Original author: Amber, Merlin Chain
As the Bitcoin Layer 2 narrative is fully unfolded, the relatively "static" Bitcoin ecosystem has gradually become active, and the importance of liquidity has become increasingly prominent. In order to meet the urgent needs of a large number of traders for Bitcoin interest and promote efficient liquidity allocation, many liquid staking protocol in the Bitcoin ecosystem have emerged in this context. The Bitcoin ecosystem's leading Layer 2 Merlin Chain, together with emerging pledge protocols such as Solv Protocol, Avalon Finance and StakeStone, introduced the concept of interest-bearing Bitcoin and combined it with the traditional liquidity pledge concept, providing investors in the Bitcoin ecosystem with a new investment experience. This article will introduce the core mechanisms and pledge gameplay of Solv Protocol, StakeStone and Avalon Finance, as well as how to cooperate with each other to "kill two birds with one stone" driven by the Merlin ecosystem.
Solv Protocol
Project Overview
Solv Protocol is a full-chain basic income protocol exclusive to the Bitcoin ecosystem, which can be compared to the Ethereum ecosystem re-staking protocol Lido. It converts idle basic assets into interest-bearing assets while promoting cross-protocol and cross-ecological free combinations to create a more efficient liquidity distribution method.
SovBTC is the first full-chain Bitcoin interest-bearing asset issued by Solv Protocol. It is essentially an ERC-20 token with considerable liquidity, which can create a safe basic income for the idle funds in the user's wallet through staking. Currently, SolvBTC has been launched on Arbitrum, BNB and Merlin Chain.
Currently, Solv Protocol TVL has exceeded 200 million US dollars, with a total number of users exceeding 55,000, and has generated 7.03 million US dollars in revenue for users.
Team and Financing
Team Background
The Solv team brings together senior professionals from various backgrounds, including experts from traditional financial institutions such as Goldman Sachs and JPMorgan Chase, product managers from Binance and OKX, and other influential celebrities in the cryptocurrency field. In addition to the Solv Protocol itself, the team also created the SFT (Semi-Fungible Token) token standard ERC-3525 and attracted more than 100 teams to build new products based on this standard.
Financing
Solv Protocol's investors include well-known institutions such as Binance Labs, NOMURA Group, Mirana, Blockchain Capital, etc., and the last round of financing raised a total of US$14 million.
Core Mechanics
Solv Protocol uses four core modules: distributed asset management structure, DAO-centric coin selection mechanism, non-custodial asset operation process, and strictly monitored risk management framework to provide strategy-based native income streams for mainstream assets such as BTC, ETH and stablecoins.
1. Distributed asset management structure: Solv's structure supports the entire asset life cycle including creation, issuance, redemption and risk control. The asset management framework consists of a trading strategy library, built-in Safe Guardian, price Oracle, and liquidity strategy-driven tokens.
Trading Strategy Vaults: used to store funds and LP assets and perform asset allocation. Since its core design concept is to eliminate counterparty risk while ensuring the efficiency of liquidity pool operations, Solv pre-defines the types of transactions allowed in the contract to exclude any behavior that may involve abuse of funds.
Built-in Safe Guardian: An independent operation mechanism is set up according to different Vault transaction strategies, and only wallets within the specified range are allowed to multi-sign. When a user performs a multi-signature operation, checkTransaction will be called to check whether it complies with the franchise rules.
Price Oracle: Acts as a bridge between Solv and other DeFi protocols, mainly used to retrieve and calculate net asset value, set achievable prices for DeFi protocols, and perform operations such as lending and trading.
Liquidity strategy driven tokens (vault LP tokens): Liquidity strategy driven tokens only convert pledged assets into liquid, tradable assets, similar to the ERC-20 standard, to ensure maximum composability and practicality within the DeFi ecosystem. Therefore, vault LP tokens such as SolvUSD and SolvBTC can be integrated and interacted with other DeFi components (such as money markets, DEXs, LPD-driven stablecoins, etc.)
2. DAO-based coin selection mechanism: The stable risk-return of SolvBTC, SolvETH and SolvUSD requires a high-quality underlying portfolio, so Solv chose to have the decentralized autonomous community Solv DAO perform the asset selection process. Currently, Solv DAO operates under the supervision of the Advisory Council and will transition to a user-funded SOLV governance model after the end of Solv TGE.
3. Non-custodial asset operation process: Solv provides investors with on-chain asset autonomy and establishes trustless standards through smart contracts to reduce the risk of malicious behavior. Smart contract upgrades require joint control with Solv partners through multi-signature addresses and TimeLock mechanisms.
