Written in August 29, 2021
Introduction
Frictionless transaction and interoperability between cross-chain layer protocols in any blockchain – Synapse Protocol. Previously called Nerve Finance with the native token NRV, the project was rebranded into Synapse Protocol, expanding its goal from being a stableswap based on Binance Smart Chain into a cross-chain token swap. The Synapse Protocol consists of two core notions: Synapse Network and Synapse Cross-chain Automated Market Maker (AMM). The multi-chain network has existed for quite some time, though the only problem is the connection between those chains.
Synapse Protocol Network and AMM
As of August 29, 2021, Synapse Protocol launched its mainnet and entered the Hadean Phase. During this phase, the Synapse Protocol’s network system is secured by validators using threshold signatures schemes that solves cross-chain multi-party computations. In threshold signatures schemes, the public and private keys, which respectively are used to verify the signature and to authenticate transactions using a signature, are generated by a subset of “m out of n“ network validators. Furthermore, no subset less than m (quorum) can generate signatures using the private key. In the context of Synapse, the validators can collaborate in signing and authenticating the transactions without endangering their privacy or in other words multi-party computation. Another example of this process would be Shamir Secret Sharing (SSS) which is used predominantly on the Bitcoin network. SSS is based upon the properties of polynomials, in which m out of n sharing is reconstructed through the process of interpolation to obtain the secret.
In the Hadean Phase, validators are selected based on community governance and consensus. However, as Synapse Protocol begins to expand and move on to Archean and Proterozoic phase, validators must stake Synapse Protocol’s token (SYN) to be part of the network. Similar to proof-of-stake consensus, validators would receive SYN as the form of staking rewards and subject to ‘slashing’ of their SYN balance if engage in malicious behavior that damages the network.
Users requesting native token from the destination blockchains would call upon Synapse AMM to execute the bridging process. The AMM employs a stableswap algorithm, based on Michael Egorov (November 10, 2019), to value transactions and rebalances assets pools. The algorithm would constantly relocate Synapse’s capital to the most desirable blockchain. Likewise, the Synapse AMM would also dynamically price all of token from supported blockchain [Ethereum, Binance Smart Chain (BSC), Polygon, Fantom, Arbitrum, and Avalanche].
The Synapse Protocol ecosystem provides a solution called stableswap which improves the predominantly Uniswap’s AMM model. Stableswap pools are optimized for assets that are intended to have price remain stable relative to each other. To achieve this, the pools can contain more than two assets, unlike traditional Uniswap pools. Furthermore, Synapse has two types of nUSD pools that are unique to the ecosystem. The first one is “nexus” pool on Ethereum and others on Avalanche, BSC, and Polygon. The nexus pool consists of a basic stableswap pool:
nUSD, USDT, USDC, DAI. Whereas the other pools are metapools (one of the token is an LP from another pool), which consists of nUSD and USD-LP based on their blockchains.
Tokenomics
SYN is used for liquidity providers, governance voting, and as native token transaction fees. The current supply of SYN is set at 250,000,000 with liquidity mining programs emitting 630,000 SYN each week. The SYN rewards contract is forked from SushiSwap’s MiniChefV2. However, the set supply is subject to change in the future through community discussion and voting. Users could buy SYN through DEXs: Sushiswap and Trader Joe. The contract addresses for SYN based on blockchains are as follows:
Ethereum: 0x0f2D719407FdBeFF09D87557AbB7232601FD9F29
Arbitrum: 0x080f6aed32fc474dd5717105dba5ea57268f46eb
Avalanche: 0x1f1E7c893855525b303f99bDF5c3c05Be09ca251
Binance Smartchain: 0xa4080f1778e69467e905b8d6f72f6e441f9e9484
Polygon: 0xf8f9efc0db77d8881500bb06ff5d6abc3070e695
As of October 24, 2021, the circulating supply of SYN is 160,185,400 with a market cap $660 million.
Team and Security
Though the Synapse Protocol has no “official” developers, it could be assumed that the team were the same from Nerve Finance: AureliusBTC (core developer), Socrates0x (core developer), Dovey Wan (Primitive Ventures), Dan Matuszewski (CMS Holding), Arthur Cheong (DeFiance Capital). Based on GitHub, AureliusBTC is also currently building several DeFi smart contracts other than Synapse with 70 public contributions for this year. Both Aurelius and Socrates are also active at twitter daily. Despite the GitHub contributions and twitter records, there is no official track record regarding the core developers.
The Synapse Protocol’s stableswap AMM has been audited by CertiK, OpenZeppelin, and Quantstamp. From CertiK, the AMM has no severe warning or errors that could potentially compromise the stableswap algorithm. Based on OpenZeppelin, there are several medium to low severity errors: pools with duplicate tokens, initial fee rates set out of bounds, approximation may finish with inaccurate value, token fees can lead to incorrect calculations. Quantstamp, on the other hand, summarizes that there are 19 total issues with 12 issues resolved. Both the Synapse bridge and network validator code has not yet been audited.
Market Data and Fit
The Synapse Protocol is categorized as a cross-chain AMM decentralized exchange. This subsector of the DEX field has the potential to skyrocket as there is still only several DEXs that supports cross-chain bridge AMM, such as O3swap, AnySwap, GravityDEX, Sifchain, Coinswap, and Synapse Protocol. AnySwap is similar to Synapse, it was from a BSC ecosystem. However, it differs only in ecosystem. Synapse currently covers Ethereum, BSC, Avalanche, Polygon, and Fantom, whereas AnySwap has 17 ecosystems covered. However, Synapse has a larger market cap than AnySwap. In terms of total value bridged:
Personal Opinions
With the burst of cryptospace exposure caused by NFTs, the community requires more decentralization and an ability to transact between different chains without having high fees or any barriers. Synapse Protocol has the potential to be one of the large cap decentralized exchanges. This is due to the fact that the project has the feature of meta pool, in which the token could be from another pool. As an example, $75 million dollars of AnySwap’s network BTC-ETH is LP in Synapse’s pool. This feature makes the project different from other cross-chain AMMs. Synapse has lower total value locked and bridge volume than AnySwap. However, this indicates that Synapse is still at its early stages, especially since it has only been a couple of months since the company rebranded from Nerve to Synapse Protocol. Synapse also has several updates phases to go through. In Archean, Synapse would upgrade its MPC-TSS to a staking system. Looking forward, Synapse still needs to hit several targets, such as bridge and validator code audit, add more ecosystem to the network, and increase its total value locked as a liquidity provider in its pools.
Stanley Tejakusuma