Solv Protocol Research Report: Exploring the Staking Abstraction Layer and Liquidity Mechanisms in the BTCFi Ecosystem
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Solv Protocol Research Report: Exploring the Staking Abstraction Layer and Liquidity Mechanisms in the BTCFi Ecosystem
Solv Protocol aims to provide Bitcoin holders with new opportunities and possibilities while building an efficient BTCFi ecosystem.
Navigating Web3 tides with focused insightsIntroduction
Solv Protocol, founded in 2020, aims to lower the barriers to creating and using on-chain financial instruments, bringing diversified asset classes and yield opportunities to the crypto space. Focused on minting and trading NFTs tied to financial ownership certificates, Solv Protocol shifted its focus to BTCFi in 2024 as the sector gained momentum. It introduced SolvBTC, a cross-chain yield-bearing Bitcoin asset designed to unlock new possibilities for Bitcoin holders and build an efficient BTCFi ecosystem. Recently, Solv launched the Staking Abstraction Layer (SAL), aiming to simplify and standardize cross-chain Bitcoin staking by abstracting away the complexity of staking scenarios, enabling faster adoption for both users and developers.
Project Overview
Basic Information
Website: https://solv.finance/
Twitter: https://twitter.com/SolvProtocol, 272K followers
Telegram: https://t.me/Solv_Protocol
Discord: https://discord.com/invite/solvprotocol
GitHub: https://github.com/solv-finance
Whitepaper: https://docs.solv.finance/
Mainnet Launch: June 2021; Solv Protocol has not issued a token.
Team
Core Team
Ryan Chow: Co-founder. Graduated from Beijing Foreign Studies University, previously served as co-founder at Beijing Youshang Technology, focusing on applying blockchain technology to automotive databases. He also worked as a financial analyst at Singularity Financial, researching blockchain integration and financial regulation.
Will Wang: Co-founder. Creator of the "ERC-3525: Semi-Fungible Token Standard," with 20 years of experience in financial IT. Led the design and development of the world's largest banking ledger system based on open platforms and distributed technologies. Recipient of the "Zhongguancun 20th Anniversary Outstanding Contribution Award."
Meng Yan: Co-founder. Former Vice President at CSDN and an active KOL in the crypto industry.
Funding
Solv Protocol has raised approximately $29 million across three funding rounds.
Angel Round
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November 10, 2020: Announced $6 million in angel funding led by Laser Digital, UOB Venture, Mirana Ventures, ApolloCrypto, Hash CIB, GeekCartel, ByteTrade, Matrix Partners China, and BincVentures.
Seed Rounds
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May 8, 2021: Announced $2 million seed round funded by Binance Labs;
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August 30, 2021: Announced $4 million seed extension round co-led by Blockchain Capital, Sfermion, and Gumi Cryptos Capital, with participation from DeFi Alliance, Axia8 Ventures, TheLAO, CMS Holdings, Apollo Capital, Shima Capital, SNZ Holding, Spartan Group, and others;
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August 1, 2023: Announced $6 million seed extension round, backed by Laser Digital (Nomura’s investment arm), UOB Venture Management, Mirana Ventures, Emirates Consortium, Matrix Partners China, Bing Ventures, Apollo Capital, HashCIB, Geek Cartel, Bytetrade Labs, and others.
Strategic Round
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October 14, 2024: Announced $11 million strategic round with participation from Laser Digital, Blockchain Capital, and OKX Ventures.
In total, Solv Protocol has raised $29 million across these rounds. Backers include top-tier investors such as Binance Labs, Blockchain Capital, Laser Digital, Matrix Partners China, and OKX Ventures—demonstrating strong institutional confidence in the project’s future.
Development Capability
Solv Protocol was initiated in 2020. Key milestones in its development are shown below:
From these key milestones, it is evident that Solv Protocol has consistently focused on lowering the barrier to creating and using on-chain financial tools. This foundation enabled Solv to quickly launch SolvBTC—the wrapped Bitcoin asset—when the BTCFi sector emerged, rapidly capturing market share in the BTC-based LST space. The team has consistently delivered on technical milestones on schedule, reflecting strong technical execution and capability.
Operating Model
Bitcoin, the largest asset in the crypto industry with a market cap exceeding $1.3 trillion, has long been held passively without unlocking its full potential like Ethereum. Solv Protocol aims to unlock this $1.3 trillion potential through Bitcoin staking. In 2024, the project pivoted to BTCFi, launching SolvBTC—a cross-chain yield-bearing Bitcoin asset—to unlock staking liquidity. More recently, Solv introduced the Staking Abstraction Layer (SAL), marking the beginning of its effort to aggregate Bitcoin liquidity.
