Introduction

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 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 Staking Abstraction Layer (SAL), designed to simplify and standardize 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: https://solv.finance/

Twitter: https://twitter.com/SolvProtocol, 272,000 followers

TG: https://t.me/Solv_Protocol

DC: https://discord.com/invite/solvprotocol

Github: https://github.com/solv-finance

Whitepaper: https://docs.solv.finance/

Launch Date: 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 co-founder at Beijing Youzan Technology, dedicated to applying blockchain technology to automotive industry databases. Additionally, he served 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," has 20 years of experience in financial IT, 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. Former Vice President of CSDN, also an active KOL in the crypto industry.

Funding Situation:

Solv Protocol has raised approximately $29 million through three rounds of financing.

Angel Round

• On November 10, 2020, announced the completion of a $6 million angel round financing, co-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, announced the completion of a $2 million seed round financing, invested by Binance Labs;
• On August 30, 2021, announced the completion of a $4 million seed round financing, 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, etc.;
• On August 1, 2023, announced the completion of a $6 million seed round financing, with investments from Japanese banking giant Nomura Securities' investment institution Laser Digital, UOB Venture Management, Mirana Ventures, Emirates Consortium, Matrix Partners China, Bing Ventures, Apollo Capital, HashCIB, Geek Cartel, Bytetrade Labs, and others.

Strategic Round

• On October 14, 2024, announced the completion of an $11 million strategic financing, with participation from 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 Solv Protocol's future development in the capital field.

Development Strength

Solv Protocol was established in 2020. Key events in the project's development are shown in the table:

From the key events in Solv Protocol's project development, it can be seen that Solv Protocol has been diligently working to lower the barriers to creating and using on-chain financial tools. This has enabled Solv Protocol to quickly issue the wrapped Bitcoin 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 on schedule, demonstrating the strong capabilities of its technical team.

Operational Model

As the largest asset in the crypto industry, BTC has a market capitalization 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 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, it also introduced the concept of the Staking Abstraction Layer (SAL), marking the beginning of Solv Protocol's aggregation of BTC liquidity.

Integrated Staking Platform

Solv Protocol Architecture (Image Source: https://docs.solv.finance/staking-abstraction-layer-sal/the-ecological-view)

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

• LST Issuers: Create liquidity yield tokens (LST) linked 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 Bitcoin, participating in DeFi and other yield activities.
• Staking Protocols: Manage the Bitcoin deposited by users, providing secure yields. Integrated staking protocols such as Babylon, CoreDao, Botanix, Ethena, GMX, etc., provide sources of Bitcoin staking yields by staking Bitcoin 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 Bitcoin corresponds to the LST Token, and updating validation status in a timely manner.
• Yield Distributors: Ensure that staking yields are transparently and fairly distributed to LST holders, guaranteeing that users can receive staking rewards in a timely manner. For example, Babylon, Pendle, Gauntlet, Antalpha, etc.

By integrating these four key roles, Solv Protocol has built a complete Bitcoin staking ecosystem. Through the integration of 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 protocols provide sources of yield for staked Bitcoin, LST issuers issue liquid staking Tokens, allowing users to maintain asset liquidity during staking, validators are responsible for verifying the legality and security of staking transactions, and yield distributors are responsible for transparently distributing the yields generated from staking to LST holders, providing users with a more convenient, secure, and attractive staking experience.

Staking Abstraction Layer (SAL)

Technical Architecture of SAL (Image Source: https://docs.solv.finance/staking-abstraction-layer-sal/the-technical-architecture)

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 purpose of the LST generation module is to simplify the issuance of cross-chain liquid staking tokens (LST). The process of issuing cross-chain staking tokens is standardized and automated, allowing users to avoid manually participating in complex cross-chain operations. This module enables LST issuers to quickly and conveniently issue liquid staking tokens and distribute these tokens to users.

Transaction Generation Module: The transaction generation module automatically generates and broadcasts 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 validation 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 users stake, these nodes check and verify the correctness of the transactions, confirming them only after ensuring there are no issues.

Yield Distribution Module: Responsible for correctly mapping staking rewards to LST holders. When users earn yields through staking, the yield distribution module is responsible for accurately distributing these yields to the users' LST tokens. Users can receive corresponding staking rewards based on the proportion of LST tokens they hold.

In summary, as a staking abstraction layer, SAL is characterized by the integration of multiple staking participants (including Bitcoin staking providers, yield acquisition, and DeFi scenario unlocking), abstracting and encapsulating these complex processes into standardized modules. This allows developers to quickly integrate Bitcoin staking functionality into their own applications and enables users to initiate staking in a comprehensive manner. SAL is simplifying the implementation of staking to promote 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 sector, Solv Protocol faces many highly similar projects in the market, such as Bedrock, Lombard, Lorenzo, Pell Network, PumpBTC, and Stakestone, each of which shares a high degree of similarity with Solv Protocol. After the launch of SAL, Solv Protocol began to focus on integrating BTC liquidity, giving it significant advantages over other projects.

