Solv Protocol's launch of a Bitcoin (BTC) staking token on Solana, called SolvBTC.JUP, represents an attempt to capture BTC liquidity in the increasingly competitive space of yield generation options for Bitcoin. With the emergence of layer-2 scaling solutions and DeFi protocols specifically targeting Bitcoin's ecosystem, platforms on Ethereum and Solana are actively trying to retain their relevance and appeal to BTC holders.
SolvBTC.JUP is a liquid staking derivative (LSD) designed to generate yield for BTC holders through transaction fees from Solana’s decentralized exchange (DEX), Jupiter Exchange. The token is still in its pilot phase but is part of a broader effort to expand Bitcoin’s integration into the decentralized finance (DeFi) sector. The introduction of such products reflects the growing demand for BTC yield opportunities as the digital currency finds more sophisticated applications outside of its traditional store-of-value role.
It sounds like Solv is aiming to offer a higher yield for BTC staking than traditional Bitcoin-native Layer 2 (L2) solutions, with a target of around 12% APR. This is notable compared to the usual low single-digit APRs offered by BTC staking on L2s such as Core Chain, Babylon, and Spiderchain. These Bitcoin-native L2s use BTC stakers to secure their networks, much like proof-of-stake (PoS) systems on Ethereum.
EigenLayer, which is Ethereum’s largest restaking protocol, is adding wrapped Bitcoin (WBTC) as collateral for restaking, allowing BTC holders to earn additional rewards by securing multiple protocols simultaneously. This concept of restaking adds more complexity and risk to the staking process, as the staked token (in this case, WBTC) is being used to secure more than one network.
Solv's risk mitigation strategy, involving a delta-neutral approach, helps hedge against traders' net open interest on centralized exchanges. This strategy should help offset some of the risk from hedging against volatile token price exposures in Jupiter's liquidity pool—a decentralized exchange on Solana with significant activity, boasting around $1.3 billion in total value locked (TVL), according to DefiLlama.