In an effort to make the Synapse protocol more capital efficient, several proposals have been put forward to reduce emissions and more effectively distribute emissions.
See:
[Advancing the liquidity Model]
One area to look deeper is into the efficiency of spending on certain chains. This proposal specifically looks at reducing Stableswap emissions (beyond the 50% suggested in a previous proposal) on Metis for a few key reasons:
- Metis Stable Swap Emissions relative to Volume are disproportionately large
- Metis is an underused chain
- Metis contributes meaningfully to other liquidity based bridges
Synapse has been the main third party bridge for users to bridge in and out of the Metis chain.In this proposal, I propose completely removing emissions on the Metis Stableswap pools.
Summary:
It's first important to look at the usage of the Metis pools and bridge volume to the chain. Metis has done ~$15m of volume per month (trailing 3 month average), and has generated ~$43k worth of fees for the DAO in the same time period.
Conversely, the Synapse DAO has spent 181k SYN on just the stableswap pools in that same time period. At the current Synapse price of .80c, this means the protocol is losing money without even considering the SYN spend on ETH pools (which is an additional 45k SYN in the same time period). It's clear that Stableswap emissions should be significantly reduced.
While capital efficiency is important, emissions are also meant to incentivise growth and liquidity in areas prime for growth and future fee accrual. We can observe emissions spent on high-volume chains to set a benchmark for emission spend elsewhere. Below shows weekly SYN spend on all chains with stableswap pools.
Arbitrum - 19,958
Avalanche - 20,160
BNB Chain - 17,388
Canto - 7,999
Fantom - 15,120
Metis - 15,120
Optimism - 7,056
Polygon - 15,120
Chains that make up a majority of Synapse Bridge volume (Arbitrum, BNB Chain) receive similar emissions, and more importantly chains that make up orders of magnitude more volume and fees for the protocol have less spend on the relevant pools (e.g. Canto and Optimism). Emissions spend should not only be concerned about capital efficiency but also spend in line with a longer term growth vision.
The last consideration is that it is ideal for Synapse to exist and have a presence on Metis. This is a channel for volume, fees, and users to accrue in the long run. Chains with lower volume have mechanisms to incentivize this and do so often. Kava provided a grant to help with liquidity provision and deployment. In fact, the Metis foundation helps to incentivize cross-chain liquidity for other bridges (Stargate Proposal).
Despite Synapse being the primary third-party bridge for users to bridge in and out of the Metis chain, and servicing the Metis ecosystem for over a year, a longer term sustainable model has not been pursued. In that time period other bridges have deployed with liquidity solely incentivised by grants from Metis.
Given previous conversations contributors have had with the Metis foundation and lack of urgency on their behalf, I propose that if the Metis Foundation does not provide incentives for the stableswap pools, emissions provided by Synapse move to zero.
Final Thoughts:
Capital Efficiency and a long term growth framework are essential to creating a sustainable protocol in the long term. For the reasons outlined above, both of these ideas suggest that emissions on the stable pools should be reduced. An ideal outcome is the Metis foundation helps with incentives and better aligns incentives for Synapse.