Security Assurance

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 actions. This comprehensive monitoring and verification mechanism provides reliable protection for users' staking transactions.

Process Optimization

While integrating BTC liquidity, Solv Protocol has also optimized the staking process of the project, allowing users to perform staking operations more conveniently. Users only need to deposit Bitcoin into the platform without needing to perform other on-chain operations, ensuring user safety while improving staking efficiency and generating yields.

All-Chain Yield Aggregation Platform

Solv Protocol is an all-chain yield aggregation platform that adopts a CeDeFi model, combining CeFi and DeFi to provide transparent contract management services. Through Gnosis Safe's multi-signature contract address and Solv Vault Guardian, it achieves refined permissions and conditional execution, ensuring asset security and efficient system operation.

Industry Standardization

After launching SAL, Solv Protocol aims not only to integrate BTC liquidity but also to promote the industry standardization of BTC-based LSTs. As a standardized staking process that regulates BTC staking processes and parameter systems, 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

As a unified liquidity entry point in the BTCFi industry, Solv Protocol integrates various liquidity resources and investment opportunities onto a single platform through the launch of SAL. Users can find and manage their investments on Solv Protocol without needing to access multiple different platforms or protocols, simplifying the operational process.

In summary, after launching SAL, Solv Protocol aims to further aggregate the fragmented BTC liquidity across the chain and provide a scalable and transparent unified solution. SAL can simplify user interactions with Bitcoin staking protocols, facilitating a convenient staking experience, while this abstraction layer will define a complete set of common functions, including LST asset issuance, distributed node staking validation, yield distribution, and slash rules, among others. At the same time, it can integrate the wrapped tokens of other LST projects into its own liquidity, greatly simplifying on-chain user operations.

Project Model

Business Model

The economic model of Solv Protocol consists of two roles: BTC and LST stakers, and projects cooperating with Solv.

BTC and LST Stakers: Solv Protocol supports BTC mainnet (currently only accepting stakers with over 100 BTC), Merlin, Mantle, Avalanche, BOB, and other on-chain users to deposit their held BTC or wrapped BTC into Solv Protocol. After launching SAL, it can absorb BTC liquidity from various scenarios such as Ethereum EVM, BNBChain, and CeDeFi. Users can deposit their held BTC or wrapped BTC into Solv Protocol to mint SolvBTC at a 1:1 ratio, and they are allowed to re-mint SolvBTC into other forms of LST. Users can achieve the goal of earning other yields while holding BTC through Solv Protocol.

Projects Cooperating with Solv: Solv Protocol can deposit the BTC and wrapped BTC staked by users into various DeFi protocols based on the different needs of its cooperating projects and the yields provided. For example, it can deposit into Merlin Chain, Stacks, Bsquare, etc., to obtain staking yields; it can also deposit into projects like Babylon to obtain restaking yields; or deposit into DeFi projects in L2s like Arbitrum and BNB Chain to earn liquidity provision yields. This not only increases the yields for Solv Protocol users but also enhances the liquidity and security of the projects cooperating with Solv.

From the above analysis, it can be seen that Solv Protocol's revenue comes from:

• Solv Protocol charges a certain percentage of user yields.

Token Model

Solv Protocol has not released any tokens or token issuance plans.

On-Chain Data

TVL

Solv Protocol TVL (Image Source: https://defillama.com/protocol/solv-protocol?denomination=USD)

From the chart, it can be seen that Solv Protocol's TVL has experienced a significant increase from January 2024 to the present, and has grown rapidly in the last month, increasing from $1.153 billion to $1.783 billion, a growth rate of 54.64%. This indicates that users are optimistic about its future development.

User Count

SolvBTC User Count (Image Source: https://dune.com/picnicmou/solv-protocol)

From the chart, it can be seen that the user count of SolvBTC has grown rapidly, with an even more rapid increase from August to now, rising from 185,799 in August to 397,324 now, an increase of 113.85%. It is evident that more and more users are choosing SolvBTC and are very optimistic about Solv Protocol.

Supporting Projects

As a project primarily focused on LST in the BTCFi sector, whether more projects adopt its LST—SolvBTC will determine its success. From Solv Protocol's financing process, we can see that Solv Protocol has a very strong background in the crypto industry, enabling it to connect with more projects and gain support from other projects. After achieving initial success, more projects and public chains have supported it, forming a positive cycle.

Chains Supporting Solv Protocol:

DeFi projects supporting Solv Protocol (APY of 0 are not included in the table):

From the above table, we can see that there is now significant support from various chains and projects for Solv Protocol, allowing its wrapped assets:

SolvBTC, SolvBTC.BBN, SolvBTC.ENA, and SolvBTC.CORE to receive substantial backing, making them adoptable across many chains and DeFi projects, facilitating users' arbitrage on their wrapped assets. This also increases users' yields.

Comparison with Babylon

Solv Protocol and Babylon have a close collaborative relationship in the BTC staking field, but each has its unique functions and positioning. Babylon is a protocol focused on BTC staking, aiming to extend Bitcoin's security to other networks through shared economic security. It allows BTC holders to earn yields through staking, and after the mainnet launch, Solv Protocol will be one of the first participants. Babylon extends the security of BTC to PoS chains, AVS, and roll-ups through its native BTC staking protocol.

