一鱼多吃: Merlin Chain流动性协议速通手册

Original author: Amber, Merlin Chain

As the narrative of Bitcoin Layer2 unfolds, the relatively "static" Bitcoin ecosystem is gradually becoming more active, highlighting the increasing importance of liquidity. In order to meet the urgent needs of a large number of traders for Bitcoin earnings and promote efficient liquidity allocation, many Bitcoin ecosystem liquidity staking protocols have emerged in this context. The top Layer2 Merlin Chain in the Bitcoin ecosystem, together with emerging staking protocols such as Solv Protocol, Avalon Finance, and StakeStone, have introduced the concept of Bitcoin earnings and combined it with traditional liquidity staking concepts, providing investors in the Bitcoin ecosystem with a brand-new investment experience. This article will introduce the core mechanisms and staking gameplay of Solv Protocol, StakeStone, and Avalon Finance, as well as how they collaborate under the Merlin ecosystem to achieve a "one fish, multiple dishes" scenario.

Solv Protocol

Project Overview

Solv Protocol is a proprietary full-chain income protocol in the Bitcoin ecosystem, comparable to the Ethereum ecosystem's re-staking protocol Lido. By converting idle base assets into income assets and promoting cross-protocol, cross-ecosystem free combinations to create a more efficient liquidity allocation method.

SovBTC, the first full-chain Bitcoin income asset issued by Solv Protocol, is essentially an ERC-20 token with considerable liquidity that can generate secure base income by staking idle assets in users' wallets. Currently, SolvBTC has been successively launched on Arbitrum, BNB, and Merlin Chain.

Currently, Solv Protocol's Total Value Locked (TVL) has exceeded $200 million, with over 55,000 total users and has generated $7.03 million in earnings for users.

Team and Financing

Team Background

The Solv team has brought together senior professionals from various backgrounds, including experts from traditional financial institutions such as Goldman Sachs, JPMorgan, product managers from Binance and OKX, and other influential figures in the cryptocurrency field. In addition to Solv Protocol itself, the team has also created the Semi-Fungible Token (SFT) token standard ERC-3525, attracting over 100 teams to build new products based on this standard.

Financing Situation

Solv Protocol's investors include well-known institutions such as Binance Labs, NOMURA Group, Mirana, Blockchain Capital, raising a total of $14 million in the previous round of financing.

Core Mechanism

Utilizing a distributed asset management structure, a coin selection mechanism centered around DAO, non-custodial asset operation processes, and a rigorously monitored risk management framework, Solv Protocol provides strategy-based native income streams for mainstream assets such as BTC, ETH, and stablecoins.

1. Distributed Asset Management Structure: Solv's structure supports the full asset lifecycle including creation, issuance, redemption, and risk control. This asset management framework consists of trading strategy vaults, built-in Safe Guardian, price Oracle, and liquidity strategy-driven tokens.

・Trading Strategy Vaults: Used to store funds and LP assets, and execute asset allocation. Due to its core design principle of eliminating counterparty risk while ensuring the efficiency of liquidity pool operation, Solv predefines the types of transactions allowed in the contract, excluding any behavior that may involve fund abuse.

・Built-in Safe Guardian: Independent operating mechanisms are set for different Vault trading strategies, allowing only multi-signatures within a specified range of wallets. When users operate through multi-signatures, the checkTransaction is called to verify compliance with the authorized rules.

・Price Oracle: Acts as a bridge between Solv and other DeFi protocols, mainly used to retrieve and calculate asset net worth, set achievable prices for DeFi protocols, and execute lending, trading, and other operations.

・Liquidity strategy-driven tokens (vault LP tokens): These tokens transform staked assets into liquid, tradable assets, similar to the ERC-20 standard, to ensure maximum composability and utility within the DeFi ecosystem. Therefore, vault LP tokens like SolvUSD and SolvBTC can be integrated and interact with other DeFi components (such as money markets, DEXs, LPD-driven stablecoins, etc.).

2. Coin Selection Mechanism Centered around DAO: SolvBTC, SolvETH, and SolvUSD require high-quality basic portfolios for stable risk-return requirements, so Solv chooses to have the decentralized autonomous community Solv DAO execute 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 Solv TGE.

3. Non-Custodial Asset Operation Processes: Solv provides investors with on-chain asset autonomy and establishes a trustless standard through smart contracts to reduce malicious risks. Smart contract upgrades require joint control with Solv partners through multi-signature addresses and the TimeLock mechanism.

