How to understand the Staking Abstraction Layer (SAL) launched by Solv Protocol?

Author: haotian

The Bitcoin staking protocol @SolvProtocol has completed a new round of $11M in financing, with a total financing amount of $25M, and its staking dispatch center has also gathered more than 20,000 BTC liquidity including SolvBTC.BBN, SolvBTC.ENA, SolvBTC.CORE, etc.

Recently, Solv proposed the concept of Staking Abstraction layer (SAL). How should we understand it? Let me briefly talk about my opinion:

1) Some people classify Solv Protocol into the Babylon ecosystem, because Solv provides more than 20% of BTC staking assets for Babylon and is the main provider of liquidity for the Babylon ecosystem. This understanding makes sense, but Solv Protocol, which holds a large amount of liquidity, is not limited to this. The two should be in a "parallel" relationship to be precise.

The reason is: Although Babylon uses sophisticated encryption algorithms to lock Native BTC assets in the direction of BTCFi, it can give some security consensus to platforms such as Solv and Lombard, but Babylon does not generate original liquidity. The liquidity of the Babylon ecosystem is provided by platforms such as Solv.

To put it simply, if Babylon is regarded as the Eigenlayer of the Bitcoin ecosystem, the role of Solv Protocol should be Lido. Solv provides the liquidity of pledged assets, and Babylon has strengthened the narrative on its basis. The two have always been a win-win relationship, and there is no contradiction or violation.

2) It is precisely because of the liquidity trump card in hand that Solv proposed the new narrative concept of Staking Abstraction layer (SAL), the goal of which is to further aggregate the decentralized BTC liquidity of the entire chain and provide a scalable and transparent unified solution.

The goal of the Solv Protocl pledge abstraction layer is to absorb BTC liquidity from many scenarios such as Ethereum EVM, BNBChain, CeDeFi, etc., and provide unified and transparent application standards for these isomorphic or heterogeneous chain assets. If Babylon only absorbs native BTC liquidity, Solv can integrate all liquidity related to BTC assets and dispatch them uniformly through the platform.

Specifically: The SAL pledge abstraction layer consists of a series of smart contracts, which can simplify the interaction between users and the Bitcoin pledge agreement and facilitate a convenient pledge experience. At the same time, the abstraction layer will define a set of general functions including LST asset issuance, distributed node pledge verification, income distribution and Slash rules.

For example: LST issuers can include LST protocols including Solv, Lombard, BedRock, etc.; staking validators can be qualified complete asset storage entities including CeFFu, Cobo, Fireblocks, etc.; and profit distributors can include DeFi protocols such as Pendle and Antalpha, etc.

From a business perspective, Solv has grasped the problem of Bitcoin liquidity being too dispersed, and tried to build a liquidity aggregation service layer to accelerate the aggregation and application circulation of BTC assets.

3) Why does Solv Protocol do this? Isn't it enough to just keep expanding the BTC fund pool? This is related to the characteristics of the BTCFi track. Since BTC assets have a wide range of application scenarios, from the DeFi Wrapped version to the original assets stored in cold wallets, to the assets flowing into ETF funds such as BlackRock, etc., it seems simple to build a unified Bitcoin asset scheduling platform, but in fact it is not limited to the chain. It is also necessary to coordinate resources in various fields, handle various relationships, and finally connect related assets "on the chain".

To a certain extent, the Staking Abstraction layer that Solv wants to do, according to its vision description, is to allow BTC scattered in different environments (on-chain and off-chain) to have a unified standard circulation and application, thereby releasing the potential and value of BTCFi.

Imagine that on Ethereum, where various infras of smart contracts are highly perfect, the ETH pledge rate remains at 28%. In the future, how far is it to continue to expand the decentralized BTC pledge rate and let it shine in asset interest?