Solv Protocol: Exploring the Stake 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 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 continuous development of the BTCFi track, Solv Protocol has shifted its focus to BTCFi, creating the SolvBTC, an all-chain yield Bitcoin asset, 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) to simplify and standardize 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

Twitter: SolvProtocol, 272,000 followers

Launch date: June 2021 mainnet launch, Solv Protocol has not issued tokens.

Project Team

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

Will Wang: Co-founder. Created "ERC-3525: Semi-Homogenized 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 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 funding.

Angel Round

On November 10, 2020, it was announced that they completed a $6 million angel round of financing, 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 had been completed, invested by a certain investment institution;
• On August 30, 2021, it was announced that a $4 million seed round financing had been 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 funding round of $6 million 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, 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 a certain investment institution.

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

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

• In November 2020, Solv Protocol completed its angel round financing.
• Completed seed round financing in May 2021
• In June 2021, the Solv mainnet went live.
• In August 2021, completed the second round of seed financing.
• In April 2022, the Convertible Voucher was launched.
• Completed the third round of seed financing in August 2023
• In January 2024, the full-chain yield BTC asset SolvBTC will be launched.
• In March 2024, the staking abstraction layer SAL will be launched.

From the perspective of key events in the development of the Solv Protocol project, Solv Protocol has been working hard to lower the barrier to creating and using on-chain financial tools. This has enabled Solv Protocol to quickly issue SolvBTC, a wrapped asset of BTC, after the rise of the BTCFi track, and rapidly capture the BTC-based LST market. In terms of the timeline for Solv Protocol to achieve various key technical milestones, the project’s technical development has been completed 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 cap of over $1.3 trillion. However, for a long time, BTC holders have simply held onto their BTC without releasing 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 all-chain yield BTC asset SolvBTC, which can release the staking liquidity of BTC. Recently, the concept of Staking Abstraction Layer (SAL) has also been introduced, marking the beginning of Solv Protocol's aggregation of BTC liquidity.

Integrated staking platform

In the Solv Protocol architecture, the staking process is broken down into four key roles and 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) 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. provide sources of BTC staking yields 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 timely updating the validation status.

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

Solv Protocol constructs a complete Bitcoin staking ecosystem by integrating these four key roles. It achieves seamless interaction between the Bitcoin mainnet and EVM-compatible chains through the integration of staking protocols, LST issuers, validators, and yield distributors, simplifying the staking implementation for both users and developers. The staking protocol provides sources of yield for staked Bitcoin, LST issuers issue Liquidity 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 allocating the yields generated from staking to LST holders. This 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 revenue distribution module, all of which rely on SPM to define transaction rules, validation standards, and revenue 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 returns while minimizing the risks associated with the accounting process 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 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 LST generation module is designed to simplify the issuance of cross-chain liquidity stake Tokens (LST). The issuance process of cross-chain stake Tokens is 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 stake 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 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 stake transactions. The role of validator nodes is to ensure that all stake transactions are legitimate 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 accurately 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 the integration of multiple staking participants (including BTC staking providers, yield acquisition, and DeFi scenario unlocking), abstracting and encapsulating these complex processes into standardized modules. This enables developers to quickly integrate BTC 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, because BTC itself does not support staking, all third-party staking may introduce certain security risks, and SAL is no exception. As SAL integrates staking-related solutions, the technical complexity and compatibility behind the integration may also bring 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 homogenization, such as Bedrock, Lombard, Lorenzo, Pell Network, PumpBTC, and Stakestone, each of which shares a high similarity with 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 stake transactions by integrating active validation services (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 avoiding errors or malicious actions. This comprehensive monitoring and validation mechanism provides reliable protection for users' stake transactions.

Process Optimization

The Solv Protocol not only integrates BTC liquidity but also optimizes the staking process of the project, 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 safety while improving staking efficiency and enabling them to earn returns.

All-in-one Yield Aggregation Platform

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