Solv Unveils BTC Yield Options Targeting 12% APR to Lure Liquidity From Ethereum and Solana
- Patricia ArquetteOriginal
- 2024-10-18 09:04:14286browse
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.
Solana (SOL) is integrating Bitcoin (BTC) into its ecosystem through a new liquid staking derivative that will allow users to stake their BTC on Solana's decentralized finance (DeFi) protocols.
Solv Finance, a cross-chain liquidity protocol, has launched a new derivative, SolvBTC.JUP, that will enable users to stake their BTC on Jupiter Exchange, one of Solana's most popular decentralized exchanges (DEX).
The derivative is designed to generate BTC-denominated yield from transaction fees on the exchange. According to Solv, the derivative will initially be available on Jupiter, with plans to expand to other Solana DEXes in the future.
Solv is targeting a yield of approximately 12% annual percentage returns (APR) on BTC, which is considerably higher than BTC staking on L2s, typically paying 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.
SolvBTC.JUP is part of an “ongoing effort to enhance Bitcoin’s role in decentralized finance,” Solv said. Several Bitcoin-native L2s, such as Core Chain, Babylon, and Spiderchain, are exploring Bitcoin-native staking.
Similar to proof-of-stake (PoS) networks like Ethereum, BTC stakers on L2s lock up their BTC as collateral to secure the networks in exchange for rewards. Stakers on L2s can also participate in proof-of-work (PoW) on the main Bitcoin chain.
Recently, L2s have been exploring ways to combine their BTC staking capabilities with DeFi to offer higher yields and cater to the growing demand for BTC liquidity in the broader crypto ecosystem.
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