Integrated Staking Platform
Solv Protocol Architecture (Source: https://docs.solv.finance/staking-abstraction-layer-sal/the-ecological-view)
The Solv Protocol architecture divides the staking process into four key roles, tightly integrated via a unified platform:
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LST Issuers: Create liquidity staking tokens (LSTs) pegged to staked Bitcoin. Solv is currently the largest Bitcoin LST issuer, allowing users to maintain liquidity while staking their Bitcoin and participating in DeFi and other yield-generating activities.
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Staking Protocols: Manage deposited Bitcoin and provide secure yield. Integrated protocols such as Babylon, CoreDao, Botanix, Ethena, and GMX serve as sources of staking yield. By staking Bitcoin within PoS networks, users earn rewards from those chains.
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Staking Validators: Entities such as Ceffu, Cobo, Fireblocks, and Solv Guard validate transactions to ensure legitimacy and security. They verify that staked Bitcoin corresponds correctly to LST tokens and update validation status in real time.
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Yield Distributors: Ensure transparent and fair distribution of staking rewards to LST holders. Examples include Babylon, Pendle, Gauntlet, and Antalpha.
By integrating these four roles, Solv Protocol has built a complete Bitcoin staking ecosystem. Through integration with staking protocols, LST issuers, validators, and yield distributors, Solv enables seamless interaction between the Bitcoin mainnet and EVM-compatible chains. This simplifies staking implementation for both users and developers. Staking protocols provide yield sources, LST issuers create liquid staking tokens, validators ensure transaction integrity, and yield distributors allocate rewards transparently—delivering a more convenient, secure, and attractive staking experience.
Staking Abstraction Layer (SAL)
SAL Technical Architecture (Source: https://docs.solv.finance/staking-abstraction-layer-sal/the-technical-architecture)
The Staking Abstraction Layer (SAL) is a modular framework designed to enable secure and efficient Bitcoin accounting through interaction with the Staking Parameter Matrix (SPM). SAL’s core modules include the LST Generation Module, Transaction Generation Module, Validator Nodes, and Yield Distribution Module—all relying on the SPM to define transaction rules, validation standards, and yield calculations. Together, these components form a secure, transparent, and efficient framework for Bitcoin accounting and LST issuance, maximizing user yields while minimizing risks associated with staking and cross-chain interactions.
Staking Parameter Matrix (SPM): The SPM standardizes various settings and parameters for Bitcoin staking. It provides developers with a simple, standardized rule set, making it easier to integrate Bitcoin staking into their applications without building complex systems from scratch.
LST Generation Module: This module streamlines the issuance of cross-chain liquidity staking tokens (LSTs). By standardizing and automating the cross-chain LST issuance process, users no longer need to manually perform complex cross-chain operations. LST issuers can quickly and easily issue and distribute LSTs to users.
Transaction Generation Module: Automatically generates and broadcasts Bitcoin staking transactions. This module handles the creation and submission of staking transactions to the Bitcoin mainnet, significantly reducing manual user effort and simplifying the overall staking process.
Validator Nodes: Real-time verification of the legitimacy and security of staking transactions. These nodes ensure all transactions are valid and secure, checking correctness before confirming any staking activity.
Yield Distribution Module: Maps staking rewards accurately to LST holders. As users earn yield, this module ensures rewards are fairly distributed according to each holder’s LST balance.
In summary, SAL serves as a staking abstraction layer that integrates multiple participants—including Bitcoin stakers, yield seekers, and DeFi applications—by encapsulating complex processes into standardized modules. This allows developers to quickly integrate Bitcoin staking into their apps and enables users to initiate staking seamlessly. SAL simplifies implementation to accelerate dApp adoption—for example, DeFi or wallet apps need only integrate SAL to offer diverse staking options. However, since Bitcoin itself does not natively support staking, third-party solutions inherently carry some security risk. SAL is no exception. Given its integration of various staking solutions, technical complexity and compatibility issues may introduce new vulnerabilities. Thus, SAL must continuously address operational robustness and security challenges.
Advantages Over Other BTCFi Projects
Solv Protocol operates in a competitive BTCFi LST landscape with projects like Bedrock, Lombard, Lorenzo, Pell Network, PumpBTC, and Stakestone offering similar functionalities. However, following the launch of SAL and its strategic focus on aggregating Bitcoin liquidity, Solv has gained significant advantages over peers.
