Unified "Measurement and Weighing": The Solv staking abstraction layer provides a "standardized" new interpretation for BTCFi

With a size of 17.5 trillion USD, Bitcoin can be considered the largest "sleeping capital pool" in the crypto world. For a long time, this massive asset has neither brought returns to its holders nor injected vitality into the on-chain financial ecosystem. Although many attempts to release the liquidity of Bitcoin assets have emerged after the DeFi Summer, most are just reinventing the wheel, attracting limited BTC fund inflows and failing to truly leverage the BTCFi market.

So where is the main battleground of BTCFi? What is the primary problem that Bitcoin staking aims to solve? This billion-dollar question is one that the Bitcoin ecosystem, especially staking projects, must answer.

As a leading project in the Bitcoin staking field, Solv has proposed a forward-looking solution, which is centered around the concept of "standardization" in the SAL( Staking Abstraction Layer).

The "Liquidity Fragmentation" Dilemma of Bitcoin

Comparing the development history of the Ethereum staking ecosystem, we can see some insights.

As of November 12, 2024, the total amount of ETH staked on Ethereum exceeds 34.55 million ETH. Data shows that the proportion of staked ETH to the total supply has significantly increased from 15% in April 2023 to about 29%, nearly doubling, with a total scale exceeding 100 billion USD.

In contrast, the staking penetration rate of the Bitcoin ecosystem during the same period is much lower than that of Ethereum. Although BTC's market value and price increase outperform ETH, it still cannot keep up with the expansion speed of the Ethereum Staking ecosystem.

It is worth noting that if BTC liquidity can be released by 10%, it would create a market of $175 billion. If a staking rate similar to that of ETH can be achieved, it would further release about $500 billion in liquidity, driving BTCFi to become a super on-chain ecosystem that surpasses the generalized EVM networks.

The success of the Ethereum Staking ecosystem, in addition to its programmability advantages, is also attributed to the Ethereum Foundation's leadership in establishing a clear and comprehensive set of ETH staking standards at the protocol level. This includes a staking threshold of 32 ETH, a penalty mechanism, and a comprehensive consideration of hardware and network costs, fully covering everything from the funding requirements of ordinary users to the economic security of node operation.

This unified standardized framework not only enhances the decentralization and security of the network but also lowers the barriers to development and participation, facilitating the rapid rise of projects such as Lido Finance, Rocket Pool, and Frax Finance, and promoting the leapfrog growth of the Ethereum staking ecosystem in terms of scale and diversity.

In contrast, the Bitcoin ecosystem has "no founders" and "no centralized promoting organizations," which has formed its extremely decentralized unique "chain sentiment." This is both an advantage of the Bitcoin ecosystem and, to some extent, has become a kind of "development curse":

This completely decentralized structure means that the establishment of key technical standards like the staking mechanism lacks a leader that can play the role of the "Ethereum Foundation," and it can only be implemented with broad consensus among global developers and node operators, a process that is often long and complex.

Therefore, for the development of BTCFi to achieve similar progress, it is necessary to introduce similar standardized mechanisms in the stake field to solve many problems related to liquidity and asset management.

Especially in the current situation where the liquidity of Bitcoin assets is accelerating fragmentation, the demand for "unification" has become particularly urgent:

On one hand, when BTC is bridged to EVM-compatible networks like Ethereum in various wrapped forms such as WBTC and cbBTC, it provides users with opportunities to participate in DeFi and earn yields. However, it also leads to the further dispersion of BTC liquidity across different chains, creating "liquidity islands" that are difficult to circulate and utilize freely, greatly limiting the development potential of BTCFi.

On the other hand, with the launch of Bitcoin ETFs and the further strengthening of global asset consensus, Bitcoin is accelerating its expansion into CeFi and CeDeFi, with more and more BTC flowing into institutional custody services, forming large pools of deposited funds.

Data shows that the currently yield-generating Bitcoin has been distributed across 95 chains, 448 protocols, and 766 liquidity pools. However, due to the lack of a unified staking standard and cross-chain liquidity mechanisms, BTC assets across chains, platforms, and institutions not only incur high friction costs in usage, but the dispersed liquidity cannot be efficiently integrated and utilized.

In this context, BTCFi and the Bitcoin staking ecosystem need to continue expanding in scale, urgently requiring the establishment of a universal, standardized industry safety standard and framework to efficiently integrate the Bitcoin liquidity resources scattered across multiple chains and platforms.

Objectively speaking, BTCFi and the Bitcoin ecosystem currently call for a leading role that can dominate these standardization processes, allowing for the integration of cross-chain Bitcoin liquidity to form consensus, establish a unified technical framework and standards, thereby bringing broader applicability, liquidity, and scalability to the Bitcoin stake market, further promoting the financialization process of staked assets, and driving the BTCFi ecosystem toward maturity.

Solv: The Leader in Bitcoin Staking

As the largest Bitcoin staking platform in the current market, Solv has quickly seized the opportunity in the Bitcoin staking field over the past six months. Since April of this year, it has attracted over 25,000 Bitcoins (including BTCB, FBTC, WBTC, etc.), accumulating more than $2 billion in assets under management.

Over 70% of SolvBTC has been allocated to various staking scenarios, making Solv the protocol with the highest TVL and capital utilization efficiency in the current Bitcoin field.

With strong liquidity and market penetration, Solv has taken the lead in proposing the new concept of Staking Abstraction Layer (SAL), aiming to aggregate the decentralized BTC liquidity across the entire chain and provide a scalable and transparent unified solution.

