Solv Protocol Research Report: 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 instruments, bringing diverse asset classes and yield opportunities to the crypto space. Solv Protocol focuses on minting and trading NFTs related to financial ownership certificates. In 2024, with the continuous development of the BTCFi sector, Solv Protocol has shifted its focus to BTCFi, creating the all-chain yield Bitcoin asset SolvBTC, aimed at providing new opportunities and possibilities for Bitcoin holders while creating an efficient BTCFi ecosystem. Recently, Solv Protocol launched the Stake Abstraction Layer (SAL), aimed at simplifying and standardizing the cross-chain Bitcoin staking process, thereby abstracting the complexities of Bitcoin staking scenarios, allowing users and developers to adopt it quickly.

Project Basic Information

Basic Information

Website:

Twitter:

TG：

DC：

Github:

White Paper:

Launch time: The mainnet was launched in June 2021, and the Solv Protocol has not issued tokens.

Project Team

Core Team

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

Will Wang: Co-founder. Created "ERC-3525: Semi-Homogeneous Token Standard," he has 20 years of experience in the financial IT sector and has led the design and development of the world's largest banking accounting system based on open platform and distributed technology. He is the 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, 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 $2 million seed round financing was completed, 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 seed round financing of 6 million USD was completed, with investments from institutions such as Laser Digital under 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 strategic financing of $11 million had been completed, with participation from companies such as Laser Digital, Blockchain Capital, and OKX Ventures.

During the three rounds of financing, Solv Protocol raised $29 million, and 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 diligently working towards lowering 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 sector and rapidly capture 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 the Solv Protocol technical team's capabilities.

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 simply held 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, 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 asset liquidity while staking token (LST) in Bitcoin and participate in DeFi and other yield activities.

• Staking Protocols (Staking Protocols): Manage users' deposited 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 receive 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 the source of yield for staking Bitcoin, LST issuers issue liquid 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 yields generated from staking to LST holders. This offers users 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 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 yields while minimizing 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 standard 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 LST generation module serves to simplify the issuance of cross-chain Liquidity stake Tokens (LST). The issuance process of cross-chain stake 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 stake Tokens and distribute these Tokens to users.

Transaction Generation Module: The role of the transaction generation module is to automatically generate and broadcast BTC staking transactions. In simple terms, this module's job is to automatically create and send staking transactions to the BTC mainnet. Previously, users had to manually perform many steps, but now this module will automatically complete most of the work for users, 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 legal and secure. When users stake, these nodes check and verify the correctness of the transactions, ensuring that there are no issues before confirming the transaction.

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 into the user's LST Token. Users can receive corresponding staking rewards based on the proportion of LST Tokens they hold.

In summary, SAL serves as an abstract layer for staking, 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 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 carry 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 highly homogeneous projects in the market, such as Bedrock, Lombard, Lorenzo, Pell Network, PumpBTC, and Stakestone. Each of these has a high degree of similarity to Solv Protocol. After the launch of SAL, Solv Protocol began to focus on integrating BTC's Liquidity, giving it a significant advantage over other projects.

Security Guarantee

Solv Protocol ensures the security of staking transactions by integrating active validation services (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 behavior. This comprehensive monitoring and verification mechanism provides reliable protection for users' staking transactions.

Process Optimization

The 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 any other on-chain operations, which ensures user safety while improving staking efficiency and enabling 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. It achieves refined permissions and conditional execution through the multi-signature contract address of Gnosis Safe and Solv Vault Guardian.