4. Strictly monitored risk management framework: Solv sets a predefined stop loss threshold for each strategy. In addition, Solv will introduce a 24-hour monitoring system in the future to track portfolio delta. Once there is a deviation or a market, the system will automatically take action.
Code Audit
Solv code audits have been performed by well-known security companies such as Quantstamp, Certik, Slowmist, Salus, SecBit, etc., and the audit reports have been made public.
How SolvBTC kills two birds with one stone
SolvBTC will become the Merlin Chain Liquidity Strategy Token (LST), which users can mint by staking M-BTC at a 1:1 ratio and cannot be redeemed before June. After the lock-up period, it can be redeemed back to M-BTC at a 1:1 ratio. Since M-BTC can be redeemed back to BTC at a 1:1 ratio at any time after the Merlin Seal staking ends, staking for SolvBTC can essentially achieve a risk-free return on the currency basis.
SolvBTC's income comes from a combination of multiple neutral trading strategies, including Perp DEX market-making income, Funding Rates neutral escape strategy, etc., which ensures stable income while minimizing the impact of market price fluctuations on income.
As the Merlin ecosystem is still in its early stages of development, the currently staked BTC will be locked in the Vault to avoid the risk of depegging until redemption is available in June. During the lock-up period, users can obtain Solv points and can obtain multiple staking benefits through a series of DeFi free combinations in the Merlin Eco. The following is a simple SolvBTC redemption process:
SolvBTC:M-BTC = 1: 1
Step 0: Transfer Layer 1 BTC across chains to Merlin Chain, and then exchange it for MBTC on MerlinSwap with a small discount.
Step 1: Deposit MBTC into Solv and get steady returns from Merlin POS Staking.
Step 2: In addition, Solv staking will also receive points airdrops, but Solv officials have not yet given specific rules and token airdrop ratios.
DeFi Protocol Lego Modules
Since it is essentially an ERC-20 token, SolvBTC can be used as an important module of "Lego blocks" and combined with other DeFi protocols at will.
Step 3: The Solv points system is only related to staking and minting, that is, SolvBTC ownership has no impact on staking points, so users can obtain more benefits through other DeFi protocols that are connected to Solv
According to the Merlin Chain application panorama officially released by Solv Protocol, Solv has cooperated with MerlinSwap, bitSmiley, Surf Protocol, Mage Finance, AvalonFinance and other leading DeFi products on Merlin Chain. The guide to killing two birds with one stone is as follows:
MerlinSwap (DEX): MerlinSwap will launch SolvBTC-M-BTC trading pairs for traders to trade freely. MerlinSwap is a DEX launched by the iZUMi Finance team with technical support and official cooperation with MerlinChain. It is committed to creating a convenient and fast DeFi interactive experience for the Bitcoin ecosystem with the help of the stability of the Bitcoin ecosystem and the interoperability of Merlin EVM. As of the end of March, MerlinSwap TVL has exceeded 100 million US dollars, and the highest daily transaction amount has reached 70 million US dollars. It is the largest DEX in the Merlin ecosystem and even the Bitcoin ecosystem.
bitSmiley (StableCoin): Pledge SolvBTC to mint bitUSD (stablecoin). bitSmiley is a Bitcoin native stablecoin protocol that allows users to mint stablecoin bitUSD by over-collateralizing native BTC on the Bitcoin network. In addition, bitSmiley has also launched lending and derivatives protocols to reshape the BTCFi ecosystem. bitSmiley was selected as a high-quality project in the Bitcoin Hackathon jointly organized by ABCDE and OKX Ventures in November last year, and received investment from ABCDE and OKX Ventures at the end of the year.
Surf Protocol (Perp DEX): Stake SolvBTC to open a position. Surf Protocol is a perpetual contract DEX on Bitcoin Layer 2. It was previously selected for the seventh season of the Binance Labs MVB Accelerator Program. The Surf Protocol testnet ended on March 26, with a total of 30,000 wallet addresses participating in the testnet, and the total transaction amount reached 250 million US dollars. The mainnet will be launched soon.
Mage Finance & Avalon Finance (Lending Protocol): Pledge SolvBTC for lending
Mage Finance is the first Bitcoin lending infrastructure built on Merlin Chain.
Avalon is a DeFi platform on Bitcoin Layer 2 and has been launched on Merlin Chain.
MerlinStarter & UniCross (LaunchPad): SolvBTC can be used as a certificate for future IDO participation
Merlin Starter is Merlin Eco's first Launchpad platform, which aims to incubate Merlin Eco native projects and provide asset support for promising projects.
