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

Introduction

Solv Protocol was established in 2020 with the aim of lowering the barrier to 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 continuous development of the BTCFi sector, Solv Protocol shifted its focus to BTCFi, creating the 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 it quickly.

Project Basic Information

Basic Information

Website: solv.finance

Twitter: @SolvProtocol, Followers 272,000

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, he was a 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 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 a 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 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 by Laser Digital, UOB Venture, Mirana Ventures, ApolloCrypto, Hash CIB, GeekCartel, ByteTrade, Matrix Partners, BincVentures, and Emirates Consortium.

Seed Round

On May 8, 2021, it was announced that a $2 million seed round financing has been completed, invested by Binance Labs.

On August 30, 2021, it was announced that a $4 million seed round financing was 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 seed round financing of $6 million had 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, Jingwei 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 a total of 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, indicating a strong confidence in the future development of Solv Protocol in the capital sector.

Development Strength

The Solv Protocol was established 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 diligently working to lower the threshold for creating and using on-chain financial tools. This has allowed Solv Protocol to quickly issue the wrapped asset SolvBTC after the emergence 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 on schedule, demonstrating the strong capabilities of the Solv Protocol technical team.

Operating Mode

BTC, as the largest asset in the Crypto industry with a market capitalization of over 1.3 trillion dollars, has long been held by its holders without releasing its potential value like ETH. Therefore, the Solv Protocol advocates unlocking the potential of 1.3 trillion dollars in BTC assets through BTC staking. In 2024, Solv Protocol shifted its 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 staking platform

In the architecture of Solv Protocol, the staking process is broken down into four key roles, which are closely connected through an integrated platform architecture:

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

Staking Protocol )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. By staking Bitcoin in POS networks, users receive rewards from POS chains.

Staking Validators ): Responsible for validating transactions, ensuring the legality and security of staking transactions, verifying that the staked Bitcoin corresponds to the LST Token, and timely updating the validation status.

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.

Solv Protocol integrates these four key roles to build a complete Bitcoin stake ecosystem. By integrating the staking protocol, 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, allowing users to maintain asset liquidity during the staking period, validators are responsible for verifying the legitimacy and security of staking transactions, and yield distributors are responsible for transparently distributing the yields generated from staking to LST holders. This offers users a more convenient, secure, and attractive staking experience.

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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 interacting with the Staking Parameter Matrix )SPM(. The key modules of SAL include the 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, enabling users to maximize their returns 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, allowing them to more easily integrate BTC staking scenarios 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 Token ) 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 function of the transaction generation module is to automatically generate and broadcast BTC stake transactions. In simple terms, the job of this module is to automatically create and send stake transactions to the BTC mainnet. Previously, users needed 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, 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 correctly distributing these rewards to the users' LST Tokens. Users can earn 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-1ea32d825bd1d4aaa261982462c6b0c8.webp(

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 scenarios unlocking (, encapsulating 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. 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

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

) Security Guarantee

Solv Protocol ensures the security of staking transactions by integrating active verification service (AVS). The AVS system comprehensively monitors every aspect 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 behavior. This comprehensive monitoring and verification mechanism provides reliable protection for users' staking transactions.

process optimization

The Solv Protocol not only integrates BTC liquidity but also optimizes the project's staking process, allowing users to stake more conveniently. Users only need to deposit Bitcoin into the platform without having to perform any other on-chain operations, which ensures user security while improving staking efficiency and generating returns.

( Full Chain Yield Aggregation Platform

Solv Protocol is a full-chain yield aggregation platform that adopts the CeDeFi model, combining CeFi and DeFi, providing transparent contract management services. Through the multi-signature contract address of Gnosis Safe and the Solv Vault Guardian, it achieves refined permissions and conditional execution, ensuring asset security and efficient system operation.

) Industry Standardization

After the launch of SAL, Solv Protocol aims not only to integrate the liquidity of BTC but also to promote the industry standardization of BTC-based LSTs. As a standardized staking process that regulates BTC staking procedures and parameter systems, establishing industry standards can facilitate cooperation and communication among all parties in the industry, promote healthy industry development, and provide users with more stable and reliable staking services.

Unified Liquidity

Solv Protocol, as a unified liquidity entry in the BTCFi industry, is launching SA.