To achieve this goal, Solv first conducted a systematic review of the Bitcoin staking ecosystem and divided the core participants into four key roles, listed from bottom to top as follows:

• Staking Agreement: An agreement that allows users to deposit Bitcoin assets and generate收益 through staking activities, such as Babylon, CoreDao, Botanix, etc.;

• Stake Validators: Entities responsible for verifying the integrity of the staking and transaction processes, ensuring that LST issuers genuinely perform staking, preventing errors or fraudulent activities, such as Ceffu, Cobo, Fireblocks, and Solv Guard.

• Yield Distributors: Entities that manage the distribution of stake rewards, responsible for efficiently and fairly distributing rewards, such as Pendle, Gauntlet, Antalpha, and most LST issuers also play the role of yield distributors;

• LST Issuer: A protocol that converts users' staked Bitcoin assets into liquidity tokens (LST), allowing stakers to earn returns while maintaining control over the liquidity of their assets, such as Solv, BedRock, etc.

These four roles complement each other, forming the core structure of the Bitcoin staking ecosystem—the staking protocol serves as the underlying foundation of the entire system, managing and supporting all other roles; staking validators operate on top of the protocol, maintaining on-chain security; yield distributors allocate earnings according to protocol rules, ensuring the operation of the system's incentive mechanisms; and LST issuers provide liquidity for staking assets through tokenization.

Therefore, the design of SAL closely revolves around these roles, launching key modules covering the entire process, including LST generation service, stake validation service, transaction generation service, and profit distribution service, efficiently integrating them using smart contract technology and Bitcoin mainnet technology:

Specifically, SAL includes the following five core modules:

• Stake Parameter Matrix (SPM): The core parameters required for the abstract staking process, including Bitcoin script configuration, staking transaction parameters, LST contract parameters, and profit distribution rules. These parameters are not only shared among the various modules of SAL but also support cross-role collaboration in the staking process.

• Stake verification service: Based on the Bitcoin mainnet algorithm, it ensures the correctness and completeness of each staking transaction while checking whether the issuance of LST matches the underlying BTC quantity to prevent malicious behaviors;

• LST Generation Service: Responsible for the issuance and redemption of BTC LST, while supporting interaction between the Bitcoin mainnet and EVM chains;

• Transaction Generation Service: Automatically generate stake transactions, estimate the best transaction fees, and broadcast the transactions to the Bitcoin mainnet;

• Yield Distribution Service: Transparent calculation of stake earnings, distributing profits proportionally to users through oracle mechanisms or yield exchange services;

Through these modules, SAL not only effectively integrates the technical differences of various protocols within the Bitcoin ecosystem but also provides a clear operational framework for different roles, building a new system for efficient collaboration:

• For staking users: SAL provides a convenient and secure staking process, reducing asset risks caused by operational errors and protocol opacity;

• For the staking protocol: SAL's standardized interface allows for rapid integration into the BTC staking market, shortening the development cycle and achieving ecological cold start;

• For LST issuers: SAL provides comprehensive yield calculation and validation tools, enhancing user trust while simplifying the issuance process, allowing them to focus on product innovation;

• For custodians: SAL has opened up a new business model for participating in the Bitcoin stake ecosystem, bringing additional income opportunities for custodians.

This greatly simplifies the participation threshold for the Bitcoin stake ecosystem, providing a unified solution that can effectively meet the needs of multiple parties for co-construction and sharing.

As of now, multiple protocols and service providers have joined the SAL protocol ecosystem, including BNB Chain, Babylon, ChainLink, Ethena, CoreDAO, etc. This not only proves the wide applicability of SAL but also brings richer application scenarios for BTC staking, accelerating the sustainable development of business models in this field.

Revitalizing the Diversified Yield Ecosystem of Bitcoin Staking

Data from a certain platform shows that in the Ethereum LSD track, a certain platform holds the first place with a market share of 68.53% (9.81 million ETH). Although its centralization concerns have long been questioned, it is undeniable that this platform has driven the deep integration of staked assets and the DeFi yield ecosystem through the innovative design of LST, significantly enhancing the utilization efficiency of staked assets.

Bitcoin staking also requires a foundational framework that facilitates the efficient utilization of assets, and SAL (Staking Abstraction Layer) was launched for this purpose: it lowers the participation threshold for all parties, provides a consistent user experience for the Bitcoin staking ecosystem, and significantly improves capital utilization efficiency through a unified liquidity management mechanism, allowing Bitcoin assets to flow freely between different chains and laying the groundwork for various financial innovations in the DeFi ecosystem.

Therefore, a more anticipated imaginative space is that SAL can essentially derive a set of diversified yield solutions based on the entire chain of BTC, allowing Bitcoin holders to obtain diversified and dynamic yield flows without affecting liquidity, thereby opening up new development space for BTCFi (Bitcoin Financialization).

The main feature is the cross-chain functionality based on SAL, which allows users to unlock various income-generating opportunities, transforming Bitcoin from a passive store of value into an interest-generating & productive asset, enabling participation in DeFi and other on-chain use cases, creating new value:

1. Users can stake Bitcoin on platforms that benefit from Bitcoin's economic security (such as Babylon) to earn local token rewards through Restaking;

2. Users can participate in the security maintenance of Bitcoin L2 networks based on the BTC they hold, by running validator nodes or delegating Bitcoin to earn validator rewards;

3. SAL enables Bitcoin holders to achieve relative returns in DeFi through trading strategies such as "Delta neutral".