With the full deployment of Bitcoin Layer 2 narrative, the previously relatively “static” Bitcoin ecosystem has gradually become active, and the importance of liquidity is increasingly prominent. In order to meet the urgent need of a large number of traders for Bitcoin yield and promote efficient liquidity allocation, many Bitcoin ecosystem liquidity staking protocols have emerged in this context.
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MerlinSwap raised nearly “500 million US dollars” to refresh the IDO record! 24-hour TVL exceeds 100 million magnesium, and trading volume exceeds 70 million magnesium.)
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Table of Contents
Solv Protocol
Project Overview
Team and Financing
Core Mechanism
How SolvBTC Benefits Multiple Parties
SolvBTC: M-BTC = 1:1
DeFi Protocol Lego Module
StakeStone
Project Overview
Financing Situation
Core Mechanism
StakeStone and the BTC Ecosystem
STONE and mSTONEBTC
BTC Ecosystem Acceleration Plan
Avalon Finance
Project Overview
Team and Financing
Core Mechanism
Code Audit
Avalon Lego Combinations
Staking Tutorial
Top-tier Bitcoin Layer 2 Merlin Chain, along with emerging staking protocols such as Solv Protocol, Avalon Finance, and StakeStone, introduces the concept of earning interest on Bitcoin and combines it with traditional liquidity staking concepts, providing investors in the Bitcoin ecosystem with a completely new investment experience.
This article will introduce the core mechanisms and staking gameplay of Solv Protocol, StakeStone, and Avalon Finance, as well as how they collaborate with each other to “benefit multiple parties” under the drive of the Merlin ecosystem.
Solv Protocol is a proprietary full-chain yield protocol for the Bitcoin ecosystem, comparable to the Ethereum ecosystem’s staking protocol Lido. By converting idle underlying assets into interest-bearing assets and promoting cross-protocol and cross-ecosystem free composition, it creates a more efficient liquidity allocation method.
SolvBTC is the first full-chain interest-bearing asset issued by Solv Protocol. It is essentially an ERC-20 token with substantial liquidity. Users can earn secure base income by staking their idle assets in their wallets. SolvBTC has been launched on Arbitrum, BNB, and Merlin Chain.
Currently, Solv Protocol’s TVL has exceeded $200 million, with a total user count of over 55,000, and has generated $7.03 million in revenue for users.
Team Background
The Solv team brings together experienced professionals from various backgrounds, including experts from traditional financial institutions such as Goldman Sachs and J.P. Morgan, product managers from Binance and OKX, and other influential figures in the cryptocurrency field. In addition to Solv Protocol itself, the team has also established the SFT (Semi-Fungible Token) token standard ERC-3525 and attracted over 100 teams to build new products based on this standard.
Financing Situation
Solv Protocol’s investors include well-known institutions such as Binance Labs, NOMURA Group, Mirana, and Blockchain Capital. The previous round of financing raised a total of $14 million.
Solv Protocol provides strategy-based native income streams for mainstream assets such as BTC, ETH, and stablecoins through a decentralized asset management structure, a DAO-centric coin selection mechanism, non-custodial asset operation processes, and a strictly monitored risk management framework.
1. Decentralized Asset Management Structure: Solv’s structure supports the entire asset lifecycle, including establishment, issuance, redemption, and risk control. The asset management framework consists of a trading strategy vault, built-in Safe Guardian, price oracles, and liquidity strategy-driven tokens.
Trading Strategy Vaults: Used to store funds and LP assets and execute asset allocation. Due to its core design concept of eliminating counterparty risk while ensuring the efficiency of liquidity pool operation, Solv defines allowed transaction types in advance in the contract, excluding any behaviors that may involve fund abuse.
Built-in Safe Guardian: Sets up independent execution mechanisms based on different vault trading strategies and only allows multi-signature wallets within a specified range. When users perform multi-signature operations, the checkTransaction function is called to check if it complies with the authorized rules.
Price Oracles: Act as a bridge between Solv and other DeFi protocols, mainly used to retrieve and calculate asset net worth and set achievable prices for DeFi protocols, and execute lending, trading, and other operations.
Liquidity Strategy-driven Tokens (vault LP tokens): Liquidity strategy-driven tokens transform staked assets into liquid and tradable assets, similar to the ERC-20 standard, to ensure maximum composability and utility within the DeFi ecosystem. Therefore, vault LP tokens such as SolvUSD and SolvBTC can integrate and interact with other DeFi components, such as money markets, DEXs, and LPD-driven stablecoins.
