The Solv Protocol has launched a Bitcoin (BTC) staking token on Solana to attract BTC holders as yield opportunities for the digital currency surge, Solv told Cointelegraph on October 17.
The Bitcoin network’s new Layer 2 Scaling Chain (L2) and new BTC yield options in the decentralized finance (DeFi) protocol ecosystem are forcing projects on other networks, such as Ethereum and Solana, to compete for BTC liquidity.
The liquid staking derivative (LSD), called SolvBTC.JUP, is designed to generate BTC-denominated returns from trading fees on Jupiter Exchange, one of Solana’s most popular decentralized exchanges (DEXs).
The token launch, while still in a testing phase, is part of an “ongoing effort to strengthen Bitcoin’s role in decentralized finance,” Solv said.
Jupiter exchange TVL. Source: DefiLlama
relevant: Bitcoin return opportunities are surging. Things to note are:
Solv is targeting an annual percentage rate of return (APR) of approximately 12% on BTC. This is significantly higher than BTC staking on L2, which typically pays an APR in the low single digits.
The higher returns offset the additional risk from hedging against volatile token price exposure in Jupiter’s liquidity pool.
“Solv mitigates risk by deploying delta-neutral strategies that hedge traders’ net open interest on centralized exchanges,” Solv said.
According to DefiLlama, Jupiter is one of Solana’s most active decentralized exchanges, with a total value locked (TVL) of approximately $1.3 billion.
Some Bitcoin-based L2s, including Core Chain, Babylon, and Spiderchain, are exploring Bitcoin-based staking. Similar to Proof-of-Stake (PoS) networks such as Ethereum, Bitcoin L2 stakers lock up BTC as collateral to secure the network in return for receiving rewards.
Ethereum’s largest re-staking protocol, EigenLayer, also attempted to lure BTC holders by adding wrapped Bitcoin to the list of tokens that EigenLayer accepts as re-staking collateral.
Re-staking involves taking tokens that have already been staked (posted as collateral with validators in return for rewards) and using them to secure another protocol at the same time.
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