4. Rigorously Monitored Risk Management Framework: Solv sets a predefined stop-loss threshold for each strategy. In addition, Solv will introduce a 24-hour monitoring system later, tracking portfolio deltas, and automatically taking action in case of deviations or emergencies.

Code Audit

Solv's code audit has been conducted by well-known security companies such as Quantstamp, Certik, Slowmist, Salus, SecBit, and audit reports are publicly available.

How SolvBTC Achieves "One Fish, Multiple Dishes"

SolvBTC will become the liquidity strategy token (LST) on Merlin Chain, allowing users to mint M-BTC at a 1:1 ratio by staking, which cannot be redeemed before June. After the lock-up period, it can be exchanged back to M-BTC at a 1:1 ratio, and since M-BTC can be exchanged back to BTC at any time after the end of Merlin Seal staking, staking for SolvBTC essentially achieves risk-free returns pegged to the coin.

The earnings from SolvBTC come from multiple neutral trading strategy combinations, including Perp DEX market-making earnings, Funding Rates neutral escape strategies, ensuring stable returns while minimizing the impact of market price fluctuations on earnings.

As the Merlin ecosystem is still in its early stages of development, the BTC staked currently will be locked in the Vault to avoid anchor risks until the redemption opens in June. During the lock-up period, users can earn Solv points and can also obtain multiple staking rewards through a series of DeFi combinations in the Merlin Eco. Here is a simple SolvBTC exchange process:

SolvBTC:M-BTC = 1:1

Step 0: Cross-chain Layer1 BTC to Merlin Chain, then exchange for MBTC on MerlinSwap at a slight discount.

Step 1: Deposit MBTC into Solv to earn stable Merlin POS Staking rewards.

Step 2: In addition, Solv staking will also receive token airdrops, but Solv has not yet provided specific rules and token airdrop ratios.

DeFi Protocol Lego Module

As fundamentally an ERC-2

0 tokens, SolvBTC can be combined with other DeFi protocols as an important module of "LEGO blocks".

Step3: The Solv point system is only related to staking and minting, so the ownership of SolvBTC does not affect the staking points. Therefore, users can earn more profits through various DeFi protocols related to Solv.

According to the panoramic view of the Merlin Chain application released by the Solv Protocol official, Solv has cooperated with top DeFi products on Merlin Chain such as MerlinSwap, bitSmiley, Surf Protocol, Mage Finance, AvalonFinance, etc. The guide to multiple benefits is as follows:

・MerlinSwap (DEX): MerlinSwap will launch the SolvBTC-M-BTC trading pair for traders to freely trade. MerlinSwap is a DEX provided by the iZUMi Finance team with technical support and officially launched in cooperation with MerlinChain, dedicated to creating a convenient and efficient DeFi interactive experience for the Bitcoin ecosystem stability and Merlin EVM interoperability. As of the end of March, MerlinSwap's TVL has exceeded $100 million, with a daily trading volume reaching $70 million, making it the largest DEX in the Merlin ecosystem and even the Bitcoin ecosystem.

・bitSmiley (StableCoin): Stake SolvBTC to mint bitUSD (stablecoin). bitSmiley is a Bitcoin-native stablecoin protocol that allows users to over-collateralize native BTC on the Bitcoin network to mint stablecoin bitUSD. In addition, bitSmiley has also launched lending and derivative protocols aimed at reshaping the BTCFi ecosystem. bitSmiley was selected as a high-quality project at the Bitcoin hackathon hosted 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 positions. Surf Protocol is a perpetual contract DEX on the Bitcoin Layer2, previously selected for the Binance Labs seventh season MVB accelerator program. The Surf Protocol testnet ended on March 26th, with a total of 30,000 wallet addresses participating in the testnet, with a total trading volume of $250 million, and will be launched on the mainnet soon.

・Mage Finance Avalon Finance (Lending Protocol): Stake SolvBTC for lending

・Mage Finance is the first Bitcoin lending infrastructure built on the Merlin Chain.

・Avalon is a DeFi platform on the Bitcoin Layer2, already launched on the Merlin Chain.

・MerlinStarter UniCross (LaunchPad): SolvBTC can be used as a voucher for future IDO participation

・Merlin Starter is the first Launchpad platform of Merlin Eco, aiming to incubate native projects of Merlin Eco and provide asset support for promising projects.