2. DAO-centric Coin Selection Mechanism: SolvBTC, SolvETH, and SolvUSD require high-quality underlying portfolios with stable risk-return characteristics. Therefore, Solv chooses to delegate the asset selection process to the decentralized autonomous community Solv DAO. Currently, Solv DAO operates under the supervision of an Advisory Council and will transition to a user-funded SOLV governance model after the Solv TGE.
3. Non-custodial Asset Operation Process: Solv provides on-chain asset sovereignty to investors and establishes a trustless standard through smart contracts to reduce malicious risks. Smart contract upgrades require joint control with Solv partners through multi-signature addresses and the TimeLock mechanism.
4. Strictly Monitored Risk Management Framework: Solv sets a predefined stop-loss threshold for each strategy. In addition, Solv will introduce a 24-hour monitoring system to track portfolio delta. Once deviations or crises occur, the system will take automatic action.
Code Audit
Solv’s code has been audited by well-known security companies such as Quantstamp, Certik, Slowmist, Salus, and SecBit, and the audit reports have been made public.
SolvBTC will become a liquidity strategy token (LST) on Merlin Chain, and users can mint M-BTC by staking SolvBTC at a 1:1 ratio, which cannot be redeemed until June. After the lock-up period, M-BTC can be exchanged back to BTC at a 1:1 ratio, and since M-BTC can be redeemed for BTC at any time after the end of Merlin Seal staking, staking for SolvBTC essentially achieves risk-free returns in terms of the base currency.
The revenue source of SolvBTC comes from multiple neutral trading strategy combinations, including Perp DEX market-making revenue and Funding Rates neutral escape strategies, ensuring stable income while minimizing the impact of market price fluctuations.
As the Merlin ecosystem is still in its early stages of development, the BTC currently staked will be locked in a vault to avoid anchoring risks until redemption is opened in June. During the lock-up period, users can earn Solv points and obtain multiple staking rewards through a series of DeFi compositions in the Merlin Eco. The following is a simplified process for exchanging SolvBTC:
Step 0: Cross-chain Layer 1 BTC to Merlin Chain, then exchange it for MBTC on MerlinSwap at a slight discount.
Step 1: Deposit MBTC into Solv to earn steady Merlin POS staking rewards.
Step 2: In addition, Solv staking will receive token airdrops, but the specific rules and token airdrop ratio have not been announced by the Solv team.
Since SolvBTC is an ERC-20 token, it can be flexibly combined with other DeFi protocols as an important “Lego piece”.
Step 3: The Solv points system is only related to staking minting, which means SolvBTC ownership does not affect staking points. Therefore, users can earn more income through various DeFi protocols related to Solv.
According to the official panoramic view of Merlin Chain released by Solv Protocol, Solv has collaborated with top-tier DeFi products on Merlin Chain, such as MerlinSwap, bitSmiley, Surf Protocol, Mage Finance, and Avalon Finance. The guide to “benefit multiple parties” is as follows:
MerlinSwap (DEX): MerlinSwap will list the SolvBTC-M-BTC trading pair for free trading by traders. MerlinSwap is a DEX supported by the iZUMi Finance team and officially launched in collaboration with the MerlinChain. It is committed to creating a convenient and fast DeFi interaction experience for the Bitcoin ecosystem by leveraging the stability of the Bitcoin ecosystem and the interoperability of Merlin EVM. As of the end of March, MerlinSwap’s TVL has exceeded $100 million, and the highest daily trading volume has reached $70 million, making it the largest DEX in the Merlin ecosystem and even the Bitcoin ecosystem.
bitSmiley (StableCoin): Stake SolvBTC to mint bitUSD (stablecoin). bitSmiley is a Bitcoin-native stablecoin protocol that allows users to over-collateralize native BTC on the Bitcoin network to mint bitUSD stablecoins. In addition, bitSmiley has also launched lending and derivatives protocols to reshape the BTCFi ecosystem. bitSmiley was selected as a high-quality project in the Bitcoin Hackathon co-hosted by ABCDE and OKX Ventures in November last year and received investments from ABCDE and OKX Ventures at the end of the year.
Surf Protocol (Perp DEX): Open positions by staking SolvBTC. Surf Protocol is a perpetual contract DEX on the Bitcoin Layer 2 network and was previously selected for Binance Labs’ 7th MVB Accelerator Program. The Surf Protocol testnet ended on March 26, with a total of 30,000 wallet addresses participating in the testnet, and the total trading volume reached $250 million. The mainnet will be launched soon.