Security
Solv Protocol enhances staking security through integration with Active Validation Services (AVS). The AVS system monitors every aspect of staking transactions—including destination addresses, script hashes, and staking duration—to ensure validity and prevent errors or malicious activity. This comprehensive monitoring provides reliable protection for user transactions.
Process Optimization
Solv Protocol has optimized the staking flow alongside liquidity aggregation, making staking more accessible. Users simply deposit Bitcoin—no additional on-chain actions required—enhancing both safety and efficiency while enabling yield generation.
Cross-Chain Yield Aggregation Platform
Solv Protocol functions as a cross-chain yield aggregator operating under a CeDeFi model, combining centralized and decentralized finance elements to deliver transparent contract management. Using Gnosis Safe multi-sig contracts and the Solv Vault Guardian, it enables fine-grained permission controls and conditional execution, ensuring both asset security and system efficiency.
Industry Standardization
With the introduction of SAL, Solv aims not only to aggregate Bitcoin liquidity but also to drive standardization for BTC-based LSTs. By establishing a standardized framework for staking workflows and parameters, Solv promotes collaboration across the industry, fostering healthier development and delivering more stable, reliable staking services to users.
Unified Liquidity Access
As a unified liquidity gateway in the BTCFi space, Solv consolidates fragmented liquidity and investment opportunities onto a single platform via SAL. Users can access and manage all their investments through Solv Protocol without navigating multiple platforms, greatly simplifying the user experience.
In conclusion, after launching SAL, Solv Protocol aims to further aggregate fragmented cross-chain Bitcoin liquidity by offering a scalable and transparent unified solution. SAL simplifies user interaction with Bitcoin staking protocols, enabling seamless staking experiences. The abstraction layer defines a comprehensive suite of standardized functions—including LST issuance, distributed node validation, yield distribution, and slashing rules—allowing Solv to incorporate wrapper tokens from other LST projects into its liquidity pool while drastically simplifying on-chain operations for users.
Business Model
Business Structure
The Solv Protocol economy consists of two primary roles: BTC and LST stakers, and partner projects.
BTC and LST Stakers: Solv supports direct Bitcoin deposits from the Bitcoin mainnet (currently accepting only deposits of 100 BTC or more) as well as wrapped BTC from chains including Merlin, Mantle, Avalanche, and BOB. Following the launch of SAL, Solv can absorb BTC liquidity from Ethereum EVM chains, BNB Chain, and other CeDeFi environments. Users can deposit BTC or wrapped BTC on supported chains to mint SolvBTC at a 1:1 ratio. They can also re-mint SolvBTC into other LST forms, enabling yield generation while maintaining Bitcoin exposure.
Partner Projects: Based on specific needs and offered yields, Solv allocates deposited BTC and wrapped BTC into various DeFi protocols. For instance, funds may be deployed to BTC Layer-2s like Merlin Chain, Stacks, or Bsquare for staking yield; to Babylon for restaking rewards; or to DeFi protocols on Arbitrum and BNB Chain for liquidity provision yield. This diversification increases returns for Solv users while enhancing the liquidity and security of partner projects.
Based on this analysis, Solv Protocol’s revenue streams include:
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A percentage of user-generated yield.
Token Model
Solv Protocol has not launched any token and has no announced plans for token issuance.
On-Chain Data
TVL
Solv Protocol TVL (Source: https://defillama.com/protocol/solv-protocol?denomination=USD)
The chart shows a significant increase in Solv Protocol’s TVL since January 2024, with particularly rapid growth in the past month—from $1.153 billion to $1.783 billion, a 54.64% increase. This reflects growing market confidence in the protocol’s future.
User Growth
SolvBTC User Count (Source: https://dune.com/picnicmou/solv-protocol)
User numbers have grown rapidly, especially from August onward—increasing from 185,799 to 397,324, a surge of 113.85%. This demonstrates rising user adoption and strong confidence in Solv Protocol.
Ecosystem Support
For Solv Protocol, a BTCFi-focused LST project, success depends on how widely its LST—SolvBTC—is adopted across other platforms. From its funding history, we see that Solv enjoys deep connections within the crypto industry, enabling broad partnerships and ecosystem support. After initial success, even more projects and blockchains have joined, creating a positive feedback loop.
Supported Chains:
Supported DeFi Projects (excluding those with 0% APY):
The tables above show extensive chain and project-level support for Solv Protocol. Its wrapped assets—SolvBTC, SolvBTC.BBN, SolvBTC.ENA, and SolvBTC.CORE—are widely integrated, enabling users to leverage them across multiple chains and DeFi applications for arbitrage and enhanced yield generation.
