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

Introduction

Solv Protocol was established in 2020 with the aim of lowering the barriers to creating and using on-chain financial tools, 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 space, Solv Protocol will shift its focus to BTCFi, creating a full-chain yield Bitcoin asset SolvBTC, providing new opportunities for Bitcoin holders while establishing 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: @SolvProtocol, 272k followers

Launch time: Mainnet launched in June 2021

Project Team

Core Team

Ryan Chow: Co-founder. Graduated from Beijing Foreign Studies University, he was a co-founder at Beijing Youzan Technology, dedicated to applying blockchain technology to the automotive industry database. Additionally, he served 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 worked in the financial IT field for 20 years and has led the design and development of the world's largest banking ledger system based on open platforms and distributed technology. He is the recipient of the "20th Anniversary Outstanding Contribution Award of Zhongguancun."

Meng Yan: Co-founder. He has served as the 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 funding.

Angel Round

On November 10, 2020, completed a $6 million angel round of financing, co-led by Laser Digital, UOB Venture, Mirana Ventures, ApolloCrypto, Hash CIB, GeekCartel, ByteTrade, Jingwei Venture Capital, BincVentures, and Emirates Consortium.

Seed Round

On May 8, 2021, completed a $2 million seed round financing, invested by a certain trading platform.

On August 30, 2021, completed a $4 million seed round financing, led jointly 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, completed a $6 million seed round financing, with investments from institutions such as Laser Digital, a subsidiary of Japanese banking giant Nomura Securities, UOB Venture Management, Mirana Ventures, Emirates Consortium, Jingwei China, Bing Ventures, Apollo Capital, HashCIB, Geek Cartel, and Bytetrade Labs.

Strategic Round

On October 14, 2024, completed a strategic financing of 11 million USD, with participation from companies such as Laser Digital, Blockchain Capital, and OKX Ventures.

In the three rounds of financing, Solv Protocol raised $29 million, with several well-known investment institutions making significant investments, indicating that the capital sector is optimistic about the future development of Solv Protocol.

Development Strength

Since its inception in 2020, Solv Protocol has been focused on reducing the barriers to 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 LST market based on BTC. From the timeline of Solv Protocol achieving various key technical milestones, the project has completed its technical development as scheduled, demonstrating the strong capabilities of the technical team.

Operating Mode

Solv Protocol advocates unlocking the potential of $1.3 trillion in BTC assets through BTC staking. In 2024, the project will shift its focus to BTCFi, launching the full-chain yield BTC asset SolvBTC, which will release the staking liquidity of BTC. Recently, the concept of Staking Abstraction Layer (SAL) was introduced, marking the beginning of aggregation of BTC liquidity.

Integrated staking platform

The Solv Protocol framework breaks down the staking process into four key roles and closely connects them through an integrated platform architecture:

• LST Issuers (: Create liquidity yield tokens (LST) pegged to staked BTC.
• Staking Protocols ): Manage the Bitcoin deposited by users and provide secure returns.
• Staking Validators (: Responsible for verifying transactions and ensuring the legality and security of staking transactions.
• Yield Distributors ): Ensure that staking rewards are transparently and fairly distributed to LST holders.

Solv Protocol has built a complete Bitcoin stake 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.

Staking Abstraction layer (SAL) 质押抽象层

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:

• Staking Parameters Matrix (SPM): Various settings and parameters for standardized BTC staking.
• LST Generation Module: Simplifies the issuance of cross-chain Liquidity staking Tokens (LST).
• Transaction Generation Module: Automatically generates and broadcasts BTC stake transactions.
• Validator nodes: Real-time verification of the legality and security of staking transactions.
• Revenue Distribution Module: Responsible for accurately mapping staking rewards to LST holders.

SAL, as a staking abstraction layer, integrates multiple staking participants and abstracts and encapsulates complex processes into standardized modules. This enables developers to quickly integrate Bitcoin staking functionality into applications and allows users to initiate staking in a comprehensive manner.

Advantages Compared to Other BTCFi Projects

After the launch of SAL, Solv Protocol focuses on integrating BTC liquidity, which has the following advantages compared to other projects:

( Security Assurance

By integrating the active verification service )AVS( to ensure the security of stake transactions. The AVS system comprehensively monitors all aspects of stake transactions, providing users with reliable protection.

) Process Optimization

Optimized the staking process, allowing users to stake more easily. Users only need to deposit BTC into the platform without any other on-chain operations.

All-Chain Yield Aggregation Platform

Adopting the CeDeFi model, combining CeFi and DeFi, to provide transparent contract management services. Achieving refined permissions and conditional execution through the Gnosis Safe multi-signature contract address and Solv Vault Guardian.

( Industry Standardization

Promote the industry standardization of BTC-based LST, establish industry standards, and facilitate industry cooperation and communication.

) Unified Liquidity

As a unified liquidity entry point in the BTCFi industry, integrating various liquidity resources and investment opportunities.

Project Model

Business Model

The Solv Protocol economic model consists of two roles: BTC and LST stakers, and projects collaborating with Solv.

Users can deposit BTC or wrapped BTC into the Solv Protocol across multiple chains, minting SolvBTC at a 1:1 ratio, and can further mint SolvBTC into other forms of LST. The Solv Protocol deposits the staked BTC into various DeFi protocols to generate yield according to the needs of partner projects.

The revenue of Solv Protocol comes from charging a certain percentage of user earnings.

Token Model

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

On-chain data

TVL

The TVL of Solv Protocol has seen significant growth from January 2024 to now, increasing from $1.153 billion to $1.783 billion in the last month, a rise of 54.64%.

![Solv Protocol Research Report: Exploring the staking abstraction layer and liquidity mechanism in the BTCFi ecosystem]###https://img-cdn.gateio.im/webp-social/moments-37b6dfcb308108cd05055f1d3cdd3da7.webp###

User Count

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

![Solv Protocol Research Report: Exploring the Staking Abstraction Layer and Liquidity Mechanism in the BTCFi Ecosystem]###https://img-cdn.gateio.im/webp-social/moments-1ea32d825bd1d4aaa261982462c6b0c8.webp(

Supported Projects

Solv Protocol has received support from multiple chains and projects, with its packaged assets SolvBTC, SolvBTC.BBN, SolvBTC.ENA, and SolvBTC.CORE being adopted across various chains and DeFi projects.

![Solv Protocol Research Report: Exploring the Staking Abstraction Layer and Liquidity Mechanism in the BTCFi Ecosystem])https://img-cdn.gateio.im/webp-social/moments-eae6591842d725d428bbb5f26705431d.webp###

Comparison with Babylon

Solv Protocol and Babylon have a close collaboration in the BTC staking space, but each has unique functions and positioning. Babylon focuses on BTC staking protocols, while Solv Protocol is a cross-chain yield and liquidity protocol. Solv Protocol's TVL (1.783 billion USD) has surpassed Babylon (1.605 billion USD).

Project Risk

1. Smart Contract Vulnerability Risk
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 sector, integrates the Bitcoin staking ecosystem through SolvBTC and SAL technology, lowering the participation threshold for users. The project demonstrates rapid growth in TVL and user numbers, reflecting market recognition. However, Solv Protocol also faces some challenges and potential risks, such as security vulnerabilities, lack of a clear token economic model, and user trust.

Despite the risks, these risks are generally present in BTCFi projects. After the launch of SAL, the development direction of Solv Protocol has significantly diverged from simply providing BTC-based LST projects, as the potential for aggregating the dispersed liquidity of BTC across the entire chain is much greater. Therefore, Solv Protocol is a project worth investing in and paying attention to.