Introduction
Solv Protocol, established in 2020, aims to lower the threshold for creating and using on-chain financial tools, bringing diverse asset classes and yield opportunities to the crypto field. Solv Protocol focuses on minting and trading NFTs related to financial ownership certificates. In 2024, with the continuous development of the BTCFi track, Solv Protocol shifted its focus to BTCFi, creating the full-chain yield Bitcoin asset SolvBTC, aiming to provide new opportunities and possibilities for Bitcoin holders while creating an efficient BTCFi ecosystem. Recently, Solv Protocol launched the staking abstraction layer (SAL), aiming to simplify and standardize the cross-chain Bitcoin staking process, abstracting the complexities of the Bitcoin staking scenario, 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
White Paper: https://docs.solv.finance/
Launch Date: Mainnet launched in June 2021, Solv Protocol has not issued any tokens.
Project Team
Core Team
Ryan Chow: Co-founder. Graduated from Beijing Foreign Studies University, formerly 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 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 financial IT, having 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 'Outstanding Contribution Award' for the 20th Anniversary of Zhongguancun.
Meng Yan: Co-founder. Former Vice President of CSDN, 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 announced the completion of a $6 million angel round of financing, co-led by Laser Digital, UOB Venture, Mirana Ventures, ApolloCrypto, Hash CIB, GeekCartel, ByteTrade, JRR Crypto, BincVentures, and Emirates Consortium.
Seed Round
On May 8, 2021, it announced the completion of a $2 million seed funding round, with investment from Binance Labs.
On August 30, 2021, it announced the completion of a $4 million seed funding round, 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, and others.
On August 1, 2023, it announced the completion of a $6 million seed funding round with investments from Japanese banking giant Nomura Securities' investment institution Laser Digital, UOB Venture Management, Mirana Ventures, Emirates Consortium, JRR Crypto, Bing Ventures, Apollo Capital, HashCIB, Geek Cartel, Bytetrade Labs, and others.
Strategic Round
On October 14, 2024, it announced the completion of $11 million in strategic financing, with investments from Laser Digital, Blockchain Capital, and OKX Ventures.
In three rounds of financing, Solv Protocol raised a total of $29 million, and well-known investment institutions such as Binance Labs, Blockchain Capital, Laser Digital, JRR Crypto, and OKX Ventures made significant investments, indicating strong confidence in the future development of Solv Protocol in the capital field.
Development Strength
Solv Protocol was initiated in 2020. Key events in project development are shown in the table:
From the key events in the project development of Solv Protocol, it can be seen that Solv Protocol has been working hard to lower the threshold for creating and using on-chain financial tools, which has allowed it to quickly issue BTC wrapped assets SolvBTC after the rise of the BTCFi track and rapidly occupy the LST market based on BTC. Looking at the timeline for achieving various key technical nodes, Solv Protocol has completed the technical development of the project on schedule, demonstrating the strength of the Solv Protocol technical team.
Operating Model
As the largest asset in the crypto industry, BTC has a market value 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 BTC asset potential through BTC staking. In 2024, Solv Protocol shifted its focus to BTCFi, launching the full-chain yield Bitcoin asset SolvBTC, which can release the liquidity of BTC staking. Recently, it also introduced the concept of Staking Abstraction Layer (SAL), marking Solv Protocol's start in aggregating BTC liquidity.
Integrated Staking Platform
Solv Protocol Framework (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 linking them together through an integrated platform architecture:
LST Issuers: Create liquidity yield tokens (LST) tied to staked Bitcoin. Solv is currently the largest Bitcoin LST issuer in the market. It allows users to maintain asset liquidity while staking the staking token (LST) and participating in DeFi and other yield activities.
Staking Protocols: Manage users' deposited Bitcoin and provide secure yields. Integrated staking protocols such as Babylon, CoreDao, Botanix, Ethena, GMX, etc., provide sources of Bitcoin staking returns, allowing users to receive rewards from POS chains by staking Bitcoin in POS networks.
Staking Validators: For example, Ceffu, Cobo, Fireblocks, Solv Guard, etc., are responsible for verifying transactions, ensuring the legality and security of staking transactions, validating that the staked Bitcoin corresponds to LST tokens, and timely updating the validation status.
Yield Distributors: Ensure that staking rewards are transparently and fairly distributed to LST holders, ensuring that users can receive their staking returns 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, enabling seamless interaction between the Bitcoin mainnet and EVM-compatible chains through the integration of staking protocols, LST issuers, validators, and yield distributors. This simplifies the staking experience for users and developers. The staking protocol provides the source of staking rewards for 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 ensure that staking-generated earnings are transparently distributed to LST holders. This provides 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 interacting 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, verification 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 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 liquid staking tokens (LST) across chains. The issuance process for cross-chain staking tokens has been standardized and automated, allowing users to participate in complex cross-chain operations without manual intervention. This module enables LST issuers to quickly and conveniently issue liquid 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 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 simpler.
