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 threshold for creating and using on-chain financial instruments, bringing diverse asset classes and yield opportunities to the crypto space. Solv Protocol focuses on minting and trading NFTs related to financial ownership certificates. In 2024, as the BTCFi sector continues to develop, Solv Protocol will shift its focus to BTCFi, creating a full-chain yield Bitcoin asset SolvBTC, providing new opportunities and possibilities for Bitcoin holders, while establishing an efficient BTCFi ecosystem. Recently, Solv Protocol launched the staking abstraction layer (SAL), aimed at simplifying and standardizing the cross-chain Bitcoin staking process, abstracting the complexity of Bitcoin staking scenarios, allowing users and developers to adopt quickly.

Project Basic Information

Basic Information

Website: solv.finance

Twitter: @SolvProtocol, Followers 272,000

TG:t.me/Solv_Protocol

DC:discord.com/invite/solvprotocol

Github:github.com/solv-finance

White Paper: docs.solv.finance

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, he 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 banking accounting system based on open platforms and distributed technology. 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 Status

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

Angel Round

• On November 10, 2020, completed 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, 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 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 including Laser Digital, an investment arm 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, with participation from Laser Digital, Blockchain Capital, and OKX Ventures.

During the three rounds of financing, Solv Protocol raised a total of $29 million, with significant investments from well-known investment institutions such as Blockchain Capital, Laser Digital, Jingwei China, and OKX Ventures, indicating that the capital sector is very optimistic about the future development of Solv Protocol.

Development Strength

The Solv Protocol 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, Solv Protocol has been working hard to lower the threshold for creating and using on-chain financial tools, which enables Solv Protocol to quickly issue SolvBTC, a wrapped asset of BTC, after the rise of the BTCFi track, and rapidly occupy the LST market based on BTC. In terms of the timing of achieving various key technical milestones, the project’s technological development has been completed as scheduled, demonstrating the strong capabilities of the Solv Protocol technology team.

Operating Mode

BTC, as the largest asset in the Crypto industry with a market value exceeding 1.3 trillion USD, has long been held by its holders without unlocking its potential value like ETH. Therefore, Solv Protocol advocates unlocking the potential of 1.3 trillion USD 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 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 framework, the staking process is broken down into four key roles, which are closely interconnected through an integrated platform architecture:

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

• Staking Protocols (: Manage the Bitcoin deposited by users and provide secure returns. Integrated staking protocols such as Babylon, CoreDao, Botanix, Ethena, GMX, and others provide sources of Bitcoin staking returns, allowing users to earn POS chain rewards by staking Bitcoin in POS networks.

• 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 ): 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 construct 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 both users and developers. The staking protocol provides the source of yield for staking Bitcoin, LST issuers issue liquid staking Tokens to maintain asset liquidity for users 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 LST generation module, transaction generation module, verification 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, 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 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 stake Token(LST). The issuance process of cross-chain stake Token has been standardized and automated, eliminating the need for users to manually engage in complex cross-chain operations. This module enables LST issuers to quickly and conveniently issue liquidity stake 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, this module's job 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.

Validation Nodes: Real-time verification of the legality and security of stake transactions. The role of validation nodes is to ensure that all stake transactions are legal 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.

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, as a staking abstraction layer, is characterized by the integration of multiple staking participants ( including Bitcoin staking providers, yield acquisition, and DeFi scenario unlocking ), which abstracts and encapsulates these complex processes into standardized modules. This allows developers to quickly integrate Bitcoin staking functionality into their own applications and enables 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 bring certain security risks, and SAL is no exception. As SAL integrates staking-related solutions, the technical complexity and compatibility behind the integration may also pose 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 has many projects with a high degree of homogeneity in the market, such as Bedrock, Lombard, Lorenzo, Pell Network, PumpBTC, and Stakestone, each of which is quite similar to Solv Protocol. After the launch of SAL, Solv Protocol began to focus on integrating BTC liquidity, which gives Solv Protocol a significant advantage compared to other projects.

( Security Guarantee

Solv Protocol ensures the security of stake transactions by integrating the active verification service )AVS###. The AVS system comprehensively monitors all aspects of stake transactions, including target addresses, script hashes, stake durations, etc., to ensure the validity and security of transactions, thereby avoiding errors or malicious actions. This comprehensive monitoring and verification mechanism provides reliable protection for users' stake 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 performing any other on-chain operations, ensuring user security while improving staking efficiency and allowing them to earn profits.

) All-Chain Yield Aggregation Platform

Solv Protocol is a full-chain yield aggregation platform that adopts the CeDeFi model, combining CeFi and DeFi, and providing transparent contract management services. Through 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

Solv Protocol, by launching SAL, aims not only to integrate BTC liquidity but also to promote the industry standardization of BTC-based LST. As a standardized staking process that regulates 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 a more stable and reliable experience.