Solv Protocol: Exploring the staking abstraction layer and liquidity mechanisms 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 diverse range of asset classes and yield opportunities to the cryptocurrency 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 SolvBTC, a full-chain yield Bitcoin asset, aimed at providing new opportunities and possibilities for Bitcoin holders while establishing an efficient BTCFi ecosystem. Recently, Solv Protocol launched the staking abstraction layer (SAL), aiming to simplify and standardize the cross-chain Bitcoin staking process, thereby abstracting the complexity of Bitcoin staking scenarios, allowing users and developers to adopt it quickly.

Project Basic Information

Basic Information

Website:

Twitter:

Launch time: Mainnet launched in June 2021, Solv Protocol has not issued tokens.

Project Team

Core Team

Ryan Chow: Co-founder. Graduated from Beijing Foreign Studies University, formerly co-founded Beijing Youzan Technology, focusing on applying blockchain technology to automotive industry databases. Additionally, he worked as a financial analyst at Singularity Financial, researching blockchain technology integration and financial regulation.

Will Wang: Co-founder. He created the "ERC-3525: Semi-Homogeneous Token Standard" and has worked in the financial IT field for 20 years, leading 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, 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 seed round financing of 2 million USD was completed, invested by a certain trading platform;

• On August 30, 2021, it was announced that a seed round financing of $4 million was completed, with Blockchain Capital, Sfermion, and Gumi Cryptos Capital as the lead investors, and 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 USD has been completed, with investments from institutions such as Laser Digital, a subsidiary of the 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 was completed, with investments from companies such as Laser Digital, Blockchain Capital, and a certain trading platform.

During the three rounds of financing, Solv Protocol raised a total of 29 million USD, and several well-known investment institutions made significant investments in it, indicating that the capital sector is quite optimistic about the future development of Solv Protocol.

Development Strength

The Solv Protocol project 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 diligently to lower the threshold for creating and using on-chain financial instruments. This has enabled Solv Protocol to quickly issue the wrapped asset SolvBTC after the emergence of the BTCFi track and rapidly occupy 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 value of over $1.3 trillion. However, for a long time, BTC holders have simply held BTC without unlocking its potential value like ETH. Therefore, Solv Protocol advocates unlocking the $1.3 trillion potential of BTC assets through BTC staking. In 2024, Solv Protocol shifted its project focus to BTCFi, launching the full-chain yield BTC asset SolvBTC, which can release the staking liquidity of BTC. Recently, they 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 architecture, the staking process is broken down 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 the liquidity of their assets while staking Token (LST) and Bitcoin, participating in DeFi and other yield activities.

• Staking Protocols (Staking Protocols): Manages the Bitcoin deposited by users and provides 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 (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 LST Token, and updating the verification status in a timely manner.

• Yield Distributors (: Ensure that staking returns are transparently and fairly distributed to LST holders, allowing users to timely receive staking rewards. For example, Babylon, Pendle, Gauntlet, Antalpha, etc.

Solv Protocol integrates these four key roles to build 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 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, secure, and attractive staking experience.

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

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 the LST generation module, transaction generation module, validation nodes, and profit distribution module, all of which rely on SPM to define transaction rules, validation standards, and profit calculations. These components together constitute a framework that ensures the security, transparency, and efficiency of BTC accounting and LST issuance, allowing users to maximize their profits 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 standardized set of rules, making it easier for them to 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 staking transactions. Simply put, the job of this module is to automatically create and send staking transactions to the BTC mainnet. Previously, users had to manually operate many steps, but now this module will automatically help users complete most of the work, making the staking process simpler.

Validator Nodes: Real-time verification of the legality and security of stake transactions. The role of validator 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, 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 user's LST Token. 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 Mechanism in the BTCFi Ecosystem])https://img-cdn.gateio.im/webp-social/moments-37b6dfcb308108cd05055f1d3cdd3da7.webp(

In summary, SAL serves as a staking abstraction layer, characterized by the integration of multiple staking participants ), including Bitcoin staking providers, yield generation, and DeFi scenario unlocking (, 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 broader adoption of dApps. For instance, DeFi applications or wallet applications only need to integrate SAL to offer a range of staking options to 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. Given that 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, has many projects in the market with a high degree of homogeneity, such as Bedrock, Lombard, Lorenzo, Pell Network, PumpBTC, and Stakestone, each of which has a high similarity to Solv Protocol. After Solv Protocol launched SAL and began to focus on integrating BTC's Liquidity, Solv Protocol has 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 transactions, thereby avoiding errors or malicious actions. This comprehensive monitoring and verification mechanism provides reliable protection for users' staking transactions.

) Process Optimization

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 other on-chain operations, which ensures user security while improving staking efficiency and allowing them to earn returns.

All-Chain Yield Aggregation Platform

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

After launching SAL, Solv Protocol aims not only to integrate BTC liquidity but also to promote 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 various parties in the industry, promote healthy development, and provide users with more stable and reliable staking services.

Unified