Although the market is in a bear market, there are still real sources of income such as market making and LSD in the industry, but most retail investors have not only failed to appreciate their wealth but also suffered losses.

Taking market making as an example, as one of the earliest real sources of income in DeFi, early market making strategies and operations were very simple. Even though there was a certain impermanent loss accompanying the rise of the market, the overall profit was still considerable. Now, Uniswap and other veteran DEXs have gone through several iterations, and emerging protocols like GMX, which are one of the highest sources of income in the industry, have provided LPs with more flexible functions and strategic space. Participation in DeFi requires more flexible and efficient strategies as well as a certain risk management capability. The living space for ordinary retail investors in the DeFi market is getting smaller and it is becoming increasingly difficult to achieve higher returns.

On the other hand, the cryptocurrency market does not lack entities that can bring appreciation income. Professional DeFi market making teams have emerged under such industry trends. They use professional quantitative trading tools to formulate trading strategies, coupled with rigorous risk management, to earn considerable profits, while retail investors can only envy. If retail investors want a piece of the pie, they need to leverage the wisdom of professional teams. The key issue is how to connect and match the strategies of professional teams with the capital of retail investors. Professional strategy teams find it difficult to establish trust, prove their innocence, and create financial instruments to expand financing channels. Trust issues and the lack of financial instruments make it difficult for professional strategies to scale.

Since its establishment in August 2020, Solv Protocol has been committed to reducing the threshold for the creation and use of on-chain financial instruments. It has successively launched the industry's first 1.5-level market liquidity solution "Vesting Voucher," and the first on-chain bond market, realizing over $100 million in bond issuance and trading. Officially launched in March 2023, Solv V3 positions itself as an on-chain fund platform, realizing the full-process standards of on-chain fund issuance, trading, and clearing. Solv V3 is backed by a general fund infrastructure and consists of two key modules:

1) On-chain fund protocol, supporting fund creation, issuance, and trading;

2) Multi-link on-chain risk control system, protecting fund security from asset screening, fund permissions, clearing, and other links.

On July 31st, Solv V 3 officially launched the first open-end fund with flexible subscription and redemption - Blockin GMX Delta Neutral Pool, which not only has a longer duration, but also supports investors to subscribe or redeem more flexibly. On August 1st, Solv Protocol announced the completion of a $6 million financing round, with investments from Laser Digital, the investment department of Japanese banking giant Nomura Securities, Dahua Bank, Matrix Partners, and other institutions. Prior to this, Solv had also been endorsed by institutions such as Binance Labs and Blockchain Capital.

Solv V 3: One-stop Chain-based Fund Issuance and Investment

Solv V 3 is an industry-oriented decentralized infrastructure that provides a unified, secure, and transparent platform for creating, issuing, managing, and settling on-chain funds. It supports efficient financial exchange between the demand and supply sides through the issuance and purchase of on-chain funds.

Next, we will demonstrate the strengths of Solv V 3 through two market-making strategy funds launched by Solv: iZUMi 202301 and Blockin GMX Delta Neutral Pool.

(1) iZUMi 202301 Closed-end Fund

iZUMi 202301 is a closed-end fund issued on the Solv V 3 platform by iZUMi Finance, a multi-chain one-stop liquidity provider, to provide liquidity for iZiSwap through fundraising.

To meet the profit expectations and risk preferences of different investors, the fund is designed with two parts - Senior Tranche and Junior Tranche. The former enjoys priority in profit distribution but only receives a fixed income of 7%. The latter is designed for investors seeking higher risk and higher returns, with a priority in bearing risks but can allocate a portion of profits other than 7% according to their share. In actual settlement, high-risk users who purchased Junior Tranche achieved an ultra-high return rate of up to 31.6%.

Fund managers are able to efficiently create layered funds on Solv V 3 thanks to the original research by the Solv team.

ERC-3525 Standard, which has the feature of flexible split and is designed for advanced financial assets, can support various complex fund structures. In addition to layered funds, Solv also supports other safety cushion models such as First Loss Capital, providing investors with more diversified asset choices.

After the completion of "202301", iZUMi Finance successively issued multiple fund products that focus on zkSync Era network market-making in Solv V 3, raising a value of 22 million US dollars worth of ETH, stETH, USDC, USDT, etc., and obtaining support from funds and individual investors such as Unicode Digital, NextGen Digital Venture, Bella Protocol, Incuba Alpha. Without exception, all fund products were redeemed in full and on time, demonstrating a good credit record.

(2) Blockin GMX Delta Neutral Pool Open Fund

GMX is one of the hottest projects in the crypto market this year. As the largest decentralized derivatives platform on Arbitrum, GMX is also a representative project for generating real profits, becoming one of the hottest sources of income in DeFi. Users can earn profits by providing liquidity to mint GLP: a portion comes from transaction fees and protocol rewards generated by GMX's daily activities, and another portion comes from the gains and losses of counterparties.

However, since GLP is backed by a basket of assets such as BTC, ETH, stablecoins, holders also need to bear the risk of uncompensated losses due to BTC and ETH price fluctuations. Moreover, when traders constantly profit, GLP may also suffer losses in extreme one-sided markets. According to the DeFiLlama GLP dashboard, the highest yield can reach 54.42%, and the lowest can reach 5.43%, with high volatility.

Professional market-making team Blockin Capital issued a closed-end fund named GMX Delta Neutral Fund on Solv in January this year, which not only provides liquidity on GMX but also monitors the positions of traders and changes in the composition of GLP coins in real-time, and hedges the corresponding exposure through perpetual contracts on Binance, transforming GLP into a low-risk, high-yield stablecoin mining pool. Real-time data shows that this strategy only had a slight 1.1% drawdown during the USDC decoupling period, achieving an annualized return of 20.02%.

