How should we view the rapid rise of SolvProtocol, the full-chain yield aggregation platform? Over the past few months, the Solv Protocol, with its new asset management paradigm, Solv Guard, built for the Bitcoin yield path, has deeply collaborated with MerlinChain, Babylon, BNBChain, and the recently GMX. It has accumulated over $1B in asset scale. Why is that? Next, I’ll share my observations:

In my opinion, Solv Protocol’s rapid growth is attributed to its focus on the burgeoning “Restaking+Yield” lending sector, which revolves around BTC as the core asset and expands horizontally across the multi-chain landscape. In simpler terms, as Restaking projects like Bouncebit and Ethena gain traction, a new breed of “CeDeFi ‘’ projects that combine CeFi management with DeFi market liquidity have attracted attention.

With the rise of such projects, how to build a transparent and reliable secure asset circulation aggregation environment has become a rigid demand, and Solv Guard aims to provide such projects with an intermediate layer of “transparent contract management” services to make asset control rights more controllable. Specifically:

1) Combining the centralized management efficiency of CeFi and the decentralized liquidity security of DeFi has increasingly become a new mainstream paradigm of asset management. This is due to the fact that CeFi custody can also gain a certain degree of “trust” under the background of the increasing maturity and compliance of Crypto custody institutions. Therefore, it will become one of the “efficiency” preference choices in balancing the impossible triangle of security, decentralization, and efficiency, which makes sense.

Take the BTC cross-chain bridge scenario as an example: the pure technical native cross-chain method has a long development cycle and is subject to uncertainty. Using centralized custodians such as Cobo and Ceffu as “bridges” can quickly solve the cross-chain solution for assets, thereby promoting the rapid implementation of BTC layer2 projects without getting stuck on the cross-chain bridge issue.

Take the off-chain interest-earning of POS assets as an example: pure POS staking assets can only obtain the original reward income for providing asset pledge for the public chain, but a large number of assets can first pass through the hands of traditional CeFi managers before becoming staked assets, and also realize certain income off-site, which increases the income source of POS assets.

Therefore, the fact that CeDeFi projects can become the focus is also the result of the impossible triangle tradeoff. They fully combine the management and use efficiency of CeFi and the decentralized transparent circulation application environment of DeFi. They are more suitable for projects with high decentralized technology barriers but absolute advantages in operation and capital. Typical projects include: @Bouncebit, @ethena_labs, and recently noticed a new stablecoin alpha project @BitU_Protocol based on the CeDeFi concept, etc.

In short, after overcoming compliance issues, some Web2-background projects tend to use their advantages such as capital size and efficiency to quickly implement projects in the Crypto field, and the CeDeFi model 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 general direction must be to pursue a decentralized architecture. In the custody application scenario, how to achieve more transparent and refined management?

The overall logic is to make the use rights of the custodial address, the inflow and outflow of assets, multi-signature management and other strategies as transparent as possible and to manage them through on-chain contracts.

As we all know, Fireblocks, as a managed SaaS service platform, provides an internal control console platform with similar management functions for many hosting institutions. However, this is an internal process service, and the outside world cannot supervise internal systematic evil.

Based on its own experience in exploring the ERC3525 contract standard and SFT semi-fungible tokens, Solv Guard has specially launched an open management platform that can help custodians increase their technological holdings. It integrates all permission settings, authorization management, inflow and outflow review, etc. into a complete Authorization permission check mechanism. As a “middleware” service layer, it “enhances” the technical content of centralized custodians when they are connected with decentralization, thereby reducing trust friction.

3) How to do it specifically? 1. Use Gnosis Safe’s multi-signature contract address to manage assets in the asset authority design of the custodial address; 2. Since Safe multi-signature can only do simple Threshold management, some more sophisticated complex permissions and conditional execution designs have to be implemented by nesting another layer of Solv Vault Guardian. For example, in the Guardian structure, you can customize the target address permissions, configure Authorization permission checks, configure execution Rules, and nest permission management contracts for specified purposes, etc.

Simple understanding: Solv Guardian further granularizes the management of fund usage rights (contracts, contract functions, ACL lists, etc.) based on the Safe multi-signature contract, and configures contractual triggers and transparent supervision conditions for funds from inflow to outflow and throughout the entire life cycle. For example: which contracts are allowed, which functions are allowed for each contract, whether each function corresponds to the corresponding ACL permission list, etc.

At the same time, in order to prevent the “middleware” from providing refined services and making the “middleware” itself a new layer of centralized risk, Solv has set strict Governor permissions for Vault Guardian: first the committee votes and then the multi-signature triggers the management configuration, and then waits for a certain timelock period before finally configuring permissions, including upgrading and modifying the transaction restrictions, address restrictions, rule restrictions, etc. specified in the contract.

That’s all for now.

So, how do we position Solv Protocol’s performance in asset management? It can be considered that Solv has added an extra lock to the industry-renowned Gnosis Safe, increasing the expressiveness and security of its multi-signature management granular products; it can also be considered that Solv has implemented a more Web3 Native “dimensionality reduction strike” on SaaS unicorn service platforms such as Fireblocks, bringing a set of on-chain transparent contractual management methods that are more in line with the needs of industry development into the custody industry process specifications.

In short, the fundamental reasons for Solv Protocol’s rapid rise in the past few months: 1) It has taken advantage of the growing demand for interest-bearing services in CeDeFi, and has been able to quickly reach cooperation with MerlinChain, Babylon, GMX, Ethena, etc.; 2) It has experience in exploring mature financial scenarios based on the ERC3525 standard and SFT asset logic, which enables it to have the ability to “extend” granular new “transparent contractual” asset management services.

In addition, it should be added that with the approval of the Ethereum ETF and the establishment of the “commodity” attribute of ETH, the “regulatory” uncertainty has become clearer. With the expectation of more off-market capital inflows, the decentralized and transparent management of digital assets not only meets the market’s need for a trusted environment, but also meets the “compliance” means of some regulatory agencies.

Given the evolving regulatory landscape, Solv Protocol is well-positioned to explore viable “full compliance” solutions that strike a balance between regulatory measures like “KYC” and “Yield Vaults” and the principles of decentralized services. Such solutions are crucial for expanding the size of the CeDeFi industry’s capital base and providing stability to yield-generating services.

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