・UniCross is a cross-chain BTC inscription platform on the Layer2 network. It allows users to mint Layer1 BRC-20 tokens on Layer2, and can also choose to pay with multi-chain assets such as BRC-20, BTC, and ETH. The stTokens obtained by users can be used for trading on the UniCross market and can also be exchanged for ERC-20 tokens on L2.

・Map Protocol Camelot Protocol (Layer3): Acting as bridging assets for Layer3

・Map Protocol is a peer-to-peer Bitcoin Layer2 focusing on cross-chain interoperability, built on ZK and light clients.

・Camelot Protocol is a Bitcoin Layer3 protocol designed for DePIN on the Merlin Chain, aiming to achieve decentralized AI training using blockchain technology. Camelot is committed to building a scalable L3 DePIN platform on the Merlin Chain, allowing organizations and individuals worldwide to contribute computing resources to the shared pool.

In addition, Solv also launched a point system on April 5th, allowing users to earn points by minting SolvBTC. The more staked, the more points earned (single wallet operation is recommended), and Solv points can be used to redeem SOLV token airdrops. The point system will last for three months until the end of the lock-up period in June.

StakeStone

Project Overview

StakeStone is committed to providing native staking rewards and liquidity for Layer2 networks, with high scalability supporting various staking pools across multiple chains, and compatible with Restaking. In addition, StakeStone has established a multi-chain liquidity market based on its native LST $STONE, providing token holders with a wider range of applications and revenue opportunities.

According to official information, StakeStone has deep cooperation with Layer2 networks such as Merlin Chain, BNB, Manta, Scroll, etc.

Financing Situation

In March of this year, Binance Labs and OKX Ventures successively announced investments in StakeStone, with specific amounts and other financing undisclosed.

Core Mechanism

The core mechanism of StakeStone consists of StakeStone Vault, Minter, Strategy Pool, and OPAP (Optimizing Portfolio and Allocation Proposal).

・StakeStone Vault: Acts as a fund buffer pool, responsible for managing deposits, withdrawals, and settlement functions. The ETH staked into the pool is stored in the contract until a new settlement appears, and then deployed to the underlying strategy pool.

・Minter: Responsible for minting and burning STONE. The existence of Minter allows the independent operation of STONE minting and underlying assets, adjusting the circulation of STONE tokens to make the token more stable.

・Strategy Pool: StakeStone's strategy pool adopts a whitelist mechanism driven by OPAP, highly compatible with multiple assets. At the same time, asset risks will be isolated within a single strategy channel to prevent high correlation risks.

・OPAP: The first decentralized solution for optimizing liquidity investment returns, allowing for portfolio optimization and allocation of STONE's underlying assets to optimize asset allocation and yield monitoring. Any changes in StakeStone's 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 the BTC Ecosystem

STONE and mSTONEBTC

STONE is the LSD token issued by StakeStone, used to integrate mainstream staking pools, re-staking pools, and LSD blue-chip DeFi strategy returns. Its value is positively correlated with the staking returns of underlying assets and can serve as liquidity on multiple blockchains.

mSTONEBTC is the first yield-bearing BTC derivative token based on the BTC Layer2 PoS mechanism. BTC can enter the StakeStone popular distribution network through this, further promoting the efficiency of capital allocation in the BTC ecosystem. When StakeStone completes the integration with Merlin Chain, it is believed that a certain proportion of exchange can be made with m-BTC.

BTC Ecosystem Acceleration Plan

Although StakeStone currently relies on staking ETH to obtain STONE, on February 21st of this year, StakeStone announced the launch of the BTC Ecosystem Acceleration Plan, intending to expand the staking scope to the BTC ecosystem.

The Accelerator Program allows users to deposit new ETH into Merlin Seal and B^2 Buzz to mint STONE and earn StakeStone points. This program will continue until the end of the staking period for Merlin Seal and B^2 Buzz.

Note: Before February 21st, participants in Merlin Seal and eligible long-term community members can share 0.5% of the total supply of StakeStone tokens as a reward.

Avalon Finance

Project Overview

Avalon Finance is a DeFi platform on the Bitcoin Layer2, offering users services such as deposits, loans, leveraged mining, and RWA loans. It has already launched on the Merlin Chain. Key projects include over-collateralized lending, algorithmic stablecoins based on lending, and RWA loans. These products focus on improving capital efficiency through collateralized lending and optimizing yield mechanisms for low-liquidity assets.