Validation Node: 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 validate the correctness of transactions, only confirming them if there are no issues.
Yield Distribution Module: Responsible for correctly mapping staking rewards to LST holders. When users earn rewards through staking, the yield distribution module is responsible for distributing these earnings to users' LST tokens properly. Users can receive corresponding staking rewards based on the proportion of LST tokens they hold.
In summary, SAL, as a staking abstraction layer, integrates multiple staking participants (including Bitcoin staking providers, yield acquisition, and DeFi scenario unlocking), abstracting these complex processes into standardized modules. This allows developers to quickly integrate Bitcoin staking functions into their own applications without having to design complex systems from scratch.
Advantages Compared to Other BTCFi Projects
As an LST project in the BTCFi track, Solv Protocol has many projects with high similarity in the market, such as Bedrock, Lombard, Lorenzo, Pell Network, PumpBTC, and Stakestone, each sharing a high degree of similarity with Solv Protocol. After launching 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 durations, etc., to ensure the validity and security of transactions, thus 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, allowing users to perform staking operations more conveniently. Users only need to deposit Bitcoin into the platform without any other on-chain operations, ensuring user safety while improving staking efficiency and generating returns.
Full-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. Through the multi-signature contract address of Gnosis Safe and Solv Vault Guardian, it implements 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 development, and provide users with more stable and reliable staking services.
Unified Liquidity
Solv Protocol serves as a unified liquidity entry point in the BTCFi industry, integrating various liquidity resources and investment opportunities onto one platform with the launch of SAL. Users do not need to access multiple different platforms or protocols; they can find and manage their investments on Solv Protocol, simplifying the operational process.
In summary, after launching SAL, Solv Protocol seeks to further aggregate decentralized BTC liquidity across the full chain and provide a scalable and transparent unified solution. SAL can simplify user interactions with Bitcoin staking protocols, facilitating a convenient staking experience. Meanwhile, this abstraction layer will define a set of common functions, including LST asset issuance, distributed node staking verification, yield distribution, and slash rules. At the same time, it can integrate the wrapped tokens of other LST projects into its liquidity and greatly simplify on-chain users' operations.
Project Model
Business Model
The Solv Protocol economic model 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 more than 100 BTC), Merlin, Mantle, Avalanche, BOB, and other on-chain users to deposit their BTC or wrapped BTC into Solv Protocol. After launching SAL, it can absorb BTC liquidity from various scenarios such as Ethereum EVM, BNBChain, CeDeFi, etc. Users can deposit their BTC or wrapped BTC on the above chains into Solv Protocol to mint SolvBTC at a 1:1 ratio and allow users to mint SolvBTC into other forms of LST. Users can achieve the goal of earning other rewards 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 and yield rates of its cooperating projects. For example, it can deposit into Merlin Chain, Stacks, Bsquare, etc., to obtain staking rewards; it can also deposit into projects like Babylon to obtain restaking rewards; or deposit into DeFi projects in L2s like Arbitrum and BNB Chain to get liquidity provision rewards. This not only increases the earnings of 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 is:
Solv Protocol charges a certain percentage of user earnings.
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)
As shown in the figure, Solv Protocol's TVL has seen a significant increase from January 2024 to now, with a rapid growth in the last month, rising from $1.153 billion to $1.783 billion, an increase of 54.64%. This indicates users' optimism about its future development.
User Count
SolvBTC User Count (Image Source: https://dune.com/picnicmou/solv-protocol)
As shown in the graph, SolvBTC's user count has grown rapidly, with a particularly sharp increase from August to now, rising from 185,799 in August to 397,324 now, an increase of 113.85%. This indicates that more and more users are choosing SolvBTC and are very optimistic about Solv Protocol.
Supporting Projects
As a project in the BTCFi track primarily focused on LST, the adoption of its LST—SolvBTC—determines its success. From Solv Protocol's fundraising process, we can see that it has a strong background in the crypto industry, allowing it to connect with more projects and gain support from other projects. After Solv Protocol achieves initial success, more projects and public chains support it, forming a positive cycle.
Chains Supporting Solv Protocol:
Supporting DeFi projects for Solv Protocol (APY of 0 not included in the table):
From the above table, we can see that many chains and projects have strongly supported Solv Protocol, leading to the wrapping of assets in Solv Protocol.
