Unified "Measurement": The Solv staking abstraction layer brings a new standardized solution for BTCFi

The $1.75 trillion scale of Bitcoin can be said to be the largest dormant capital pool in the crypto world. For a long time, this massive asset has neither generated returns for its holders nor injected vitality into the on-chain financial ecosystem. Although there have been many attempts in the industry to release the liquidity of Bitcoin assets since the DeFi boom in 2020, most of them have been reinventing the wheel, attracting limited BTC inflows, and have never truly leveraged the BTCFi market.

So, where is the main battlefield of BTCFi? What problems need to be solved first for Bitcoin staking? The answer, worth hundreds of billions of dollars, is a question that the Bitcoin ecosystem, especially staking projects, must answer. As a leader in the current Bitcoin Staking field, Solv has proposed a forward-looking solution, the core of which lies in the concept of "standardization" of SAL (Staking Abstraction Layer).

The "Liquidity Dilemma" of Bitcoin

We can first review the development history of the Ethereum staking ecosystem.

As of November 12, 2024, the total amount of staked Ethereum exceeds 34.55 million ETH. Data from CryptoQuant shows that the proportion of staked ETH to the total supply has dramatically increased from 15% in April 2023 to about 29%, nearly doubling, with a total scale surpassing $100 billion.

In contrast, the Bitcoin ecosystem, which has risen alongside the Ordinal wave during the same period, has a staking penetration rate that is far lower than that of Ethereum. Although BTC's market capitalization and price increase outperform ETH, it has never been able to catch up with the expansion speed of the Ethereum Staking ecosystem.

It is worth noting that if 10% of BTC liquidity can be released, it will create a market of up to $175 billion. If a staking rate similar to ETH can be achieved, it is even more likely to release about $500 billion in liquidity, driving BTCFi to become a super on-chain ecosystem that surpasses the general EVM networks.

The success of the Ethereum staking ecosystem, apart from the advantages of programmability, is largely attributed to the leading role of the Ethereum Foundation at the protocol level. They have established a clear and comprehensive set of standards for ETH staking, including a staking threshold of 32 ETH, a penalty mechanism, and a comprehensive consideration of hardware and network costs, fully covering the financial requirements of ordinary users and the economic security of node operation.

This unified standardized framework not only enhances the decentralization and security of the network but also lowers the barriers to development and participation, facilitating the rapid rise of projects like Lido Finance, Rocket Pool, and Frax Finance, which has propelled the Ethereum Staking ecosystem to achieve exponential growth in scale and diversity in a short period of time.

In contrast, the characteristics of the Bitcoin ecosystem being "founderless" and "without a centralized driving organization" form its extremely decentralized unique "chain sentiment". This is both a unique advantage of the Bitcoin ecosystem and, to some extent, a kind of "development curse": this completely decentralized structure means that the formulation of key technical standards, such as the stake mechanism, lacks a leader that can play the role of the "Ethereum Foundation" and requires broad consensus among global developers and node operators to be implemented, and this consensus-building process is often long and complex.

Therefore, a complete set of clear standardized frameworks in the Ethereum ecosystem has laid a solid foundation for the rapid growth of its staking and liquidity ecosystem. For BTCFi to achieve similar progress, it will inevitably need to introduce similar standardized mechanisms in the staking field to address numerous challenges in liquidity and asset management.

Especially in the current situation where the liquidity of Bitcoin assets is accelerating fragmentation, the demand for "unification" has become particularly urgent:

On one hand, when BTC is bridged to EVM-compatible networks such as Ethereum in various wrapped forms like WBTC and cbBTC, it provides users with the opportunity to use Bitcoin assets to participate in DeFi for earning returns. However, it also leads to BTC liquidity being further dispersed across different chains, creating "liquidity islands" that are difficult to circulate and utilize freely, greatly limiting the development potential of BTCFi.

On the other hand, with the launch of Bitcoin ETFs and the further strengthening of global asset consensus, Bitcoin is accelerating its expansion into CeFi and CeDeFi, and more and more BTC is flowing into institutional custody services, forming large pools of deposited funds.

According to DeFiLlama, the currently yield-bearing Bitcoin has been distributed across 95 chains, 448 protocols, and 766 liquidity pools. However, due to the lack of a unified staking standard and cross-chain liquidity mechanisms, BTC assets across chains, platforms, and institutions not only incur high friction costs but also have decentralized liquidity that cannot be efficiently integrated and utilized.

In this context, if the BTCFi and Bitcoin staking ecosystem are to continue expanding, it is necessary to establish a universal, standardized industry security standard and framework to efficiently integrate the Bitcoin liquidity resources dispersed across multiple chains and platforms.

Objectively speaking, BTCFi and the Bitcoin ecosystem currently need a leading role that can dominate these standardization processes, so that the integration of cross-chain Bitcoin liquidity can form a consensus, establish a unified technical framework and standards, thereby bringing broader applicability, liquidity, and scalability to the Bitcoin stake market, further promoting the financialization process of staked assets and driving the BTCFi ecosystem towards maturity.

Solv: The Leader in Bitcoin Staking

As the largest Bitcoin staking platform in the current market, Solv has quickly seized opportunities in the Bitcoin staking field over the past six months. Since April of this year, it has attracted over 25,000 Bitcoins (including BTCB, FBTC, WBTC, etc.), accumulating more than $2 billion in asset management scale.

