As the multichain future announced itself in 2021, bridging emphatically arrived along with it. The summer Avalanche boom was a landmark event for bridgoooors, with the act of traversing between layer 1 ecosystems achieving mass consciousness with the crypto community and unlocking further opportunities for crafty market participants.
As the crypto market matures with the arrival of more sophisticated outfits and more measured big money, bridging offers savvy smaller players a key tool enabling the ability to go where most institutions cannot to gain an edge. A successful bridge platform with sound token value accrual naturally lines up as a “selling shovels for the gold rush” opportunity. While some bridges bring about the ease of use and excitement like the Golden Gate, others clunkier products create experiences more similar to Ted Kennedy trying to bridge back from Chappaquiddick. Today we are taking a look at a project closer to the Golden Gate: Synapse Protocol.
Synapse, spawned from a rebrand of the BSC stableswap Nerve Finance, officially launched in August 2021 as a “cross-chain layer ∞ protocol powering frictionless interoperability between blockchains.”
Current Product
Today Synapse functions as an application specific EVM bridge, diverging from chain specific (ex. Avalanche Bridge) or asset specific (ex. Badger BTC Bridge) bridges. Instead of restricting users to just 1 variable in the bridging process, Synapse brings the ability to choose both asset and chain.
Users can bridge traditional stablecoins as well as the $SYN utility token across the EVM landscape. nUSD, short for nexus USD, is a Synapse native cross-chain stablecoin backed by the nexus stablecoin pool on Ethereum is also bridgeable on all live chains. An all important few kernels of gas are provided on once across the bridge. The team has aggressively shipped new chains out to users since launch, running up to 12 total and $6.18B in total bridged volume (TBV). Synapse is a frequent flier on the convenient Bridgoooooooors reference sheet compiled by @XLBao_ on Twitter.
“If you build it they will come” has rang true for Synapse as bridge volumes have shown steady growth. Q1’s volatility has spiked this trend, with the ATH volume day set on 1/23 with over $157M bridged while markets were at the lows. The Synapse Analytics page provides color into protocol participation like the chart below.
Protocol Revenue and Liquidity Pools
A default .05% bridge transaction fee accrues revenue and is poised to continue growth in step with the protocol. Synapse bridged $2.55B in user funds this January, posting its largest volume month to date. Projecting this load through the rest of 2022 gives us a cumulative volume of $30.6B and $15.3M in bridging revenue assuming a constant .05% fee. Stableswap transactions also enlarge overall revenue.
Irrespective of your proclivity for bridging to surf multiple chains, Synapse’s pools provide an appealing venue to park “blue-chip” stablecoins serviced on the bridge. Similar to Curve’s 3pool model and the protocol’s Nerve Finance roots, Synapse pools together USDC, USDT, and nUSD along with DAI & BUSD where applicable. Stableswap pools are currently paying 11-20+% APY depending on the chain such as AVAX currently at 13.31%.
The sustainable yields and convenience of Synapse pools come with an acceptance of the exploit risk, evidenced no clearer than the Wormhole and Multichain hacks so far this year.
Roadmap and Tokenomics
Growth so far this fall and winter has been focused on expanding asset and chain capability within the EVM scene, increasing the “lego pieces” in the hands of the user. For example, paving the ETH <-> FTM bridge and opening up a path to the Near ecosystem with Aurora support. The next frontier for Synapse is enabling support for bridges with languages UTXO (Bitcoin) and Rust (Solana, Near). These goals shown on the Milestones page could bring explosive growth, particularly from the Rust end of things as L1 champion Solana and hot name Near bring significant potential new users.
A further out but most ambitious goal of the team is the second big picture phase of the Roadmap and what could fulfill the “cross-chain layer ∞” vision: the Archean Phase.
The Hadean Phase: A time of growth and rapid development, while having numerous guardrails ensuring safe deployment of new features. Validators are selected based on community governance and consensus. This is the current phase of the Synapse Protocol.
The Archean Phase: Further validator decentralization is introduced, primarily via the launch of the Synapse Chain, economically secured via Delegated Proof of Stake (DPoS). Validators and delegators are incentivized via SYN rewards and protocol fees. In order to maintain honesty of individual validators, and thus the security of the network, they will be subject to slashing of their staked SYN upon engaging in either negligent or malicious behavior. Delegators will be subject to the same slashing as their chosen validator. The Synapse Chain will create a cross-chain interoperable ecosystem, secured by SYN, connecting all chains.
The Proterozoic Phase: The Synapse DPoS Chain continues to grow and harden. The network is further decentralized by integrating Zero Knowledge Proofs allowing anyone to relay and settle cross-chain transactions.
The community got a great glimpse into what Synapse’s transition into a DPoS L1 could look like via a November governance proposal by Core Dev Aurelius.
Single sided staking would inherently be launched and delegate to the validator of their choice. Delegation would enable the locking up of SYN supply and drive value to the token through securing the network. If ultimately executed well, the Archean Phase should bring new and migrant projects to the Synapse network along with SYN fees to use like any other DPoS blockchain. The most exciting development for SYN holders is the confluence of forces within the ecosystem accruing value to the token, most of which currently do not exist yet.
While the multichain narrative is in play so should the bridging narrative, creating cozy conditions for Synapse Protocol’s growth. A transition to a DPoS blockchain is poised to greatly enhance that trajectory and deliver a leap in value to the network.