Based on some research and discussions, it has come to my attention that Synapse’s treasury is quite strongly denominated in idle $SYN tokens - these could be used more productively to generate revenue for the treasury and subsequently used to diversify and fund new initiatives. I would like to first present this RFC proposal to gauge interest prior to making a full proposal that would help to achieve this objective through employing on-chain covered call strategies using MYSO (https://myso.finance/ | https://app.myso.finance/).
The idea is to leverage a portion of Synapse’s treasury through on-chain covered call lending. This approach involves lending out a smaller part of currently idle $SYN tokens. By doing so, Synapse can generate significant upfront revenue in USDC. The earned USDC can be immediately utilized for community needs. And unlike a simple token sale, covered call lending enables the treasury to diversify its holdings into stable assets without an immediate market impact. All loan execution happens through MYSO smart contracts and is trustless and fully transparent with full on-chain traceability.
• Idle $SYN tokens can be used to generate upfront USDC revenue
• Immediate revenue and liquidity for operational and developmental activities
• Diversification of the treasury into stables
• Tokens don’t need to be sold, thus there’s no immediate market impact
The diagram below shows indicative upfront premiums (as of Jan. 22, 2024) that the Synapse treasury could earn across various loan duration (Days to Expiry) and upside cap (Relative Strike Level) combinations
^ For some reason it wouldn't allow me to post a picture directly into the proposal so I've added the indicative quotes to this Google Drive
Now, for instance, let's say the Synapse treasury lends $100k worth of $SYN for 60 days at a 110% upside cap. In turn, Synapse treasury gets approx. $22.7k USDC upfront - the treasury keeps this no matter what happens as loan expiry.
If the $SYN price remains below 110% after the 60 days, the originally loaned $SYN is returned. If it exceeds 110%, the Synapse treasury receives $110k USDC (and still keeps the initial $22.7k USDC upfront as well).
This proposal outlines how the Synapse community can generate USDC stablecoin revenue by using idle $SYN treasury for covered call lending. This approach not only diversifies the treasury but also avoids market impacts that could arise from outright selling $SYN tokens.
Would love to hear feedback and comments from the treasury team and community and would be happy to make put together a full proposal outlining each of the above point, the process for facilitating this trustless, on-chain covered call, and describing MYSO, the proposer, in more detail.