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 array of 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 track, Solv Protocol has shifted its focus to BTCFi, creating a fully on-chain yield Bitcoin asset, SolvBTC, providing new opportunities and possibilities for Bitcoin holders, while creating an efficient BTCFi ecosystem. Recently, Solv Protocol launched the Stake Abstraction Layer (SAL), simplifying and standardizing the cross-chain Bitcoin staking process, abstracting the complexities of Bitcoin staking scenarios, allowing users and developers to adopt it quickly.

Project Basic Information

Basic Information

Website: solv.finance

Launch time: The mainnet went live in June 2021, and the Solv Protocol did not issue tokens.

Project Team

Core Team

Ryan Chow: Co-founder. Graduated from Beijing Foreign Studies University and previously served as co-founder at Beijing Youzan Technology, dedicated to applying blockchain technology to the automotive industry database. Additionally, he 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 bank accounting system based on open platforms and distributed technology. He is a recipient of the "20th Anniversary Outstanding Contribution Award of Zhongguancun".

Meng Yan: Co-founder. Formerly served as Vice President of CSDN, and 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, completed a $6 million angel round of financing, led jointly by Laser Digital, UOB Venture, Mirana Ventures, ApolloCrypto, Hash CIB, GeekCartel, ByteTrade, Jingwei Venture Capital, BincVentures, and Emirates Consortium.

seed round

• On May 8, 2021, completed a 2 million USD seed round financing, invested by an investment institution.
• On August 30, 2021, completed a $4 million seed round financing, 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, completed a $6 million seed round financing, 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, completed a $11 million strategic financing round, participated by 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 several well-known investment institutions making significant investments, indicating a strong optimism in the capital sector regarding the future development of Solv Protocol.

Development Strength

The Solv Protocol was initiated in 2020. The key events in the project's development are as follows:

Solv Protocol has been dedicated to reducing the barriers to creating and using on-chain financial tools, which has allowed it 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 its project technology development 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 dollars. However, for a long time, BTC holders have merely held their BTC without unlocking its potential value like ETH. Therefore, Solv Protocol advocates unlocking the potential of 1.3 trillion dollars 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, tightly connected 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 participate in DeFi and other yield activities.

• Staking Protocols (Staking Protocols): Manage user deposits of BTC and provide secure returns. Integrated staking protocols such as Babylon, CoreDao, Botanix, Ethena, GMX, etc. offer sources of BTC staking returns by staking BTC in POS networks, allowing users to earn rewards from POS chains.

• Staking Validators (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 Bitcoin corresponds to the LST Token, and updating the validation status in a timely manner.

• Yield Distributors (Yield Distributors): Ensure that staking rewards are transparently and fairly distributed to LST holders, guaranteeing that users can receive their staking returns in a timely manner. 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 a source of yield for staked Bitcoin, LST issuers issue liquid staking tokens to maintain asset liquidity for users during the staking period, validators are responsible for verifying the legality and security of staking transactions, and yield distributors are responsible for transparently allocating the yield generated from staking to LST holders. This provides users with a more convenient, safer, and more attractive staking experience.

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 interacting with the Staking Parameter Matrix (SPM). The key modules of SAL include LST generation module, transaction generation module, verification nodes, and yield distribution module, all of which rely on SPM to define transaction rules, verification standards, and yield calculations. These components together form a framework that ensures the security, transparency, and efficiency of BTC accounting and LST issuance, allowing users to maximize their yields while minimizing the risks associated with accounting processes and cross-chain interactions.

Staking Parameter Matrix (SPM): The function 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 role 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 without manually engaging 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 legitimate and secure. When users stake, these nodes check and verify the correctness of the transactions and only confirm them 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 receive corresponding staking rewards based on the proportion of LST Tokens they hold.

In summary, SAL, as a staking abstraction layer, is characterized by integrating 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 facilitate the adoption of more 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 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 is quite similar to Solv Protocol. After the launch of SAL, Solv Protocol began to focus on integrating BTC's Liquidity, giving it a significant advantage compared to other projects.

Security Assurance

Solv Protocol ensures the security of staking transactions by integrating the active validation service (AVS). The AVS system comprehensively monitors all aspects of staking transactions, including target addresses, script hashes, staking durations, etc., to ensure the validity and security of transactions, thus avoiding errors or malicious activities. This comprehensive monitoring and verification mechanism provides reliable protection for users' staking transactions.

Process Optimization

Solv Protocol has optimized 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 the need for any additional on-chain operations, which ensures user security while improving staking efficiency and generating profits.

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. It achieves refined permission and conditional execution through the multi-signature contract address of Gnosis Safe and Solv Vault Guardian, 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 staking procedures and parameter system of BTC, establishing industry standards can facilitate cooperation and communication among various parties in the industry, promote healthy industry development, and provide users with more stable and reliable staking services.

Unified Liquidity