Solv Protocol Research Report: 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 barriers to the creation and use of on-chain financial tools, 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 development of the BTCFi track, Solv Protocol shifted its focus to BTCFi, creating the full-chain yield Bitcoin asset SolvBTC, providing new opportunities for Bitcoin holders while establishing an efficient BTCFi ecosystem. Recently, Solv Protocol launched the staking abstraction layer (SAL), simplifying and standardizing the cross-chain Bitcoin staking process, allowing users and developers to adopt it quickly.

Project Basic Information

Basic Information

Website: solv.finance

Twitter: @SolvProtocol, 272,000 followers

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. 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 worked in the financial IT field for 20 years, led the design and development of the world's largest banking accounting system based on open platforms and distributed technology, and is a 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 was completed, led jointly 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 of financing had been completed, invested by Binance Labs.

On August 30, 2021, it was announced that a $4 million seed round financing was completed, co-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, it was announced that a $6 million seed round financing was completed, with investments from institutions such as Laser Digital under Japanese banking giant Nomura Securities, UOB Venture Management, Mirana Ventures, Emirates Consortium, Matrix Partners 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 has been 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, with significant investments from well-known investment institutions such as Binance Labs, Blockchain Capital, Laser Digital, Matrix Partners China, and OKX Ventures, indicating a strong confidence in the future development of Solv Protocol in the capital sector.

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 hard to lower the threshold for creating and using on-chain financial tools. This has enabled Solv Protocol to quickly issue the wrapped asset SolvBTC after the emergence of the BTCFi track and swiftly 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 value exceeding $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 for 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, 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 architecture, the staking process is broken down into four key roles, which are closely linked together 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 liquidity of their assets while staking the staking Token ) LST (, participating in DeFi and other yield activities.

Staking Protocol ): Manage users' deposited BTC and provide secure returns. Integrated staking protocols such as Babylon, CoreDao, Botanix, Ethena, GMX, etc. provide sources of BTC staking returns by staking BTC in POS networks, allowing users to earn rewards from POS chains.

Staking Validators (: For example, Ceffu, Cobo, Fireblocks, Solv Guard, etc. are responsible for validating transactions, ensuring the legality and security of staking transactions, verifying that the staked BTC 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 timely receive their staking returns. 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 users and developers. The staking protocol provides a source of yield for staked Bitcoin, LST issuers issue liquidity 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 yield generated from staking to LST holders. It 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 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 collectively form a framework that ensures the security, transparency, and efficiency of BTC accounting and LST issuance, enabling users to maximize profits while minimizing risks associated with the accounting process and cross-chain interactions.

Staking Parameter Matrix ( SPM ): The SPM module serves to standardize various settings and parameters for BTC staking. SPM provides developers with a simple and standardized 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 avoid manual participation in complex cross-chain operations. 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 stake transactions. In simple terms, the job of this module is to automatically create and send stake 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 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 income through staking, the revenue distribution module is responsible for correctly distributing these earnings to the users' LST Tokens. Users can receive corresponding staking rewards based on the proportion of LST Tokens they hold.

In summary, SAL serves as an abstraction layer for staking, characterized by its integration of multiple staking participants (, including Bitcoin staking providers, yield acquisition, 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 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 complexities 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

As an LST project in the BTCFi track, Solv Protocol 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 focusing on integrating BTC liquidity, it has significant advantages compared to other projects.

( Security Guarantee

Solv Protocol ensures the security of stake transactions by integrating the active validation 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 preventing errors or malicious actions. This comprehensive monitoring and verification mechanism provides reliable protection for users' stake transactions.

) Process Optimization

The Solv Protocol optimizes the staking process of the project while integrating BTC liquidity, allowing users to stake more conveniently. Users only need to deposit Bitcoin into the platform without needing to perform any other on-chain operations, which ensures user security while also improving staking efficiency and allowing them to earn returns.

All-Chain Yield Aggregation Platform

Solv Protocol is an all-chain yield aggregation platform that adopts a CeDeFi model, combining CeFi and DeFi, and provides 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 the BTC staking procedures and parameter systems, establishing industry standards can facilitate cooperation and communication among all parties in the industry, promote healthy development, and provide users with more stable and reliable staking services.

) Unified Liquidity

Solv Protocol as BTCFi