Solv Protocol, on the other hand, is an all-chain yield and liquidity protocol that simplifies the Bitcoin staking process using SAL, allowing users to stake SolvBTC across different blockchains. Solv Protocol not only provides over 20% of BTC staking assets to Babylon but also becomes a major liquidity provider in the Babylon ecosystem. Additionally, Solv Protocol has launched the SolvBTC.BBN liquid staking token, allowing users to access liquidity for their BTC while earning native token rewards from PoS chains through Babylon.

Thus, through the comparison of the two, we can see that Babylon is more akin to Eigenlayer in the BTCFi space, while Solv Protocol resembles Lido, indicating that the relationship between Solv Protocol and Babylon should be parallel. Solv Protocol possesses substantial liquidity and is not limited to supporting Babylon. Furthermore, Solv Protocol has also launched BTC staking tokens on other chains, such as BTC staking tokens on Solana.

For BTCFi projects, TVL is an important indicator of project development. Let's compare the TVL of Solv Protocol and Babylon: Solv Protocol's TVL is $1.783 billion, while Babylon's TVL is $1.605 billion. From this comparison, we can see that Solv Protocol's TVL has surpassed that of Babylon.

In summary, Babylon focuses on achieving the secure extension of Bitcoin staking through its native protocol, while Solv Protocol simplifies and enhances the staking experience of BTC across multiple DeFi ecosystems through its staking abstraction layer and liquid staking tokens.

Project Risks

1. Smart Contract Vulnerability Risk: Although Solv uses multi-signature and other security mechanisms to protect assets, the smart contracts themselves may still have vulnerabilities or be subject to attacks. This risk could lead to the loss or theft of users' assets. Smart contract vulnerability risk has always been a significant challenge faced by crypto asset management services.
2. Lack of a Clear Token Economic Model: Solv Protocol has been incentivizing user participation in BTC staking activities through a points reward mechanism, but it has not launched a token economic model or issuance plan, which may reduce user participation enthusiasm to some extent.
3. Challenges of Decentralized Management: Solv Protocol attempts to address the transparency issues in traditional crypto asset management services through decentralized methods. While decentralized management can resolve transparency issues, it also brings about trust issues. Decentralized management may complicate decision-making processes and, in some cases, make it difficult to respond quickly to market changes, necessitating the search for suitable solutions to balance decentralization and efficiency.
4. Liquidity Risk: As a liquidity layer, Solv Protocol relies on substantial user participation and capital investment. If the market experiences severe fluctuations or user confidence declines, it may lead to liquidity depletion, thereby affecting the platform's stability and security.
5. Risks of High-Risk DeFi Protocols: Solv Protocol manages the risks of high-risk DeFi protocols through features like Convertible Vouchers, but these mechanisms do not completely eliminate potential financial risks. In highly volatile markets, these risks may be amplified.
6. Market Acceptance and User Trust: Although Solv Protocol has received support from well-known institutions like Binance and OKX, its market acceptance and user trust still require time to build. If user trust in the platform cannot be effectively enhanced, it may impact its long-term development.

Conclusion

As an innovative project in the BTCFi sector, Solv Protocol successfully integrates key roles in the Bitcoin staking ecosystem through its all-chain yield Bitcoin asset SolvBTC and staking abstraction layer (SAL) technology, significantly lowering the participation threshold for users. Its advantages lie in robust security assurance mechanisms, optimized staking processes, all-chain yield aggregation capabilities, and efforts to promote industry standardization. The project has garnered support from several renowned investment firms in the crypto industry, helping Solv Protocol gain backing from well-known public chains and DeFi projects, while also demonstrating rapid growth in TVL and user numbers, reflecting market recognition. Solv Protocol creates more value for BTC holders by providing a unified liquidity entry point and diverse staking options, while also promoting the development of the BTCFi ecosystem.

However, Solv Protocol faces a series of challenges and potential risks. Firstly, its complex cross-chain operations and smart contract interactions increase the risk of potential security vulnerabilities, especially when handling large amounts of user assets. Secondly, the project has not yet issued tokens and lacks a clear token economic model, which may affect the effectiveness of long-term incentive mechanisms. Additionally, as a third-party staking solution, Solv Protocol may face challenges regarding user trust. The project's level of decentralization and governance mechanisms also need further improvement to ensure long-term sustainable development. Finally, although TVL is growing rapidly, the user base is relatively small, and market education and user adoption will still require time.

In summary, while Solv Protocol has certain project risks, the risks it faces are common to projects in the BTCFi sector at this stage and do not represent unique risks specific to Solv Protocol. After launching the staking abstraction layer (SAL) technology, it is clear that Solv Protocol's future development direction has significantly changed compared to other projects that solely provide BTC-based LSTs, with greater potential for aggregating the fragmented liquidity of BTC across the chain. Therefore, we believe Solv Protocol is a project that is very worthy of investment and attention.

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