Synapse Protocol Enhancement & Treasury Optimization

synapse_og

Abstract

The Synapse protocol stands at a crucial juncture of its fundamental mechanisms and economics. This proposal presents a comprehensive framework for protocol enhancement, centered around a carefully calibrated treasury reallocation strategy. The core objective is to strengthen the protocol's economic foundation through strategic SYN accumulation, preparing for upcoming staking mechanisms while maintaining robust treasury reserves.

The cryptocurrency ecosystem has evolved significantly since Synapse's inception, necessitating a thoughtful recalibration of the protocol's economic mechanisms. Previous governance proposals initiated the first phase of tokenomics optimization, demonstrating the community's commitment to sustainable protocol economics. The launch of SIN, coupled with current market conditions, presents an optimal window for implementing the next phase of protocol enhancements.

Further to this proposal, research efforts and proposals are welcome to explore a fee switch for protocol revenues and proposals on staking implementation from an economic standpoint. The latest launch of Synapse Intent Network introduces the technical reality of a POS mechanism for relayers and guards, though its economics requires further research.

This proposal suggests the DAO implement an initial buyback program(BB-1) of $3.5M for approx 5M SYN. Details on the execution, reasoning and implementation are outlined below. Comments and suggestions are welcome.

Treasury Analysis

Current State

Total non-SYN assets: $17M+
Asset composition: Bridge/swap fees across 19 chains, protocol grants. DAO assets exist on every chain Synapse is deployed.
Treasury dashboard: [Link: https://synapse-treasury-frontend.vercel.app/]

Asset Distribution Breakdown

Unclaimed fees distribution:
- Bridge fees
- Swap fees
Grant allocations:
- Optimism ecosystem grant
- Other committed funds: Metis

Proposed Treasury Reallocation

Target Parameters

Maximum allocation: $3.5M
Estimated target acquisition: 5M SYN tokens
Implementation timeframe: No more than 12 months

Parameter Justification

$3.5M allocation represents less than ₂₀% of current non-SYN treasury assets
- Conservative approach maintaining significant treasury reserves
  - Accounts for operational expenses and grant commitments
5M SYN target based on:
- Current market depth analysis
  - Projected staking requirements for SIN

This proposal commits a maximum of $3.5M for treasury rebalancing efforts. The targeted acquisition is _5M SYN. Buyback program would be considered completed at either the depletion of the $3.5M or at the acquisition of 5M SYN.

Implementation Strategy

Execution Framework

Multisig Operation:
- Asset consolidation from 70+ deployed contracts
  - Systematic fee claiming across major chains
Potential Acquisition Methods - Given legal constraints previously :
- On-chain DEX trades
  - CoW Swap integration
  - DEX aggregator optimization
  - Market maker engagement

Future Considerations

Staking Implementation

SIN POS launch requirements
Proof of Stake parameters
Slashing conditions

Fee Switch Mechanism

Revenue allocation model
Staking incentive structure

Success Metrics

Acquisition targets:
- Dollar-value efficiency
  - Token accumulation rate
  - Market impact minimization
Treasury composition:
- Asset diversification
  - Strategic reserve maintenance

Technical Implementation Requirements

Within this framework, this proposal authorizes the DAO Multisig to allocate up to $3.5M from the treasury for the buybacks-1 program over a period no longer than 12-month period. The Multisig will retain discretion over execution methodology, given the technical complexity of treasury consolidation across smart contracts, chains, and other requirements., legal requirements, and technical feasibility. The DAO authorizes theexecution of the buyback through various market mechanisms such as on-chain venues, CoW Swap, using aggregator protocols, or market maker relationships, as deemed most appropriate given market conditions and regulatory considerations.

This flexible execution framework acknowledges the dynamic nature of market conditions and the necessity for swift adaptation to changing circumstances.

Regular updates will be provided through established governance channels, ensuring transparency.

Aj013

synapse_og looks good to me, and we can monitor and adjust as required

Yalii38

synapse_og

Looks very good.

However, I find it inappropriate that the buyback must be conducted within 12 months.
I propose reducing the timeframe to 2-3 months because we are in a bull market, Cortex Alpha launch is imminent, and the full launch is likely coming in the next few weeks.

This means the SYN price will probably be much higher than it is now, and the DAO would have to buy SYN at 2-3x the current price.

kellanmccauley

12 months to execute at $0.70… feels off at this point. You’re telling the market any and every runup will come back to your expected purchase price, you’ll kill momentum before we even get any, and at whose expense mainly? Holders. And if the market can’t get momentum you risk missing a bull run to establish a floor even higher with better support at a bigger level. Can we get an update on that? It can be used strategically, but I think the buyback is better performed in a shorter time frame. Leave price target out of it. You’ve approved a $3.5M buyback, that’s all you need to say IMO.

Herro

GM,

Honest opinion is 12 mo. seems too long. I would like to see this changed to 2 months flat beginning 1 week after proposal passes (assuming it passes), TWAP each week, transparent on how much was purchased.

0xbottomseller

Would like to know if you see any risks in / have any arguments against educing time frame to 3 months. There's significant voter support to execute asap.

Synapsefox

12 months or 1 month it doesn’t really matter. What matters is how much is being spent now. You could do 90%now and rest towards end of a calendar year. The issue I see is that you are telling future investors, we believe $.70 is fair average price of Syn within 12 months. Maybe state $3.5mil over 12 months market price.

synapse_og

Consolidating some of the feedback posted above, and from various community members, here are some changes to the initial proposal.

Reduce the timeline to at maximum 3 months from the date the proposal is passed.
Clarification of the inital proposal. The buyback is $3.5m. The target was 5m SYN since the price was at $0.7 at the time of posting, but the buyback is not dependent on price.

Also -- venues with deep liquidity for SYN on chain should be increased (for general on-chain liquidity, and for the sake of the buybacks.

kellanmccauley

synapse_og Kudos on the updates. Move to vote and get ready to buy the current dip!

Gallium

Regular updates will be provided through established governance channels, ensuring transparency.

It would be great if you share every buyback with price and amount to the community and the public (twitter).

Rorish

Great news in the buyback, 2 or 3 months should be enough. We need to establish strength in the buy side.
Marketing should improve, crypto is about influence and marketing at the end. We are so so in this department.
Lets keep it up.
Cheers.