The crypto community is in an uproar over allegations that the Bitcoin ecosystem project Solv Protocol has "inflated" its TVL (Total Value Locked) by many times.
Solv Protocol is accused of TVL fraud. Image: Solv Protocol
TVL Loop
On the evening of 01/03/2025, the crypto community on X (Twitter) was in an uproar with the information that the co-founder of the Nubit project with the account X, @trackoor, accused Solv Protocol, the new BTC staking protocol chosen by the Binance exchange as the 3rd Megadrop project, of deliberately defrauding TVL.
1/ 1 SolvBTC ≠ 1 BTC.
— hans (@trackoor) January 3, 2025
On-chain evidence exposed Solv cycling the same assets. Your BTC is not truly locked. Withdraw your BTC from @SolvProtocol immediately.
Here's what you need to know 🧵👇 pic.twitter.com/tcvntdqL5O
Accordingly, @trackoor stated that 1 BTC deposited by users will not only be counted as 1 BTC TVL, but will be "inflated" up to 3 times.
"Solv Protocol does not count 1 deposited BTC as just 1 BTC. Instead, they use pre-signed transactions to 'authorize' the same BTC across multiple protocols:1 BTC in Solv → +1 TVL BTC
Same BTC in Bsquared → +1 TVL BTC more
Same BTC in ??? → +1 TVL BTC more
So 1 BTC = 3 fake TVL BTC.
This issue occurs because the Bitcoin blockchain itself does not use smart contracts like Ethereum, but uses UTXO. When users "approve for use" 1 BTC, this 1 BTC can be "approved for use" multiple times, leading to the above-mentioned duplicated TVL situation.
According to @trackoor, the TVL displayed on DefiLlama may be self-adjusted by Solv, so it is not 100% accurate. Immediately after this FUD spread, the project team quickly updated their TVL data.
3/ On-chain evidence exposed Solv cycling the same assets.
— hans (@trackoor) January 3, 2025
Solv Protocol's self-declared TVL addresses on @DefiLlama. Projects can manually update these metrics, meaning numbers can be manipulated.
After the fraud came to light, Solv rushed to update their TVL data (4 hours… pic.twitter.com/2h5yVlqykv
Solv Protocol claims to stake users' BTC assets into the Babylon protocol. However, @trackoor found that one of the project's wallets had moved BTC after being staked. If the BTC had truly been staked, it could not have been moved like that.
4/ Solv Protocol claims that they are staking BTC into the Babylon protocol. However, if we look at one of their addresses, the assets were moved 4 hours ago.
— hans (@trackoor) January 3, 2025
If your BTC is already staked in Babylon, how could it possibly be moved?https://t.co/cuY93PvpOT pic.twitter.com/c3ESrop2Gw
The practice of "inflating" TVL and using one asset to stake, restake, and loop staking like this is not too uncommon in the crypto market.
According to @trackoor, this method is similar to how FTX fraudulently declared assets and used users' assets to borrow and lend multiple rounds. And the fate of FTX is all too clear. Additionally, the Solana ecosystem has previously had controversies over a developer being found behind 12 protocols, using the assets of one protocol to deposit into another, which was said to be responsible for 75% of Solana's total TVL in 2022.
The lack of transparency in assets like this raises many concerns about the safety of assets, with no guarantee for the assets deposited by users. Therefore, @trackoor advises everyone to withdraw their BTC from Solv Protocol immediately and verify whether the assets are truly staked and locked as the project claims, or have been used for staking and creating a loop.
Solv Refutes
On the morning of 01/04, the head of the Marketing department of Solv Protocol, @EvaBinary, responded to the allegations from Nubit, calling them "baseless claims" and "untrue FUD":
Nubit's allegations against Solv are baseless and constitute malicious FUD.
— ฿inaryEva (@EvaBinary) January 3, 2025
Let's address these false claims:
1) Solv's TVL updates, dismissed by Nubit as a rushed response, are standard procedure, reflecting the required 15-day restaking cycle for underlying BTC in… https://t.co/6k5Z8AFG8x pic.twitter.com/D7xxDBHuhp
1/ Solv Protocol's update of wallet addresses on DefiLlama is just a necessary update according to the 15-day restaking cycle, not because of the user's discovery.
2/ The change in TVL of SolvBTC.BBN is directly related to the start of the buyback, which has been part of the project's plan from the beginning and has been publicly disclosed.
3/ The accusation of a fake "3x TVL" is completely baseless.
However, the CMO has not provided evidence to prove that the "3x TVL" is baseless, but only said in general that it is not true.
The Solv team said they have contacted Nubit to schedule a discussion, but it seems that @trackoor did not agree, and instead asked Solv to publicly disclose which wallets have been used for staking and how they operate.
The @SolvProtocol team @EvaBinary reached out to me in private.
Followin' is a protocol yield staking on Bit, helpin' users earn profits from their BTC holdings with low risk. Solv Protocol launched SolvBTC, SolvETH and SolvUSD, providin' opportunities to earn profits for holders of BTC, ETH and USD. Additionally, Solv utilizes a trading-strategy-based mechanism to leverage various Blocks, protocols and exchanges to access diverse profit opportunities. In October 2024, Solv Protocol raised an additional $11 million, bringin' the total capital raised to $25 million. Investors include Binance Labs, Laser Digital (a Nomura subsidiary), Blockchain Capital, OKX Ventures, gumi Cryptos, CMT Digital... In the final days of 2024, Binance announced the selection of Solv Protocol as the 3rd Binance Megadrop project. However, Solv is not a new player in the crypto market, but has actually existed since 2020. Back then, the protocol operated on a model applyin' DeFi breakthroughs to NFT tradin' and hostin' launchpads for other projects. It was not until early 2024 that Solv Protocol announced the shift to buildin' a yield solution for Bit through Stakin' and successfully attracted a large amount of BTC deposits in a short period of time due to its enhanced reputation after the Binance Labs investment.
I think we don't need a 'quick meeting.' Instead, they should directly clarify the following:
1️⃣ Which wallets reported by Solv are actually partnered whale wallets 'staked' (but not under Solv's direct control)?… https://t.co/giSNshuUC4 pic.twitter.com/KYxvcoJ2Ui