UniCross is a cross-chain BTC inscription minting platform on the Layer 2 network. It allows users to mint Layer 1 BRC-20 tokens on Layer 2, and can also use multi-chain assets such as BRC-20, BTC and ETH for payment. The stTokens obtained by users can be used for trading on the UniCross market, or exchanged for ERC-20 tokens on L2.
Map Protocol & Camelot Protocol (Layer 3): Serving as Layer 3 bridge assets
Map Protocol is a peer-to-peer Bitcoin Layer 2 focused on cross-chain interoperability, built on ZK and light clients.
Camelot Protocol is a Bitcoin Layer 3 protocol designed for DePIN built on Merlin Chain, aiming to decentralize AI training using blockchain technology. Camelot is committed to building a scalable L3 DePIN platform on Merlin Chain, enabling organizations and individuals around the world to contribute computing resources to a shared pool.
In addition, Solv also launched a points system on April 5, allowing users to earn points by minting SolvBTC. The larger the amount of pledge, the more points you can get (single wallet operation is recommended), and Solv points can be used to exchange for SOLV token airdrops. The points system will last for three months until the lock-up period ends in June.
StakeStone
Project Overview
StakeStone is a full-chain liquidity infrastructure dedicated to providing native staking income and liquidity for Layer 2 networks. StakeStone itself has high scalability, supports various staking pools on multiple chains, and is compatible with Restaking. In addition, StakeStone has also established a multi-chain liquidity market based on its native LST $STONE, providing token holders with a wider range of application scenarios and income opportunities.
According to official information, StakeStone has already carried out in-depth cooperation with Layer 2 networks such as Merlin Chain, BNB, Manta, and Scroll.
Financing
In March this year, Binance Labs and OKX Ventures successively announced their investments in StakeStone, and the specific amounts and other financing were not disclosed.
Core Mechanics
The core mechanism of StakeStone consists of four parts: StakeStone Vault, Minter, Strategy Pool and OPAP (Optimizing Portfolio and Allocation Proposal).
StakeStone Vault: Acts as a capital buffer pool, responsible for managing deposits, withdrawals and settlement functions. The ETH staked in the pool is stored in the contract until a new settlement occurs, and then deployed to the underlying strategy pool.
Minter: responsible for the minting and destruction of STONE. The existence of Minter allows the minting of STONE to operate independently from the underlying assets, that is, it can adjust the circulation of STONE tokens, making the tokens more stable.
Strategy pool: StakeStone strategy pool adopts OPAP-driven whitelist mechanism, which is highly compatible with multiple assets. At the same time, asset risks will also be isolated in a single strategy channel to prevent high correlation risks.
OPAP: The first decentralized solution for optimizing liquidity fixed investment yields, allowing for portfolio and allocation optimization of STONE's underlying assets, thereby optimizing interest-bearing asset allocation and spot-on returns. Any changes in StakeStone funds need to be presented in the form of proposals, and STONE holders will decide whether to execute them through on-chain voting.
StakeStone and BTC Ecosystem
STONE and mSTONEBTC
STONE is an LSD token issued by StakeStone, which is used to integrate the returns of mainstream staking pools, re-staking pools and LSD blue-chip DeFi strategies. Its value is positively correlated with the staking returns of the underlying assets, and can serve as liquidity on multiple blockchains.
mSTONEBTC is the first BTC derivative token based on the BTC Layer 2 PoS mechanism. BTC can enter the StakeStone popular distribution network, thereby further promoting the efficiency of BTC ecological capital allocation. When StakeStone officially completes the Merlin Chain integration, it is believed that a certain proportion of exchange can be made with it through m-BTC.
BTC Ecosystem Acceleration Plan
Although StakeStone currently relies on staking ETH to obtain STONE, on February 21 this year, StakeStone announced the launch of the BTC ecosystem acceleration plan, intending to expand the scope of staking to the BTC ecosystem. The acceleration plan allows users to deposit new ETH in Merlin Seal and B^2 Buzz to mint STONE and obtain StakeStone points. The plan will last until the end of the Merlin Seal and B^2 Buzz staking period.
Note: Merlin Seal participants and eligible long-term community members before February 21 can share 0.5% of the total supply of StakeStone tokens as rewards.
Avalon Finance
Project Overview
Avalon Finance is a DeFi platform on Bitcoin Layer 2, providing users with deposit, lending, leveraged mining and RWA lending services, and is currently available on Merlin Chain. Its key projects include overcollateralized lending, algorithmic stablecoins based on lending, and RWA loans. These products focus on improving capital efficiency through pledged lending and optimizing the income mechanism of less liquid assets.
