SolvBTC

Background

Bitcoin, the world’s most valuable digital asset, has become a cornerstone of decentralized finance (DeFi). As Bitcoin’s influence continues to grow, so does the demand for using Bitcoin across multiple blockchain ecosystems. However, Bitcoin’s native infrastructure wasn’t originally built to support the rapid, flexible transactions required for DeFi. Wrapped Bitcoins, an asset class that bridges Bitcoin to other blockchains, have emerged, allowing Bitcoin to interact across different blockchain networks.

The Rise of Wrapped Bitcoin in DeFi

Wrapped Bitcoins (WBTCs) are assets issued on other blockchains (such as Ethereum) by locking an equivalent amount of BTC on the Bitcoin blockchain. They typically hold the same value as the original BTC but are much more interoperable. This model allows Bitcoin holders to use their BTC for lending, borrowing, trading, and yield generation on platforms like Aave, Uniswap, and Curve while still maintaining exposure to Bitcoin's value.

However, wrapped Bitcoin solutions vary significantly in custody, liquidity, and security. Some are custodial, relying on trusted entities, while others aim for more decentralized, trust-minimized solutions. These variations impact the ease of use, risk exposure, and liquidity available across DeFi ecosystems.

Not All Wrapped BTCs are the Same

Different wrapped Bitcoin assets serve specific needs but come with trade-offs in terms of security, liquidity, and trust. Some examples:

• WBTC (Wrapped Bitcoin): Managed by BitGo, WBTC offers high liquidity but is centralized and relies on trusted custodians to manage reserves.

• BTCB (Binance Bitcoin): Issued by Binance, BTCB functions similarly, providing liquidity primarily on Binance Chain, but also centralized.

• tBTC and dlcBTC: These decentralized alternatives reduce custodial risk by eliminating third-party intermediaries. However, their liquidity is typically lower than that of centralized solutions, and they can be more complex for users.

• BTC.b (Avalanche) and M-BTC (Merlin): These ecosystem-specific solutions offer better integration within their respective blockchains but are siloed, making it harder for liquidity to move freely across different platforms.

This diversity in wrapped Bitcoin assets results in fragmented liquidity and introduces challenges for users who want to maximize their Bitcoin’s utility across various DeFi protocols.

The Challenges of Fragmented Bitcoin Liquidity

The rise of various wrapped BTC assets has fragmented Bitcoin liquidity across multiple chains. As different ecosystems adopt their own versions of wrapped Bitcoin, liquidity becomes siloed, making it difficult for Bitcoin to move seamlessly across chains. This can lead to inefficiencies, increased risks, and limitations in how Bitcoin can be utilized in DeFi.

For example, if liquidity is trapped on one chain, users may face high slippage or liquidity shortages when attempting to move Bitcoin between platforms. Moreover, different wrapped BTC assets may be exposed to varying degrees of risk, depending on their custodial model and the overall stability of the underlying chain.

One of the major issues with current wrapped BTC solutions is the fragmentation of Bitcoin liquidity. Each blockchain may use its own version of wrapped BTC, such as BTC.b on Avalanche or M-BTC on Merlin, which restricts liquidity to their respective ecosystems. This leads to:

• Siloed liquidity: Bitcoin locked on one chain (e.g., Ethereum) is not easily transferable or usable on other chains like Binance Smart Chain or Solana.

• Slippage and inefficiencies: Moving Bitcoin between chains often involves high costs, slippage, and liquidity shortages, particularly in times of high demand.

• Increased risk: Users must also contend with varying levels of trust and security depending on the specific wrapped BTC model, leading to potential exposure to custodial risk or smart contract vulnerabilities.

SolvBTC: A Bitcoin Reserve for Everyone

SolvBTC is built to address these issues by unifying Bitcoin liquidity across multiple chains, serving as a universal Bitcoin reserve for DeFi users. It offers a flexible, yield-generating solution for Bitcoin holders who want to move their assets across blockchain ecosystems without dealing with fragmented liquidity or the risks tied to individual wrapped BTC assets.

With SolvBTC, Bitcoin holders can:

• Freely move their assets between blockchains such as Ethereum, BNB Chain, Avalanche, Arbitrum, Base, BOB, Mantle, and Merlin.

• Participate seamlessly in DeFi ecosystems across chains.

• Access liquidity and yield generation on multiple platforms without worrying about inefficiencies or high transaction costs.

Through partnerships with Chainlink’s Cross-Chain Interoperability Protocol (CCIP) and Free.tech, SolvBTC ensures secure, efficient cross-chain transactions, allowing users to benefit from smooth liquidity flow and low fees.

Introduction

SolvBTC is a universal Bitcoin reserve token designed to unlock the full potential of over $1 trillion in Bitcoin assets. SolvBTC is fully backed 1:1 by the underlying Bitcoin in both native and wrapped forms. SolvBTC is minted by depositing either BTC or other wrapped Bitcoin assets, making it easy for Bitcoin holders to convert their assets into a more flexible, DeFi-compatible form. As a “Bitcoin Reserve for Everyone,” SolvBTC enables Bitcoin holders to move their assets freely and securely between different blockchain ecosystems, eliminating the silos that currently restrict liquidity flow. With SolvBTC, Bitcoin holders can seamlessly participate in DeFi on multiple chains without worrying about fragmented liquidity or the risks associated with individual wrapped BTC assets.

Tiered Reserve System

To manage the risks associated with different types of wrapped BTC assets, Solv Protocol employs a tiered reserve system. This system classifies reserve assets into two main categories:

• Core Reserve Assets: These are the most secure and liquid assets, forming the foundation of SolvBTC’s reserve. Examples include:

  • Bitcoin (BTC): The native Bitcoin asset.

  • BTCB (Binance’s wrapped Bitcoin): A custodial solution with high liquidity.

  • cbBTC (Base’s wrapped Bitcoin): A custodial solution with high liquidity.

  These core assets offer users a high level of security and liquidity, ensuring they can trust the backing of their SolvBTC holdings.

• Isolated Reserve Assets: SolvBTC minted using isolated reserve assets and its collateral are segregated.