SolvBTC, SolvBTC.BBN, SolvBTC.ENA, and SolvBTC.CORE have received significant support, enabling their adoption across various chains and DeFi projects, facilitating users' arbitrage of their wrapped assets. This also increases users' earnings.
Comparison with Babylon
Solv Protocol and Babylon have a close cooperative relationship in the BTC staking field, yet each has its unique functions and positioning. Babylon focuses on BTC staking protocols, aiming to extend Bitcoin's security to other networks through shared economic security. It allows BTC holders to earn rewards through staking, and after the mainnet launch, Solv Protocol will be one of the first participants. Babylon expands the security of BTC to PoS chains, AVS, and roll-ups through its native BTC staking protocol.
Solv Protocol is a full-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 Babylon with over 20% of BTC staking assets but also becomes a major liquidity provider for the Babylon ecosystem. Additionally, Solv Protocol has launched the SolvBTC.BBN liquid staking token, which allows users to maintain liquidity access to their BTC while earning native token rewards from PoS chains through Babylon.
By comparing the two, we can see that Babylon is more similar to Eigenlayer in BTCFi, while Solv Protocol is more like Lido, indicating that the relationship between Solv Protocol and Babylon should be parallel. Solv Protocol has significant liquidity and is not limited to supporting Babylon. Additionally, Solv Protocol has also launched BTC staking tokens on other chains, such as the BTC staking token launched on Solana.
For the BTCFi project, Total Value Locked (TVL) is an important indicator of its 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. The comparison shows that Solv Protocol's TVL has surpassed Babylon's.
In summary, Babylon focuses on achieving the secure expansion of Bitcoin staking through its native protocol, while Solv Protocol simplifies and enhances the staking experience of BTC in multiple DeFi ecosystems through its staking abstraction layer and liquid staking tokens.
Project Risks
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.
Lack of Clear Token Economic Model: Solv Protocol has been incentivizing user participation in BTC staking activities through a points reward mechanism, but has not launched a token economic model or token issuance plan, which may reduce user participation enthusiasm to some extent.
Challenges of Decentralized Management: Solv Protocol seeks to address the transparency issues in traditional crypto asset management services through decentralized methods. While decentralized management can resolve transparency issues, it also brings trust issues. Decentralized management may complicate decision-making processes and make it difficult to respond quickly to market changes in some cases, thus requiring suitable solutions to balance decentralization and efficiency.
Liquidity Risk: As a liquidity layer, Solv Protocol relies on a large number of users' participation and capital investment. If the market experiences severe fluctuations or user confidence decreases, it may lead to liquidity depletion, affecting the platform's stability and security.
High-Risk DeFi Protocols Risk: Solv Protocol manages risks associated with high-risk DeFi protocols through features like Convertible Voucher, but these mechanisms cannot completely eliminate potential financial risks. In highly volatile markets, these risks may be amplified.
Market Acceptance and User Trust: Although Solv Protocol has received support from well-known institutions such as Binance and OKX, its market acceptance and user trust still need time to build. If user trust in the platform cannot be effectively enhanced, it may affect its long-term development.
Conclusion
As an innovative project in the BTCFi track, Solv Protocol successfully integrates the key roles of the Bitcoin staking ecosystem through its full-chain yield Bitcoin asset SolvBTC and staking abstraction layer (SAL) technology, significantly lowering the participation threshold for users. Its advantages lie in strong security mechanisms, optimized staking processes, full-chain yield aggregation capabilities, and efforts to promote industry standardization. The project has received support from several well-known investment companies in the crypto industry, helping Solv Protocol gain support from some well-known public chains and DeFi projects, reflecting a rapidly growing TVL and user count, indicating market recognition. Solv Protocol creates more value for BTC holders by providing a unified liquidity entry and diverse staking options while 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 potential risk of security vulnerabilities, especially when handling large amounts of user assets. Secondly, the project has not yet issued tokens, lacking 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 in user trust. The project's degree of decentralization and governance mechanism also needs further improvement to ensure long-term sustainability. Finally, although TVL is growing rapidly, the user base is relatively small, and market education and user adoption will still take time.
In summary, although Solv Protocol faces certain project risks, these risks are common to projects in the BTCFi track at this stage and are not unique to Solv Protocol. After the launch of the staking abstraction layer (SAL) technology, it is clear that Solv Protocol's development direction has significantly changed from other projects that solely provide BTC-based LST, with greater potential for aggregating decentralized BTC liquidity. Therefore, we believe that Solv Protocol is a project worth investing in and paying attention to.
