How to View the Rapid Rise of the SolvProtocol Full Chain Yield Aggregation Platform?
In the past few months, SolvProtocol has experienced rapid growth, accumulating over $1 billion in assets, thanks to its Solv Guard new asset management paradigm for the Bitcoin yield track and its deep partnerships with MerlinChain, Babylon, BNBChain, and recently, GMX. Why is this happening? Here are my observations:
In my opinion, SolvProtocol’s rapid growth is due to its positioning in the flourishing “Restaking+Yield” yield track, which extends the core asset of Bitcoin to the entire chain ecosystem. In simple terms, as projects like Bouncebit, Ethena, and many other Restaking projects gain popularity, a hybrid CeFi management and DeFi market circulation project known as “CeDeFi” has attracted attention.
With the rise of these projects, the need to build a transparent and trustworthy environment for secure asset circulation has become essential. Solv Guard aims to provide an intermediate layer of “transparent contract management” services for such projects, making asset control more controllable. Specifically:
1) Combining the centralized management efficiency of CeFi with the decentralized liquidity security of DeFi has become a new mainstream asset management paradigm. This is possible because CeFi custody in Crypto custody institutions has become more mature and compliant, gaining a certain level of “trust.” Therefore, it becomes a preferred choice in balancing security, decentralization, and efficiency, which makes sense.
Take the BTC cross-chain bridge scenario as an example: using a purely technical native cross-chain method has a long development cycle and uncertainty. By directly using centralized custody institutions like Cobo and Ceffu as “bridge” carriers, asset cross-chain solutions can be quickly implemented, promoting the rapid implementation of BTC layer2 projects without getting stuck on cross-chain bridge issues.
Similarly, in the case of out-of-chain yield for POS assets, pure staking assets only earn native rewards for providing asset staking for public chains. However, a significant amount of assets can generate profits outside of staking by going through traditional CeFi managers before becoming staking assets, thereby enhancing the sources of income for POS assets.
Therefore, CeDeFi projects becoming the focus is the result of balancing the triangle trade-off, fully combining the management and efficiency of CeFi with the decentralized transparent circulation application environment of DeFi. It is more suitable for projects with high decentralized technology thresholds but absolute advantages in operation and capital. Typical projects include Bouncebit, Ethena Labs, and recently, a stablecoin project called BitU Protocol based on the CeDeFi concept.
In summary, after overcoming compliance issues, web2 projects tend to quickly implement projects in the crypto field, leveraging their advantages in capital and efficiency. CeDeFi becomes the optimal solution.
2) The centralized part in CeDeFi is often connected to a custody institution with compliance qualifications and long-term brand reputation. However, this solution is only a “transitional” solution, and the overall direction is to pursue a decentralized architecture. In the custody application scenario, how can more transparent and fine-grained management be achieved?
The overall logic is to strive for transparency and on-chain contract management in terms of the usage permissions of custody addresses, asset inflow and outflow, multi-signatures, and other management strategies.
As we all know, Fireblocks, as a custody SaaS service platform, provides internal control console platforms with similar management functions to many custody institutions. However, this is an internal process service, and the external world cannot supervise internal systemic misconduct.
On the other hand, Solv Guard, based on its ERC3525 contract standard and the exploration experience of SFT semi-fungible tokens, has specifically introduced an open management platform for custody institutions to engage in technological holdings. It constructs a complete set of authorization permission check mechanisms for all permission settings, authorization management, inflow and outflow review, etc., as an “middleware” service layer. This service aims to increase the technical content when centralized custody institutions converge with decentralized solutions, thereby reducing trust friction.
3) How is this achieved? 1) The asset permissions of custody addresses are managed using Gnosis Safe’s multi-signature contract addresses. 2) Since Safe multi-signature can only provide simple threshold management, a Solv Vault Guardian is nested to achieve more fine-grained and complex permissions and condition execution. For example, in this Guardian structure, target address permissions can be customized, authorization permission checks can be configured, execution rulers can be set, and nested permission management contracts for specific purposes can be implemented.
To put it simply, Solv Guardian further granularizes the management of fund usage permissions (contracts, contract functions, ACL lists, etc.) based on Safe multi-signature contracts. It constructs contractual triggers and transparent supervision conditions for asset inflow, outflow, and the entire lifecycle. For example, it allows certain contracts, functions allowed for each contract, and whether each function corresponds to the corresponding ACL permission list.
To avoid making the “middleware” service itself a new layer of centralized risk, Solv sets strict Governor permissions for Vault Guardian: it requires a committee vote followed by a multi-signature trigger management configuration, a certain Timelock period, and finally, permission configuration. This includes upgrading and modifying transaction restrictions, address restrictions, rule restrictions, etc. within the contract.
So, how should we define Solv Protocol’s performance in terms of asset management capabilities? It can be seen as adding an extra layer of security to the industry-renowned Gnosis Safe, enhancing its granular product performance and security in multi-signature management. It can also be seen as a “dimensional strike” against SaaS unicorns like Fireblocks, bringing in a set of on-chain transparent contract management methods that better meet industry development needs into the custody industry process standards.
In conclusion, the fundamental reasons for Solv Protocol’s rapid rise in the past few months are: 1) It positions itself in the growing demand for CeDeFi yield services, which has led to quick collaborations with MerlinChain, Babylon, GMX, Ethena, and others. 2) It has mature financial scene exploration experience with ERC3525 standards and SFT asset logic, giving it the ability to extend its granular “transparent contract” asset management services.
Furthermore, it should be noted that with the approval of the Ethereum ETF and the establishment of ETH as a “commodity” asset, regulatory uncertainties are becoming clearer. With the expectation of more off-chain capital inflow, decentralized and transparent management methods for digital assets not only meet the market’s need for a credible environment but also align with the “compliance” needs of some regulatory authorities.
I believe that in this context, Solv Protocol can explore feasible “comprehensive compliance” solutions that balance “KYC,” “Yield Vaults,” and other regulatory measures with decentralized service concepts. This will strengthen the scale of the CeDeFi industry’s funds and provide stability to yield services.