Solv Raises $25 Million, Stuck with 50 Bitcoins

Behind the withdrawal issue lies the silence of the entire BTCFi sector.

Written by: Eric, Foresight News

"I’m greedy for your 3% annual yield, but you’re after my entire principal."

On September 29, this accusation gained nearly 500,000 views on X. The poster, named Neil Lee, claimed that about 50 Bitcoins had been stuck in the Solv Protocol for over two months, unable to be withdrawn.

The author reached out to Solv Protocol regarding this issue, and Solv stated that the core reason the user could not withdraw the Bitcoins was due to triggering the platform's risk control mechanism. For security reasons, the 50 Bitcoins could not be released until the situation was verified, but the assets were intact and secure.

The sequence of events is not complicated.

Neil Lee stated that on July 8, he transferred about 50 Bitcoins from Binance, entering through the BTC+ yield entry in the Binance Web3 wallet, and converted them into SolvBTC for deposit, targeting an annual yield of about 3%.

Screenshot shared by Neil Lee

However, just five days later, the BTC+ contract on the BNB Chain was attacked. The attacker obtained the private key of the contract deployer and directly upgraded the minting contract, creating BTC+ out of thin air. Solv isolated the malicious contract and destroyed the unauthorized tokens within three hours, announcing that the underlying Bitcoins were untouched, but the subscription and redemption were temporarily closed.

On July 31, Solv announced that the functions were restored. When Neil Lee went to redeem, he found that his address was still on the restricted list. For the next two months, he communicated back and forth on Discord, Telegram, and email, providing proof of funds and wallet control, but there was still no progress.

Controversial SOLV

Investors in Solv Protocol include YZi Labs, IOSG, and Nomura Securities subsidiary Laser Digital, with total funding reaching $25 million, making it one of the leading players in the BTCFi boom.

On January 17, 2025, SOLV launched through Binance Megadrop, surging to around $0.2 on its first day. That was the historical peak price and the last price many holders saw.

This was followed by a year and eight months of decline, excluding the crash on October 11 last year, with the price dropping to around $0.002, a 99% decrease. Now it has returned to $0.0042, with an FDV of about $40 million. On the supply side, SOLV is still under pressure, with 5.53 billion of the 9.66 billion cap in circulation, and over 40% of the tokens waiting to be unlocked.

Some voices in the community point out that the "collapse" of SOLV's price stems from releasing too much circulation at the beginning of the token's issuance.

According to public data, the genesis supply of SOLV was 8.4 billion tokens, with an initial circulation of 1.4826 billion tokens, accounting for over 17% of the genesis supply. The number of tokens in the Binance Megadrop accounted for over 40% of the initial circulation, and they were directly unlocked after the token was officially launched.

High initial circulation cannot be termed a "problem" as long as sufficient demand can be created to maintain the token's price, but during this time, Solv faced repeated setbacks.

In January last year, Nubit co-founder publicly criticized Solv for using pre-signed transactions to double-count the same Bitcoin across multiple protocols, resulting in one Bitcoin being counted as three, and compared it to FTX. Solv responded firmly, claiming that it was organized smear from competitors and threatened legal action. During the turmoil, the official X account was also hacked to post phishing links, ending with full compensation. Six months later, Solv integrated Chainlink's proof of reserves as a remedial measure.

In March this year, the BRO treasury was hacked using a double minting vulnerability, resulting in 135 BRO being turned into 567 million, extracting about 38 SolvBTC worth $2.7 million. Solv's handling was impeccable, with less than ten affected users receiving full compensation, and a 10% bounty given to the white hat. However, the security community criticized that the compromised contract was not included in any of Solv's published audit reports.

Then came the private key leak in July and the 50 Bitcoins issue that surfaced in September.

The Collapse of the BTCFi Narrative

BTCFi had only $300 million in TVL at the beginning of 2024, swelling 22 times to $7 billion within a year, peaking at $9.1 billion last October before retreating entirely. This year, Bitcoin L2 sidechain TVL shrank over 74%, with the entire ecosystem locking around 91,000 Bitcoins, only accounting for 0.46% of the circulation, while Ethereum DeFi's figure is 15%.

Data shows that 77% of holders have never interacted with BTCFi. Bedrock's uniBTC was hacked for $2 million just two days after launch, and Badger DAO shut down eBTC. Many star L2 projects turned into data ghost towns after their airdrops ended, and the overall DeFi TVL dropped from $115 billion to $70 billion this year.

The issue in this sector can be summed up in one sentence: promoting a product with mediocre returns and a complex risk structure to the most conservative holders in the market. A 3% annual yield cannot cover the psychological cost of a security incident, and TVL rented through points and airdrops cannot retain real money. Babylon can maintain $4 billion in locked assets precisely because it is the most straightforward, not wrapped, not cross-chain, and does not move the coins.

In June this year, a lesser-known Bitcoin L2 project, Botanix, chose to shut down. This project, which operated for less than a year, revealed two core issues of the BTCFi sector: most Bitcoin holders view Bitcoin as a reserve asset rather than an investment asset, and the wrapped Bitcoin on Ethereum has already met the investment needs.

From a technical perspective, the BTC on these Bitcoin L2s and the WBTC on Ethereum are not fundamentally different; both lock BTC on the Bitcoin mainnet and issue an equivalent amount of assets on the new chain. Using ETH to participate in DeFi still has the opportunity to freeze assets through contracts if the protocol is hacked, while immature BTCFi may face situations where security issues at the code level could lead to irreversible losses.

BTCFi itself is not a failed narrative, but the market is far from the grand claims made. Web3 should allow for trial and error, but we hope these trials do not come at the expense of ordinary people's assets.