Summary:
SynapseRFQ transforms every bridge transaction into an auction where relayers compete to give the best price to users. It is the fastest, cheapest and most capital efficient way to bridge. Bridges are completed in under 10 seconds.
Expanding Synapse RFQ size by providing $5M of protocol owned liquidity as a loan to Synapse Labs to deploy a relayer.
Estimated long term impact:
- Reduce emissions $SYN emissions by 2M/year
- Increase net new fees by $2.2M/year
- Expand RFQ support to all the largest chains
Motivation:
Based on the past few months of bridge data, we’ve seen massive user adoption of RFQ driven by better prices and near-instant bridging. Synapse should aim to enable as many users and as much volume as possible to flow through RFQ since it has proven to be the best bridging UX. Increased capacity will increase overall bridge volume and serve as a beachhead to attract new users and community members.
Leveraging RFQ’s efficiency, this $5M loan by the DAO is estimated to save 2M SYN in emissions for the term of the loan, which would no longer need to be deployed by the DAO to incentivize liquidity pools. Additionally, the new users and volume it would attract are estimated to increase RFQ protocol fees earned by the DAO by approximately $2.2M.
Market Leadership:
The RFQ system positions Synapse as a leader in the bridging space by offering the fastest, most cost-effective, and flexible bridging solutions, attracting a broader user base and increasing transaction volume. Scaling this module allows Synapse to capture exponentially more bridge volume and users.
Capital Efficiency:
Expanding RFQ’s capacity means more capital-efficient bridging options for users, and more capital efficiency from a SYN spend perspective for the DAO. Using treasury funds to provide a loan to scale RFQ allows the DAO to spend proportionately less on emissions.
Terms & Execution:
To support the operational scaling of the Synapse RFQ bridge module, the following principal terms are proposed:
Effective Date: The effective date of the loan is the date upon which the proposal to provide the loan passes, if ever.
Loan Amount: A principal amount of (i) $1.5m in the form of ETH (calculated based on the closing price of ETH on Coinbase on the day this proposal is effective, if ever) and (ii) 3.5m USDC. If the DAO does not currently hold sufficient amounts of these assets, DAO holdings may be exchanged & bridged to consolidate. The foregoing amounts will be advanced in a single tranche.
Term:
1 year from the Effective Date, renewable by mutual consent via governance proposal initiated at least 30 days prior to the end of the term.
Loan can be prepaid in part or in full by Synapse Labs (including accrued and unpaid interest) rate at any time without penalty.
Synapse Labs will repay the loan in whole or in part on written demand from the DAO in the form of a passed governance proposal approving such demand.
Rate of interest: 4.62%, compounded monthly, in line with the prevailing short-term AFR published by the Internal Revenue Service for March 2024.
Default: Upon an Event of Default, the DAO may declare by passed governance proposal that all outstanding amounts, including accrued and unpaid interest, will be immediately due and payable. For purposes of this arrangement, an Event of Default occurs if:
Synapse Labs fails to perform its obligations under the loan and fails to utilize the funds to deploy a relayer;
Synapse Labs does not repay the loan on the due date and not extension of the Term has been agreed;
Synapse Labs commences liquidation, bankruptcy, or similar proceedings; or
Synapse Labs ceases to carry on all or a substantial part of its business.
Governing Law: This loan is governed by the laws of the Cayman Islands.
Limitation of Liability; Indemnification: Synapse Labs cannot be held liable for funds lost due to Synapse protocol, smart contract, and/or RFQ mechanism hacks, errors, exploits, or similar occurrences. If the loan principal amount is lost due to the above (and not due to the gross negligence or wilful misconduct of Synapse Labs or its shareholders, employees, contractors, advisors), Synapse Labs shall not be liable to the DAO for loss of such funds and the loan principal amount shall be automatically reduced in the amount of funds lost to such occurrence. The DAO shall indemnify and hold harmless Synapse Labs, its affiliates, and their respective shareholders, officers, directors, employees, agents, consultants, and assigns from third-party claims arising out of this arrangement, except to the extent that losses attributable to such claims resulted from gross negligence, fraud, or willful misconduct.
Enforcement: To the extent this proposal is approved, the Synapse Foundation shall act as the enforcer of the approved DAO proposal terms. The Synapse Foundation does not stand to benefit from any of the rights or obligations of Synapse Labs or the DAO pursuant to this proposal or the arrangement described herein and this proposal does not provide any other rights in favor of the Synapse Foundation. The Synapse Foundation will not serve as a guarantor on the loan for the benefit of the DAO.
Synapse Labs will update the DAO on progress and milestones quarterly.
DAO Impact:
An estimate based on RFQ data from the past month suggests that over the course of a year the additional capacity could increase fees from RFQ bridgers by approximately $2.2 million, while saving the DAO 2M SYN in emissions avoided and earning the DAO $235,954.75 in interest paid by Synapse Labs with respect to the loan.
Based on the foregoing, in effect, the Synapse DAO will be saving or earning an estimated 90% on its capital.
