industry Standardization

After the launch of 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 the BTC staking procedures and parameter systems, establishing industry standards can facilitate cooperation and communication among various parties in the industry, promote healthy development, and provide users with more stable and reliable staking services.

Unified Liquidity

Solv Protocol serves as a unified liquidity entry in the BTCFi industry, integrating various liquidity resources and investment opportunities onto one platform through the launch of SAL.