Mage Finance & Avalon Finance (Lending Protocol): Collateralize SolvBTC for borrowing.
Mage Finance is the first Bitcoin lending infrastructure built on Merlin Chain.
Avalon is a DeFi platform on the Bitcoin Layer 2 network and has been launched on Merlin Chain.
MerlinStarter & UniCross (LaunchPad): SolvBTCCan be used as a future IDO participation certificate
Merlin Starter is the first launchpad platform of Merlin Eco, aiming to incubate native projects of Merlin Eco and provide asset support for promising projects.
UniCross is a cross-chain BTC minting platform on Layer 2 networks. It allows users to mint Layer 1 BRC-20 tokens on Layer 2 and supports multiple chain assets such as BRC-20, BTC, and ETH for payment. The stTokens obtained by users can be used for trading on the UniCross market and can also be exchanged for ERC-20 tokens on L2.
Map Protocol & Camelot Protocol (Layer 3): Acting as bridging assets for Layer 3.
Map Protocol is a peer-to-peer Bitcoin Layer 2 focused on cross-chain interoperability, built on ZK and lightweight clients.
Camelot Protocol is a Bitcoin Layer 3 protocol built on Merlin Chain specifically designed for DePIN, aiming to decentralize AI training using blockchain technology. Camelot is dedicated to building a scalable L3 DePIN platform on Merlin Chain, allowing organizations and individuals worldwide to contribute computing resources to the shared pool.
In addition, Solv launched its point system on April 5th, allowing users to earn points by minting SolvBTC. The more users pledge, the more points they can earn (single wallet operation is recommended). Solv points can be used to redeem SOLV token airdrops. The points system will last for three months until the end of the lock-up period in June.
StakeStone is a full-chain liquidity infrastructure dedicated to providing native staking rewards and liquidity for Layer 2 networks. StakeStone itself has high scalability and supports various types of staking pools on multiple chains, while also being compatible with Restaking. In addition, StakeStone has established a multi-chain liquidity market based on its native LST $STONE, providing token holders with a wider range of applications and profit opportunities.
According to official information, StakeStone has deep cooperation with Merlin Chain, BNB, Manta, Scroll, and other Layer 2 networks.
In March of this year, Binance Labs and OKX Ventures announced investments in StakeStone, with the specific amounts undisclosed.
The core mechanism of StakeStone consists of StakeStone Vault, Minter, Strategy Pool, and OPAP (Optimizing Portfolio and Allocation Proposal).
StakeStone Vault: Acts as a fund buffer pool responsible for managing deposit and settlement functions. ETH pledged to the pool is stored in a contract until a new settlement appears, and it is then deployed to the underlying strategy pool.
Minter: Responsible for the minting and burning of STONE. The existence of Minter allows the minting of STONE tokens to be independent of the underlying assets, which can adjust the circulation of STONE tokens and increase their stability.
Strategy Pool: StakeStone’s strategy pool adopts a whitelist mechanism driven by OPAP and is highly compatible with multiple assets. Asset risks will also be isolated within a single strategy channel to prevent high correlation risks.
OPAP: The first decentralized solution for optimizing liquidity investment returns, allowing optimization of portfolio allocation for underlying assets of STONE, thereby optimizing asset allocation and monitoring returns. Any changes in StakeStone’s funds need to be presented through proposals, and STONE holders will decide whether to implement them through on-chain voting.
STONE is the LSD token issued by StakeStone, which integrates mainstream staking pools, restaking pools, and LSD blue-chip DeFi strategy returns. Its value is positively correlated with the staking returns of underlying assets and can act as liquidity on multiple blockchains.
mSTONEBTC is the first yield-based BTC derivative token based on the BTC Layer 2 PoS mechanism. BTC can enter the StakeStone distribution network through mSTONEBTC, further promoting the efficiency of BTC’s ecological capital allocation. It is believed that when StakeStone completes the integration with Merlin Chain, a certain proportion of m-BTC can be exchanged with it.
Although StakeStone currently relies on staking ETH to obtain STONE, on February 21st of this year, StakeStone announced the launch of the BTC ecosystem acceleration plan, intending to expand the staking scope to the BTC ecosystem. This acceleration plan allows users to deposit new ETH in Merlin Seal and B^2 Buzz to mint STONE and earn StakeStone points. This plan will continue until the end of the staking period for Merlin Seal and B^2 Buzz.
