Solv Launches Bitcoin Staking Token on Solana to Enhance BTC Liquidity

In a strategic move to attract Bitcoin holders amid the expanding yield opportunities for the cryptocurrency, Solv Protocol has introduced a Bitcoin staking token on Solana. Announced on Oct. 17, this initiative aims to capitalize on Bitcoin’s burgeoning layer-2 and decentralized finance (DeFi) ecosystems.

Competing for BTC Liquidity

As new yield options emerge within Bitcoin’s layer-2 scaling chains and DeFi protocols, projects on other networks, including Ethereum and Solana, are intensifying their efforts to capture BTC liquidity.

The newly launched token, named SolvBTC.JUP, serves as a liquid staking derivative (LSD) that aims to generate BTC-denominated yield from transaction fees on Jupiter Exchange, one of Solana’s leading decentralized exchanges (DEX). Solv Protocol is targeting an attractive yield of approximately 12% annual percentage returns (APR) on BTC, significantly higher than the low single-digit APRs typically offered for BTC staking on layer-2 solutions.

Risk Mitigation Strategy

To counterbalance the inherent risks associated with volatile token price fluctuations in Jupiter’s liquidity pool, Solv has implemented a delta-neutral strategy. This approach involves hedging traders’ net open interest on centralized exchanges, thereby providing a more stable yield for participants.

Jupiter Exchange stands out as one of Solana’s most active DEXs, boasting around $1.3 billion in total value locked (TVL), according to DefiLlama.

Bitcoin-Native Layer-2 Staking Initiatives

Several Bitcoin-native layer-2 projects, such as Core Chain, Babylon, and Spiderchain, are exploring the potential for Bitcoin-native staking. In these ecosystems, similar to proof-of-stake (PoS) networks like Ethereum, Bitcoin L2 stakers lock up BTC as collateral to help secure the network in exchange for rewards.

In parallel, EigenLayer, Ethereum’s largest restaking protocol, is also targeting BTC holders by adding wrapped Bitcoin to its list of accepted tokens for restaking collateral. Restaking allows users to utilize tokens that have already been staked as collateral with a validator, enabling them to earn rewards while simultaneously securing other protocols.

As the DeFi landscape continues to evolve, Solv’s new Bitcoin staking token on Solana represents a significant development in the race to enhance BTC liquidity across multiple chains.