Comparison with Babylon
Solv Protocol and Babylon maintain a close partnership in Bitcoin staking, yet differ in scope and positioning. Babylon is a dedicated Bitcoin staking protocol focused on extending Bitcoin’s security to other networks via shared economic security. It allows BTC holders to earn yield and, upon mainnet launch, Solv will be among its first participants. Babylon leverages native BTC staking to extend Bitcoin’s security to PoS chains, AVSs, and rollups.
In contrast, Solv Protocol is a cross-chain yield and liquidity protocol that uses SAL to simplify Bitcoin staking, enabling users to stake SolvBTC across multiple blockchains. Solv contributes over 20% of Babylon’s total staked BTC and acts as a primary liquidity provider within the Babylon ecosystem. Additionally, Solv launched SolvBTC.BBN, a liquid staking token that allows users to earn native PoS chain rewards via Babylon while retaining liquidity.
In essence, Babylon resembles EigenLayer in the BTCFi space, while Solv aligns more closely with Lido. Their relationship is complementary rather than competitive. Solv’s vast liquidity is not limited to supporting Babylon—it has also launched Bitcoin staking tokens on other chains, such as Solana.
TVL is a key metric for BTCFi projects. Comparing the two: Solv Protocol’s TVL stands at $1.783 billion, surpassing Babylon’s $1.605 billion. This highlights Solv’s leading position in the ecosystem.
In summary, Babylon focuses on securely extending Bitcoin’s security via native staking, whereas Solv Protocol enhances the Bitcoin staking experience across multiple DeFi ecosystems through its staking abstraction layer and liquid staking tokens.
Risks
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Smart Contract Vulnerabilities: Despite using multi-sig mechanisms and other security measures, Solv remains exposed to potential smart contract bugs or exploits, which could result in loss or theft of user funds—a persistent challenge for crypto asset platforms.
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No Clear Tokenomics: Solv currently relies on incentive points to encourage user participation in BTC staking but lacks a token or tokenomic model. This absence may dampen long-term user engagement.
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Challenges in Decentralized Governance: While Solv aims to improve transparency through decentralization, this approach introduces trust and coordination challenges. Decentralized governance can slow decision-making and hinder rapid responses to market shifts, requiring a balanced approach to efficiency and decentralization.
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Liquidity Risk: As a liquidity layer, Solv depends on sustained user participation and capital inflow. Sharp market volatility or declining user confidence could lead to liquidity drying up, threatening platform stability.
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Risk from High-Risk DeFi Protocols: Although Solv employs mechanisms like Convertible Vouchers to mitigate exposure to volatile DeFi protocols, residual financial risks remain, especially during periods of high market volatility.
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Market Adoption and Trust: Despite backing from major players like Binance and OKX, Solv still needs time to build broader market acceptance and user trust. Failure to strengthen trust could hinder long-term growth.
Conclusion
Solv Protocol stands out as an innovator in the BTCFi space, leveraging its cross-chain yield-bearing asset SolvBTC and the Staking Abstraction Layer (SAL) to integrate key players in the Bitcoin staking ecosystem and dramatically lower user entry barriers. Its strengths lie in robust security, streamlined staking flows, cross-chain yield aggregation, and leadership in driving industry standardization. Backed by prominent crypto investors, Solv has secured support from major blockchains and DeFi projects, while demonstrating rapid growth in TVL and user base—clear indicators of market validation. By providing a unified liquidity gateway and diverse staking options, Solv unlocks greater value for Bitcoin holders and advances the BTCFi ecosystem.
However, Solv faces several challenges and risks. Complex cross-chain operations and smart contract interactions increase exposure to potential vulnerabilities, particularly when managing large volumes of user assets. The absence of a native token and clear tokenomics may weaken long-term incentives. As a third-party staking solution, Solv must overcome user trust hurdles. Its decentralization level and governance mechanisms require further maturation to ensure sustainable development. Lastly, despite impressive TVL growth, its user base remains relatively small, indicating ongoing needs for market education and adoption efforts.
Overall, while Solv Protocol carries inherent risks, these are common across the BTCFi sector and not unique to Solv itself. With the introduction of SAL, Solv has clearly differentiated its trajectory from other BTC-based LST providers, aiming instead to aggregate fragmented cross-chain Bitcoin liquidity—a strategy with significantly higher scalability and upside potential. Therefore, TechFlow considers Solv Protocol a highly promising project worthy of investment and close attention.
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