SYN Buyback to Bootstrap Synapse Ecosystem Fund

multichainmija

CONTEXT
Synapse played a major role in bridging volume to Arbitrum, and as a result the DAO received 1M ARB ($1.25M USD). With Synapse's rollup inching closer, it makes sense to set up a developer incentive fund to kickstart dApp development, especially when competing with other multichain solutions such as Layer Zero. Synapse DAO could sell an agreed upon portion of its ARB holdings to buyback SYN that can later be redistributed through a developer incentive program.

This post is simply to start a discussion around a Synapse Ecosystem Fund and potential ways to bootstrap this fund. "Build it and they will come" is not a viable go to market strategy to attract developers. Synapse's rollup has massive potential, and the DAO should take initiative to generate momentum from the day the rollup is deployed.

There is no operational purpose for the DAO to hold its ARB tokens, and these funds could better be used to help create a vibrant ecosystem on Synapse's own rollup. The sale of ARB would not adversely impact Arbitrum's price, given the token has ample liquidity across multiple trading venues. At the date of this post, SYN is relatively cheap when compared to its competitors. This presents an opportunity for the DAO to purchase incentives for a low price, and distribute assets in a way that more closely benefits Synapse. Actual structure of the sale and purchase of tokens can be discussed in more detail if this proposal passes.

Proposal

The Synapse DAO would sell anywhere between 50% to 100% of its ARB holdings (1M ARB). Similar action can be taken with Synapse's OP holdings.
These funds would then be used to purchase SYN and set aside for a Synapse Ecosystem Fund.
Actual facilitation of such treasury actions would be carried about the Synapse DAO multisig. Actual parameters and timing of the treasury actions would be further discussed if this proposal passes.
The Synapse Ecosystem Fund could award grants to promising teams who aim to deploy dApps on the Synapse Network. This structure could follow something similar to Canto's Online Hackathon, which has successfully linked teams with funding to create dApps to further the Canto ecosystem.

Expected Benefits
This proposal could lead to the following benefits for Synapse:

A diverse ecosystem of dApps on day one of Synapse's Network launch, leading to more usage of the Network
Strong incentives for talented developers to deploy groundbreaking dApps on the Synapse Network that showcase unparalleled capabilities when compared to other networks
Support for Synapse's valuation that more closely mirror the protocol's strength

A vote "For" of this proposal approves the decision. Specifics of the transaction could then be discussed in a separate proposal.

A vote "Against" this proposal rejects the decision.

shaman

The arb could be used directly for incentives which might work to attract TVL from arbitrum.

In general mass market buying tokens from the market feels likely to attract front run trades/using the fund as exit liq.

I do think having a fund of native tokens is obviously better long term.

0xbottomseller

AGAINST syn buy back using ARB:
1) see it as a temporary way to pump price which allows people wanting to exit better prices to do that
2) SYN, currently, is not being USED by the protocol to for anything besides providing liquidity on the SYN/ETH pool
FOR selling some ARB for Stables /ETH:
1) More attractive IMO for builders to hold this
2) No sell pressure on SYN
3) Before distribution is finalised the ETH/ stables received from selling ARB can be used to deploy in our current pools/ create new ones, allowing us to actually USE the tokens we receive from selling ETH
AGAINST using SYN as Ecosystem funds unless SYN is confirmed as the gas token on the new L2, BUT would personally vote against SYN being used as gas on L2 anyways seeing how Metis is fairing against Arbitrum and Optimism

Googly

Generally speaking, all for the DAO managing its treasury a bit more actively: there is no point in the DAO holding some tokens collected as fees over time and never selling them back into ETH/stables and then experiencing massive drawdowns on them (eg JEWEL or GOHM).

I am also in favour of the DAO using part of its treasury, including ARB, to be managed along the same lines: although I would never compare ARB with the tokens mentioned above, I think it makes sense to avoid assets/liabilities mismatch. With liabilities being here what is spent by the DAO i.e. gas (mainly ETH), stables (for the Foundation and Interop.), etc.

On the proposal more precisely, I do think the DAO creating an incentive program to attrack builders on the chain makes a lot of sense and, as a tokenholder / community member, I would vote in favour of it. Having the program targeted towards builders also make more sense to me than farmers.

However, not too much of a big fan of using other assets to buy SYN right now. Especially if those SYN tokens are then used as incentives which means they will be sold again by the recipients of such incentives. Additionally, any sell of ARB into SYN will be heavily frontran resulting in slippage for the DAO (ARB is liquid enough for this to have 0 impact, SYN is not).

Additionally, the treasury is already automatically accumulating a bit of SYN (via fees on SYN bridging) and, does own some SYN via the SYN/ETH LP currently in Sushiswap. The DAO owning too much of its own token does carry some downside risks.

Thoughts on having a two step proposal on

Vote 1: Whether the DAO sells for ex ARB into ETH and create an incentive program with ETH or SYN
Vote 2: Whether the DAO sells that ETH into SYN for the incentive program (or keeps it as ETH)