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 barriers to creating and using on-chain financial tools, bringing diversified 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 sector, Solv Protocol shifted its focus to BTCFi, creating a full-chain yield Bitcoin asset SolvBTC, providing new opportunities for Bitcoin holders while creating an efficient BTCFi ecosystem. Recently, Solv Protocol launched the staking abstraction layer (SAL), 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:

Twitter: @SolvProtocol, Followers 272,000

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, previously served as 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. He 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 "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 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, with Laser Digital, UOB Venture, Mirana Ventures, ApolloCrypto, Hash CIB, GeekCartel, ByteTrade, Matrix Partners, BincVentures, and Emirates Consortium as the co-lead investors.

Seed Round

• On May 8, 2021, it was announced that they completed a $2 million seed round financing, invested by a certain trading platform.
• 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 $6 million seed round funding was completed, with investments from institutions such as Laser Digital, a subsidiary of 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 was completed, with participation 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, with several well-known investment institutions making large investments, indicating that the capital sector is optimistic about the future development of Solv Protocol.

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 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 rise of the BTCFi track and rapidly occupy the LST market based on BTC. In terms of the timeline for achieving various key technical milestones, Solv Protocol has completed the development of project technology as scheduled, demonstrating the strength of its technical team.

Operating Mode

BTC, as the largest asset in the Crypto industry, has a market capitalization exceeding $1.3 trillion. However, for a long time, BTC holders have simply held onto their assets without unlocking their potential value like ETH. Solv Protocol advocates unlocking the $1.3 trillion potential of BTC assets through BTC staking. In 2024, Solv Protocol will shift its project focus to BTCFi, launching the fully on-chain yield BTC asset SolvBTC to release the staking liquidity of BTC. Recently, it also introduced the Staking Abstraction layer(SAL) concept, beginning to aggregate the liquidity of BTC.

Integrated staking platform

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

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

• Staking Protocols (: Manage users' deposited BTC and provide secure returns. Integrated staking protocols such as Babylon, CoreDao, Botanix, Ethena, GMX, and others provide BTC staking yield sources, allowing users to earn rewards from POS chains by staking BTC in POS networks.

• Staking Validators ): Such as 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 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, guaranteeing that users can obtain staking returns in a timely manner. Such as Babylon, Pendle, Gauntlet, Antalpha, etc.

Solv Protocol has built a complete Bitcoin staking ecosystem by integrating these four key roles, achieving seamless interaction between the Bitcoin mainnet and EVM-compatible chains, and simplifying the staking implementation for both users and developers. The staking protocol provides a source of income for staking Bitcoin, LST issuers issue liquidity staking tokens, allowing users to maintain asset liquidity during the staking period, validators are responsible for verifying the legality and security of staking transactions, and the revenue distribution party is responsible for transparently distributing the income generated from staking to LST holders. This provides users with a more convenient, safer, and more 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-37b6dfcb308108cd05055f1d3cdd3da7.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 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 yields while minimizing the risks associated with the accounting process and cross-chain interactions.

Staking Parameter Matrix ) SPM (: The purpose 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 role of the LST generation module is to simplify the issuance of cross-chain liquidity staking Token ) LST (. The process of issuing cross-chain staking Tokens has been standardized and automated, allowing users to avoid manually participating 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 role of the transaction generation module is to automatically generate and broadcast BTC stake transactions. In simple terms, this module's job 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.

Validation Nodes: Real-time verification of the legality and security of staking transactions. The role of validation nodes is to ensure that all staking transactions are legitimate and secure. When a user stakes, 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 stake 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 stake 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 BTC staking providers, yield acquisition, and unlocking DeFi scenarios (, encapsulating these complex processes into standardized modules. This allows developers to quickly integrate BTC 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. 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 BTC 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.

![Solv Protocol Research Report: Exploring the Staking Abstraction Layer and Liquidity Mechanism in the BTCFi Ecosystem])https://img-cdn.gateio.im/webp-social/moments-1ea32d825bd1d4aaa261982462c6b0c8.webp(

Advantages Compared to Other BTCFi Projects

Solv Protocol, as an LST project in the BTCFi track, has many projects with a high degree of homogeneity in the market, 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, it began focusing on integrating BTC's Liquidity, giving Solv Protocol a significant advantage compared to other projects.

) Security Guarantee

Solv Protocol ensures the security of stake transactions by integrating the active verification service (AVS). The AVS system comprehensively monitors all aspects of stake transactions, including the target address, script hash, stake duration, 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' stake transactions.

Process Optimization

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

( Full-chain Yield Aggregation Platform

Solv Protocol is a cross-chain yield aggregation platform that adopts the CeDeFi model, combining CeFi and DeFi to provide transparent contract management services. It achieves refined permissions 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

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

Unified Liquidity

Solv Protocol, as a unified liquidity gateway in the BTCFi industry, integrates various liquidity resources and investment opportunities into one platform through the launch of SAL. Users can find and manage their investments on Solv Protocol without having to access multiple different platforms or protocols, simplifying the operational process.

In summary, after the launch of SAL, Solv Protocol