On July 31st, Blockin Capital once again issued its first open-end fund based on Solv V 3 - Blockin GMX Delta Neutral Pool, adopts the same trading strategy as the previous GMX market-making fund, while allowing for subscriptions and redemptions at any time.

In order to reduce market risks, Solv also promotes Blockin Capital to establish a very strict suspension and liquidation mechanism for the open-ended fund. Whenever the redemption net value is lower than 3% of the 30-day average net value, the fund will be forced to suspend and convert all funds back to USDC investment currency. Solv, Blockin Capital, risk managers, etc. will initiate a community vote to decide whether to restart or liquidate the fund. Risk managers only have the authority to suspend during the fund management process, and will monitor the net value of the fund in real time and intervene or suspend in a timely manner.

Solv V 3 provides continuous sources of income for the cryptocurrency market

According to official data, since the launch of V 3, it has completed the issuance of $150 million in funds, and Solv V 3 has attracted more than 10 fund managers on Ethereum, BNB Chain, and Arbitrum, and issued more than 40 funds.

However, the market-making strategy fund is only an important part of Solv V 3's asset categories. Solv will also leverage its advantages in asset selection and asset creation to continuously bring richer sources of income to the market.

Thanks to the powerful asset expression capabilities of ERC-3525, Solv V 3 allows fund managers to highly customize their own fund products. Similar to customizing NFTs, they can customize the subscription rules, fee structure, and income strategies managed by smart contracts in a visual way. This is mainly demonstrated in three aspects:

• Rich underlying assets: in the DeFi field, build more diversified management strategies on DEX, derivatives markets, liquidity staking, NFTFi, and provide diverse sources of income; in the CeFi field, launch quantitative funds, arbitrage strategy funds, and CeFi market-making funds in succession; in the TradFi field, package more real-world assets and match corresponding income strategies, providing sufficient and stable sources of income for the cryptocurrency market.

• Diverse profit strategies: Solv V 3 supports various fund management strategies such as active management, profit enhancement, Copy Trading, and structured investments.

• Rich product structure: Solv also supports various product structures such as layered funds and First Loss Capital protection funds, serving investors with different risk preferences and establishing stronger confidence for investors.

Earlier this month, Solv also announced plans to integrate NFT collateral lending platforms such as Pine Protocol within the next eight months and launch a secondary trading market for fund shares in the first quarter of next year, unlocking more DeFi Lego gameplay and providing more liquidity solutions and profit opportunities.

Solv V 3 brings more mature risk management mechanisms

While creating high-quality asset products for the market, Solv has also established a comprehensive on-chain risk control mechanism.

On the one hand, it implements fund co-management and layered permissions based on smart contracts. Regardless of adopting DeFi or CeFi strategies, funds raised on the Solv platform will be transferred to designated MPC solutions through the Solv V 3 smart contract, and corresponding rights will be granted based on roles, achieving full separation of fund transfer rights, liquidation rights, and operation rights, eliminating single points of failure, and ensuring specialized use of funds. With real-time on-chain monitoring, in case fund creators violate fund strategies and misappropriate assets, Solv will immediately freeze the funds to avoid further losses. For investors, they can also monitor fund usage and returns in real-time through the UI page, with automated visualization of profits and losses, truly achieving process transparency and on-chain traceability.

On the other hand, it also implements an efficient and responsive liquidation mechanism. Solv organizes a network of trusted institutions to set reasonable liquidation thresholds for each fund, elects and appoints professional Risk Managers responsible for safeguarding fund security to address potential extreme situations. Risk Managers will monitor positions and margins in real-time, issue risk alerts, provide risk reports, and in the event of liquidation, close positions and carry out reasonable settlements in an orderly manner. Taking the GMX open-ended fund as an example, investors can expect a return rate of 10%-30% while enjoying a protection mechanism that temporarily suspends when the 30-day average drawdown reaches 3%.

Solv V 3 has built a highly collaborative decentralized organizational network, providing reliable services and risk management for funds and laying a trustworthy foundation for on-chain investments.

Conclusion

Ryan Chow, the founder of Solv Protocol, also stated in an interview, "The fund market is one of the most valuable directions in the DeFi world. With the development of new narratives such as RWA and LSD, DeFi assets will inevitably experience more diversified outbreaks. Solv V 3 already has relatively mature infrastructure and is in a leading position in the market. We will also continue to bridge high-quality assets and industry liquidity through decentralized fund platforms, preparing for the next stage of mass adoption in DeFi."

According to Solv's official documentation, the majority of $SOLV tokens will be used for community incentives, and users who participate in open fund purchases and hold them will have the opportunity to receive airdrop incentives.



In the more detailed Roadmap, Solv stated that it will integrate NFT mortgage lending platform in August this year and launch ETH benchmark strategy fund on the LSD protocol. In the fourth quarter of this year, Solv will launch RWA (Real World Asset) related strategy fund. In the first quarter of 2024, an open-end mother fund and token rewards will be launched; in the second quarter of 2024, a secondary market for fund shares will be launched.

The appearance of Solv V 3 has reduced the threshold for creating and investing in crypto funds, allowing people with revenue-generating ability to quickly create funds and obtain cash flow, and enabling more ordinary crypto players and incremental investors to access more high-quality fund income products and provide liquidity with peace of mind. Looking forward to Solv creating more new asset classes for the crypto market, driving more incremental assets to enter the market, and pushing the development of the crypto market to a new level. Interested users can join the Solv community.