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Bitcoin’s emerging layer-2 and DeFi ecosystems are sparking competition for BTC liquidity on other chains.
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Solv Protocol has launched a Bitcoin (BTC) staking token on Solana in a bid to woo BTC holders as yield opportunities proliferate for the digital currency, Solv told Cointelegraph on Oct. 17.
New BTC yield options in the Bitcoin network’s emerging ecosystem of layer-2 scaling chains (L2s) and decentralized Finance (DeFi) protocols are forcing projects on other networks — such as Ethereum and Solana — to compete for BTC liquidity.
Dubbed SolvBTC.JUP, the liquid staking derivative (LSD) is designed to generate BTC-denominated yield from transaction fees on Jupiter Exchange, one of Solana’s most popular decentralized exchanges (DEX).
The token launch is still in the pilot phase but is part of an “ongoing effort to enhance Bitcoin’s role in decentralized finance,” Solv said.
Jupiter Exchange TVL. Source: DefiLlama
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Solv is targeting a yield of approximately 12% annual percentage returns (APR) on BTC — considerably higher than BTC staking on L2s, which usually pay APRs in the low single digits.
The higher yield offsets additional risks from hedging against volatile token price exposures in Jupiter’s liquidity pool.
“Solv mitigates risk by deploying a delta neutral strategy, which involves hedging the traders’ net open interest on centralized exchanges,” Solv said.
Jupiter is among Solana’s most active decentralized exchanges, with approximately $1.3 billion in total value locked (TVL), according to DefiLlama.
Some Bitcoin-native L2s — including Core Chain, Babylon, and Spiderchain — are exploring Bitcoin-native staking. Similar to proof-of-stake (PoS) networks such as Ethereum, Bitcoin L2 stakers lock up BTC as collateral to secure the networks in exchange for rewards.
EigenLayer, Ethereum’s largest restaking protocol, has also sought to woo BTC holders by adding wrapped Bitcoin to the roster of tokens EigenLayer accepts as restaking collateral.
Restaking involves taking a token that has already been staked — posted as collateral with a validator in exchange for rewards — and using it to secure other protocols simultaneously.
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This article first appeared at Cointelegraph.com News