Note: Participants of Merlin Seal and eligible long-term community members before February 21st can share 0.5% of the total supply of StakeStone tokens as a reward.
Avalon Finance is a DeFi platform on the Bitcoin Layer 2 network, providing users with services such as deposits, loans, leverage mining, and RWA lending. It has already been launched on Merlin Chain. Its key projects include over-collateralized lending, algorithmic stablecoins based on lending, and RWA loans. These products focus on improving capital efficiency and optimizing the yield mechanism of lower liquidity assets through collateralized lending.
Over-collateralized lending: A basic lending protocol with an isolated pool mechanism that supports various assets as collateral (both major assets and assets with lower liquidity).
Algorithmic stablecoins based on lending: An algorithmic stablecoin based on over-collateralization, optimizing capital allocation efficiency through lending protocols.
RWA lending: This pool supports both permissioned and permissionless RWA tokens, including money market funds, stock indices, and corporate bonds.
Currently, Avalon’s Total Value Locked (TVL) has reached 51.31 million, with a total user count exceeding 4,200.
The core team of Avalon consists of senior professionals with 10 years of experience in the cryptocurrency industry. The founder previously served as a Hedge Fund Trader at the $15 billion fund ExodusPoint, managing more than $300 million in investment portfolios.
On March 15th of this year, Avalon announced the completion of a $1.5 million seed round of financing, with participation from institutions such as SNZ Capital, Summer Capital, and Matrixport Ventures.
The core mechanisms of Avalon Finance include an isolated staking pool designed for asset security and the AVAF locking mechanism designed for growth services.
Isolated staking pool mechanism: Due to the different liquidity characteristics of different staking assets, Avalon chooses to put them into separate staking pools.
Main Pool: Used for staking permissionless assets with stable prices that are not easily manipulated. The current main pool on Merlin Chain includes BTC, M-BTC, M-USDT, M-USDC, and M-ORDI.
Innovation Pool: Used for staking permissionless assets with unstable prices that may be subject to potential manipulation. As these token assets mature, they can be migrated to the main pool after approval by Avalon DAO. The current innovation pool on Merlin Chain can be used for staking M-BTC, VOYA, and HUHU.
RWA Lending Pool: This pool supports both permissioned and permissionless RWA tokens, including money market funds, stock indices, and corporate bonds.
Currently, Avalon has started the first phase of staking and has not yet opened the lending function. Both the main pool and the innovation pool can be staked independently, and assets can be redeemed at any time as long as liquidity permits. The second phase will open the lending function for the main pool, including BTC, ETH, USDT, USDC, etc., and the team will monitor the security dynamics 24/7. The third phase will open the lending function for the innovation pool, executed independently from the main pool, and Avalon DAO voting will be initiated in this phase. In addition, the team also proposes to provide fractionalization innovation for NFTs, providing income channels for “small pictures” with lower liquidity.
AVAF is the governance token of Avalon Finance, used to incentivize protocol users and liquidity providers. The circulation supply of AVAF will depend on the total amount of tokens used for marketing and relationship maintenance and is expected to have a maximum supply of 1 billion. The issuance of tokens beyond the limit is controlled by a 28-day time lock and will only be triggered when new products require more liquidity. The activation of the time lock also requires community governance voting.
In addition, liquidity providers will receive esAVAF as proof of staking. Except for the inability to transfer, esAVAF has the same utility as AVAF.
Avalon’s security audit is conducted by Salus, and the audit report and contract address have been publicly disclosed.
Currently, Avalon has partnered with other top DeFi projects in the Merlin Eco, such as the collaboration between Avalon and Solv mentioned earlier, where Avalon supports SolvBTC staking and lending. Users can first stake M-BTC in Solv to obtain Solv staking pool points, and then use the proportionally exchanged SolvBTC to stake in Avalon and earn points.
Step 1: Connect your wallet (MetaMask recommended), the default interface is the main pool, if you want to switch to the innovation pool, you need to click the dropdown button next to Merlin Market.
Step 2: Choose the currency you want to deposit, click “Supply,” enter the amount you want to deposit, adjust the gas to 0.05 gwei, and confirm.
After the deposit is completed, the deposit certificate token will automatically pop up, showing the deposited currency and amount.
Step 3: Click on “Points” to view the current staking points (StakeStone’s points system updates every 8 hours after staking).
In addition, clicking on “Withdraw” next to “Supply” allows redemption at any time as long as liquidity permits.
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