SYN Buyback Proposal

DanyangKunshan

Summary
Propose an initial buyback of $1m in SYN tokens and enact a monthly recurring buyback using 50% of swap and bridge fees paid to the DAO.

Background and Motivation
Since October 2023, volume and speculation has returned to the crypto markets. Many tokens are up over 5x in this short time and the buzz around new L2s, AI<>Crypto, and the launch of anticipated ZK chains has driven a demonstrable uptick in DeFi and cross-chain volumes. CEX open interest increased to over $32b, the highest level seen since early 2022. With the interoperability narrative not yet taken off and the imminent launch of Synchain soon we view the SYN token as undervalued and see this as an opportunity to increase treasury holdings of SYN. The DAO can later decide the best use of this SYN (ecosystem grants, market maker loans, pool rewards etc).

The protocol has fared extremely well since inception, accumulating a $17 million treasury throughout a bear market which has left other treasuries empty. However, the treasury is underweight on $SYN token when compared to the native holdings of similar defi projects. Thus, the community believes that Synapse stands to benefit from this proposal for multiple reasons:

1) Increasing the treasuries holdings of SYN will allow the team more flexibility for offering incentives on future Synapse products to bootstrap their launches.
2) The ongoing buybacks demonstrate that there is a relationship between the success of Synapse and the success of the Synapse token.
3) Rebalancing the treasury to be more in line with competitors treasuries native holdings clearly shows that the Synapse team have confidence in the Synapse token.

Revenue
Since 2023, Synapse DAO has consistently generated monthly revenue in the low hundreds of thousands of dollars, average monthly revenue of $452k and median of $411k. The protocol has also seen a resurgence in volume with over $1B in volume since November 2023.

Expense
Synapse has a relatively low cost basis as well. Monthly costs for the DAO are approximately $350k ($300k to Interoperability, $13k for the Synapse Foundation, $10k for contributors, and an estimated $28k of excess expense to be conservative).

Idle and Underutilized Capital
The protocol has generated excess monthly fees of $105k on average since 2023. Additionally, assuming only burn and $0 of additional revenue, Synapse has over 50 months (4 years) of runway. The treasury is simply not being allocated efficiently while protocol operations continue to be strong.

Proposal

At this time, we believe a one-time buyback of $1m from the treasury funded with $450k USDT, $450k of USDC, and $100k of ETH is prudent. We also propose that given Synapse continues to generate DAO surplus that 50% of the monthly fees beginning March 1, 2024 be used to execute a programmatic buyback.

One-time Buyback: The one-time buyback can be executed via CowSwap immediately. It should be done utilizing the TWAP function in 20 to 50 parts (at the team’s discretion) over a period of 10-days.

Ongoing Buybacks: The monthly buybacks can also be executed via CowSwap or a market maker. If via CowSwap, this should be done utilizing the TWAP function in 10 to 100 parts (at the team’s discretion) over an undisclosed period no shorter than 10-days and no longer than 30-days.

Logistics:

The DAO currently utilizes Gnosis multi-sigs which can be utilized to execute TWAP transactions on CowSwap
Monthly fees can be consolidated into ETH and USDC by core contributors/the team and used to execute the aforementioned programmatic buyback

Note: If a suitable market maker can be onboarded by March 8, 2024 Synapse may contract with this party to execute the buyback on its behalf. Previous discussions have occurred between Wintermute and Selini, it is our belief either of these parties is preferable to on-chain.

Proposal

For: Approve $1m one-time buyback of SYN and a programmatic monthly buyback of 50% of DAO fees beginning March 1, 2024.

Against: Do nothing

The proposal will be taken to snapshot later this week

Passive

Dumb !

Freud

“With the interoperability narrative not yet taken off and the imminent launch of Synchain soon we view the SYN token as undervalued and see this as an opportunity to increase treasury holdings of SYN. The DAO can later decide the best use of this SYN (ecosystem grants, market maker loans, pool rewards etc).“ This is perfect timing for the above reason. One could quibble about the size and frequency of the buybacks but it’s a great move that will help all parties interested in the welll-being and vibrancy of Synapse moving forward.

generalissimo

Thanks for the post DanyangKunshan.

I'm part of a US-based venture fund who's held Synapse for a long time, we've been closely following the proposal for a Synapse token buyback. After careful analysis and consultation with our general counsel, we've come to the conclusion that we're against this proposal. Here's why:

Initiating a buyback at this stage seems like a short-sighted approach to increasing token value. It's like a $150M public company resorting to buybacks, essentially signaling a lack of better investment avenues and capping growth potential. Given Synapse's 50% month-over-month growth rate and mainnet coming live in next 4-6 weeks, it's clear there are far more strategic ways to deploy funds that align with long-term growth.

I also spoke with our GC briefly; mind you, this is specifically from a US perspective. His initial take was that this is very aggressive. It would both force us to reconsider if we can continue holding Synapse(and he believes the same for other US based funds) as well as how US based exchanges and CEXs would react to something like this.

We believe the community should consider more sustainable and impactful strategies, akin to what Uniswap has proposed and we've supported. Directing fees towards stakers of the SYN token, who contribute to securing the network, could offer a more compelling use of funds. This not only rewards long-term holders but also encourages further investment in the protocol's growth and stability.

This buyback would in effect give money to short term traders over long term holders, signal to the market there's no growth left in the protocol and dissuade CEXs and institutional funds needed for Synapse to compete with Axelar, Wormhole, and others.