・Over-collateralized lending: A basic lending protocol with an isolated pool mechanism that supports various assets as collateral (both major assets and low-liquidity assets).

・Algorithmic stablecoins based on lending: An over-collateralized algorithmic stablecoin that optimizes capital allocation efficiency through lending protocols.

・RWA loans: This pool supports both permissioned and permissionless RWA tokens, including money market funds, stock indices, and corporate bonds.

Currently, Avalon's Total Value Locked (TVL) has reached 51.31 million, with over 4200 total users.

Team and Financing

The core team of Avalon consists of senior professionals with 10 years of experience in the crypto industry. The founder previously served as a Hedge Fund Trader at the $15 billion fund ExodusPoint, managing a portfolio of over $300 million.

On March 15th of this year, Avalon announced the completion of a $1.5 million seed round of financing, with participation from SNZ Capital, Summer Capital, Matrixport Ventures, and other institutions.

Core Mechanisms

Avalon Finance's core mechanisms include isolated collateral pools designed for asset security and the AVAF locking mechanism tailored for growth.

Isolated Collateral Pool Mechanism

Due to the different liquidity characteristics of different collateral assets, Avalon chooses to allocate them to separate collateral pools.

・Main Pool: Used for collateralizing stable-priced assets that are not easily manipulated. The current main pool on the Merlin Chain allows collateral assets such as BTC, M-BTC, M-USDT, M-USDC, and M-ORDI.

・Innovation Pool: Used for collateralizing assets with unstable prices that may be subject to potential manipulation. As these token assets mature, they can be migrated to the main pool after approval by Avalon DAO. The current innovation pool on the Merlin Chain can be used to collateralize M-BTC, VOYA, and HUHU.

・RWA Lending Pool: This pool supports both permissioned and permissionless RWA tokens, including money market funds, stock indices, and corporate bonds.

Currently, Avalon has initiated the first phase of staking, with lending functions not yet available. Both the main pool and innovation pool can be staked independently, and assets can be redeemed at any time if liquidity permits. The second phase will introduce lending functions for the main pool, including assets such as BTC, ETH, USDT, USDC, etc. The team will monitor security dynamics 24/7. The third phase will introduce lending for the innovation pool, running independently from the main pool, and will initiate Avalon DAO voting during this phase. Additionally, the team aims to provide innovative fragmentation for NFTs, offering income channels for "small pictures" with low 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 total number of collateral pool tokens already used for marketing and relationship maintenance, with a maximum expected supply of 1 billion tokens. Token minting beyond the limit is controlled by a 28-day timelock, triggered only when more liquidity is needed for new product launches, and the timelock activation requires community governance voting.

In addition, liquidity providers will receive esAVAF as collateral proof, which, apart from being non-transferable, has the same utility as AVAF.

Code Audit

Avalon's security audit is conducted by Salus, and the audit report and contract address are currently public.

Avalon Lego Combination

Avalon has already partnered with other top DeFi projects in the Merlin Eco ecosystem, such as the collaboration between Avalon and Solv mentioned earlier. In this partnership, Avalon supports SolvBTC collateralization and lending, where users can first collateralize M-BTC in Solv to exchange for Solv collateral pool points, then collateralize the equivalent SolvBTC in Avalon to earn point rewards.

Staking Tutorial

Deposit link: https://app.avalonfinance.xyz/dashboard/

Step 1: Connect your wallet (MetaMask recommended). The default interface is the main pool, and to switch to the innovation pool, click the dropdown button next to Merlin Market.

M-BTC can be staked in both the main pool and innovation pool, with higher points available in the main pool. The primary use of M-BTC in the innovation pool is as collateral proof for exchanging other tokens after the development of lending in the third phase.

Step 2: Choose the currency you want to deposit, click "Supply," enter the amount you want to deposit, adjust gas to 0.05 gwei, and confirm.

Upon completion of the deposit, the deposit token certificate will automatically pop up, showing the deposited currency and amount on the page.

Step 3: Click on Points to view the current staking points (Avalon's point system updates every 8 hours after staking).

Additionally, clicking "Withdraw" next to Supply allows you to redeem at any time if liquidity permits.

Reference: https://merlinchain.notion.site/2f4ec0f88d584cb5bab4030ad56c0b60?pvs=74

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