More than 70% of SolvBTC has been invested in various staking scenarios, making Solv the protocol with the highest TVL and the highest capital utilization efficiency in the current Bitcoin space.

With its strong liquidity and market penetration, Solv has pioneered the new concept of Staking Abstraction Layer (SAL) to aggregate the decentralized BTC liquidity across the entire chain, providing a scalable and transparent unified solution.

To achieve this goal, Solv first conducted a systematic review of the Bitcoin stake ecosystem and categorized the core participants into four key roles, from bottom to top as follows:

• Staking Agreement: A protocol that allows users to deposit Bitcoin assets and generate returns through staking activities, such as Babylon, CoreDao, Botanix, etc.;

• Staking Validators: Entities responsible for verifying the integrity of the staking and transaction processes, ensuring that the LST issuers genuinely execute the staking, preventing errors or fraudulent activities, such as Ceffu, Cobo, Fireblocks, and Solv Guard.

• Yield Distributors: Entities that manage the distribution of staking rewards, responsible for efficiently and fairly distributing rewards, such as Pendle, Gauntlet, Antalpha, and most LST issuers also play the role of yield distributors;

• LST Issuer: A protocol that converts users' staked Bitcoin assets into liquidity tokens (LST), allowing stakers to earn returns while maintaining liquidity control over their assets, such as Solv, BedRock, etc.;

These four roles complement each other, forming the core structure of the Bitcoin staking ecosystem — the staking protocol serves as the underlying foundation of the entire system, managing and supporting all other roles; staking validators operate above the protocol, maintaining on-chain security; yield distributors allocate earnings according to the protocol rules, ensuring the operation of the system's incentive mechanism; and LST issuers provide liquidity to staking assets through tokenization.

Therefore, the design of SAL closely revolves around these roles, launching key modules that cover the entire process, including LST generation services, stake verification services, transaction generation services, and profit distribution services, efficiently integrating them using smart contract technology and Bitcoin mainnet technology:

Specifically, SAL consists of the following five core modules:

• Stake Parameter Matrix (SPM): The core parameters required for the abstract staking process, including Bitcoin script configuration, staking transaction parameters, LST contract parameters, and profit distribution rules. These parameters are not only shared among various SAL modules but also support cross-role collaboration in the staking process.

• Stake verification service: Based on the Bitcoin mainnet algorithm, it ensures the correctness and integrity of each stake transaction, while checking whether the issuance of LST matches the underlying BTC quantity, preventing malicious behavior;

• LST Generation Service: Responsible for the issuance and redemption of BTC LST, while supporting interaction between the Bitcoin mainnet and EVM chains;

• Transaction generation service: Automatically generate stake transactions, estimate the best transaction fees, and broadcast the transactions to the Bitcoin mainnet;

• Yield distribution service: Transparently calculate staking rewards and distribute them to users proportionally through oracle mechanisms or yield exchange services.

Through these modules, SAL not only effectively integrates the technical differences of various protocols in the Bitcoin ecosystem but also provides a clear operating framework for different roles, building a new system for efficient collaboration:

• For staking users: SAL provides a convenient and secure staking process, reducing asset risks caused by operational errors and protocol opacity;

• For staking protocols: The standardized interface of SAL allows for rapid integration into the Bitcoin staking market, shortening the development cycle and achieving ecological cold start;

• For LST issuers: SAL provides comprehensive yield calculation and verification tools, enhancing user trust while simplifying the issuance process, allowing them to focus on product innovation;

• For custodians: SAL has opened up a new business model for participating in the BTC staking ecosystem, bringing additional revenue opportunities for custodians.

This greatly simplifies the participation threshold in the Bitcoin staking ecosystem, providing a unified solution that effectively meets the needs of multiple parties for co-construction and sharing.

As of now, multiple protocols and service providers have joined the SAL protocol ecosystem, including BNB Chain, Babylon, ChainLink, Ethena, CoreDAO, etc., which not only proves the wide applicability of SAL but also brings richer application scenarios for Bitcoin staking, accelerating the sustainable development of business models in this field.

Revitalizing the Diversified Income Ecosystem of BTC Staking

Bitcoin staking requires a foundational framework that promotes the efficient utilization of assets, and SAL (Staking Abstraction Layer) is designed for this purpose: it lowers the participation threshold for all parties, provides a consistent user experience for the Bitcoin staking ecosystem, and significantly enhances capital utilization efficiency through a unified liquidity management mechanism, allowing Bitcoin assets to flow freely across different chains and laying the groundwork for various financial innovations in the DeFi ecosystem.

Therefore, a more promising imaginative space is that SAL can essentially derive a diversified income solution based on the entire chain of BTC, enabling Bitcoin holders to obtain a variety of dynamic income streams without affecting liquidity, thus opening up new development space for BTCFi (Bitcoin Financialization).

The main feature is the cross-chain functionality based on SAL, which allows users to unlock various income-generating opportunities, transforming Bitcoin from a passive store of value into an income-producing asset, enabling participation in DeFi and other on-chain use cases, creating new value:

1. Users can stake BTC on platforms that benefit from the security of the Bitcoin economy (such as Babylon) to earn local token rewards through Restaking;

2. Users can participate in the security maintenance of the Bitcoin L2 networks based on the BTC they hold, by running validator nodes or delegating Bitcoin to earn validator rewards;

3. SAL allows Bitcoin holders to gain DeFi through trading strategies such as "Delta neutral".