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 diversified asset class 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 track, Solv Protocol shifted its focus to BTCFi, creating the full-chain yield Bitcoin asset SolvBTC, aimed at providing new opportunities and possibilities for Bitcoin holders while creating 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 so that users and developers can adopt it quickly.

Project Basic Information

Basic Information

Website: solv.finance

Twitter: @SolvProtocol, 272,000 followers

Launch time: The mainnet went live in June 2021, and Solv Protocol has not issued tokens.

Project 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 and has led the design and development of the world's largest banking accounting 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. Formerly served as Vice President of CSDN, 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 of financing had been completed, led by Laser Digital, UOB Venture, Mirana Ventures, ApolloCrypto, Hash CIB, GeekCartel, ByteTrade, Jingwei Venture Capital, BincVentures, and the Emirates Consortium.

Seed Round

On May 8, 2021, it was announced that a $2 million seed round financing has been completed, with investment from a well-known trading platform's investment institution.

On August 30, 2021, it was announced that a $4 million seed round financing has been completed, 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, it was announced that a $6 million seed round financing has been completed, with investments from institutions such as 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, it was announced that a $11 million strategic financing has been completed, with investments from companies including Laser Digital, Blockchain Capital, and a well-known trading platform investment institution.

During the three rounds of financing, Solv Protocol raised a total of 29 million USD, and well-known investment institutions such as Blockchain Capital, Laser Digital, and Matrix Partners China made significant investments, indicating a strong optimism in the capital sector regarding the future development of Solv Protocol.

Development Strength

In 2020, the Solv Protocol project was initiated. 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 to lower 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 sector and rapidly capture 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 Solv Protocol technical team.

Operating Mode

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

Integrated stake platform

In the Solv Protocol architecture, the staking process is divided into four key roles, which are closely linked together through an integrated platform architecture:

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

Staking Protocols (Staking Protocols): Manage the Bitcoin deposited by users and provide secure returns. Integrated staking protocols such as Babylon, CoreDao, Botanix, Ethena, GMX, etc. provide sources of Bitcoin staking returns, allowing users to earn rewards from POS chains by staking Bitcoin in the POS network.

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, ensuring that users can receive 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 stake ecosystem. Through the integration of 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 staked Bitcoin, LST issuers issue liquidity staking Tokens to allow 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.

![Solv Protocol Research Report: Exploring the Stake Abstraction Layer and Liquidity Mechanism in the BTCFi Ecosystem])https://img-cdn.gateio.im/webp-social/moments-c35acdb36f146b6be75b5d1974229bdb.webp(

Staking Abstraction layer (SAL) 质押抽象层

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 constitute a framework that ensures the security, transparency, and efficiency of BTC accounting and LST issuance, enabling users to maximize their yield while minimizing the 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, making it easier for them to integrate the BTC staking scenario into their applications without having to design complex systems from scratch.

LST Generation Module: The purpose of the LST generation module is to simplify the issuance of cross-chain Liquidity staking Tokens (LST). The issuance process of cross-chain staking Tokens has been standardized and automated, allowing users to participate in complex cross-chain operations without manual involvement. 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, 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.

Validator Nodes: Real-time verification of the legality and security of staking transactions. The role of validator nodes is to ensure that all staking transactions are legitimate and secure. When users stake, these nodes check and verify 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 properly distributing these rewards into users' LST Tokens. Users can receive corresponding staking rewards based on the proportion of LST Tokens they hold.

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

In summary, SAL, as a staking abstraction layer, is characterized by the integration of multiple staking participants (including Bitcoin staking providers, yield generation, and DeFi scenario unlocking), 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 promote greater adoption of 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 bring 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 these has a high similarity to Solv Protocol. After the launch of SAL, Solv Protocol began to focus on integrating BTC liquidity, which gives it 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 the transactions, thereby avoiding errors or malicious actions. 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 having to perform any other on-chain operations, which ensures user safety while improving staking efficiency and generating returns.

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. By utilizing the Gnosis Safe multi-signature contract address and Solv Vault Guardian, it achieves refined permissions and conditional execution, ensuring asset security and efficient system operation.

![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(

) Industry Standardization

After the launch of SAL, Solv Protocol aims not only to integrate BTC liquidity but also to promote