Overcollateralized lending: a basic lending protocol with an isolated pool mechanism that supports multiple assets as collateral (prime and less liquid assets are both acceptable)
Lending-based algorithmic stablecoin: an overcollateralized algorithmic stablecoin that optimizes capital allocation efficiency through lending protocols
RWA Lending: The pool supports both permissioned and permissionless RWA tokens
Currently, Avalon TVL has reached 51.31 million and the total number of users has exceeded 4,200.
Team and Financing
The core team of Avalon is composed of senior people with 10 years of experience in the crypto industry. The founder worked as a Hedge Fund Trader at ExodusPoint, a fund with a scale of 15 billion, and managed an investment portfolio of more than 300 million US dollars.
On March 15 this year, Avalon announced the completion of a US$1.5 million seed round of financing, with participation from SNZ Capital, Summer Capital, Matrixport Ventures and other institutions.
Core Mechanics
Avalon Finance's core mechanisms include an isolated staking pool designed for asset security and an AVAF locking mechanism designed for growth.
Isolate staking pool mechanism
Since the liquidity of different pledged assets is different, Avalon chooses to put them into different pledge pools.
Main Pool: used to pledge permissionless assets that are stable in price and not easily manipulated. Currently, the main pool on Merlin Chain can pledge assets including BTC, M-BTC, M-USDT, M-USDC and M-ORDI.
Innovation Pool: used to pledge unlicensed assets with unstable prices and potential for manipulation. As these token assets mature, they can be migrated to the main pool after approval by Avalon DAO. Currently, the Innovation Pool on Merlin Chain can be used to pledge M-BTC, VOYA, and HUHU.
RWA Lending Pool: The pool supports both permissioned and permissionless RWA tokens, including money market funds, stock indexes, and corporate bonds.
At present, Avalon has started the first phase of staking, and the lending function is not open for the time being. The main pool and the innovation pool are independently pledged, and assets can be redeemed at any time if liquidity permits. The second phase will open the main pool lending function, including BTC, ETH, USDT, USDC, etc. The team will monitor security dynamics 24 hours a day. The third phase will open the innovation pool lending, operate independently of the main pool, and start the Avalon DAO voting in this phase. In addition, the team also proposed to provide fragmented innovation for NFT and provide interest-bearing channels for "small pictures" with poor liquidity.
AVAF locking mechanism
AVAF is the governance token of Avalon Finance, used to incentivize protocol users and liquidity providers. The circulating supply of AVAF will depend on the number of tokens in the staking pool and the total number of tokens used for marketing and relationship maintenance, with an estimated maximum supply of 1 billion. The minting of token supply exceeding the limit is controlled by a 28-day time lock, which will only be triggered when and only when more liquidity is needed to launch a new product. At the same time, the time lock needs to be voted by community governance.
In addition, liquidity providers will also receive esAVAF as proof of pledge, which has the same utility as AVAF except that it cannot be transferred.
Code Audit
The Avalon security audit was performed by Salus, and the audit report and contract address have been made public.
Avalon LEGO Set
At present, Avalon has reached cooperation with other leading DeFi projects in Merlin Eco, such as the cooperation between Avalon and Solv mentioned above, that is, Avalon supports SolvBTC staking and lending. Users can first pledge M-BTC in Solv in exchange for Solv staking pool points, and then use the SolvBTC obtained in equal proportion to pledge in Avalon to obtain points income.
Staking Tutorial
Deposit link: https://app.avalonfinance.xyz/dashboard/
Step 1: Connect your wallet (MetaMask is recommended). The default interface is the main pool. If you want to switch to the innovation pool, you need to click the drop-down button next to Merlin Market.
M-BTC can be pledged in both the main pool and the innovation pool, but the points in the main pool are higher. The main purpose of M-BTC in the innovation pool is to be used as a pledge certificate in exchange for other tokens after the third phase of development lending in the future.
Step 2: Select the currency you want to deposit, click "Supply", enter the amount you want to deposit, adjust the gas to 0.05 gwei, and confirm.
After the deposit is completed, the deposit certificate token will automatically pop up, and the page will display the currency and amount that has been deposited.
Step 3: Click Points to view the current staking points (after staking, the Avalon points system will be updated every 8 hours)
In addition, click “Withdraw” next to Supply to redeem at any time if liquidity permits.
refer to:
https://merlinchain.notion.site/2f4ec0f88d584cb5bab4030ad56c0b60?pvs=74
