Synapse app review

Synapse

Synapse app review

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Open Dapp

Basic info

  • Token SYN
  • Audited yes
  • DAO yes
  • Yield farming yes
  • Team private
  • Hacks no

Audits

Auditors:

Certik

Certik

Token profile

Price Market cap.

Frank Stewskid

Last updated: Dec 06, 2022

What is Synapse

Synapse is a cross-chain communication protocol supporting smart contract calls, token transfers, and more, employing an optimistic verification model for security. The platform is essentially a bridge between various blockchains and can be used to interact directly with smart contracts. Synapse also has its own integrated AMM for swapping stablecoins on different blockchain networks. Launched in August 2021, the platform now supports bridging between 17 blockchains. 

Originally called Nerve Finance, the project used to be a stableswap AMM on the BNB Smart Chain. After the rebranding and expansion of the project’s product suite to include bridging, the platform’s AMM became a cross-chain AMM allowing its users to conduct cross-chain swaps through a single transaction.

The project is managed by its community through the Synapse DAO and all governance decisions are regularly posted on the Synapse documentation portal.

How does Synapse work

To provide for transferring tokens between blockchains, the project uses its own messaging system, verification mechanism, and a built-in AMM. The AMM feature allows the platform to transfer not only the usual wrapped assets but also native tokens. 

Synapse uses a generalized messaging system to provide for sending arbitrary data between various blockchains. It is secured through an optimistic verification model, inspired by Celo’s Optics protocol, as disclosed by the Synapse team. The model named after Optimistic rollups, assumes all transactions are “honest” by default. However, it employs a network of off-chain participants to submit so-called fraud proofs in order to prohibit fraudulent transactions. The mechanism relies on having at least one honest verifier to remain secure, unlike externally verified networks which rely on an honest majority. To learn more about the Optimistic rollup technology and what makes it different from ZK rollups, check out our video explainer.

The platform’s verification mechanism includes four types of participants. The first is called a “notary” and holds the responsibility of signing the Merkle roots on supported chains, while also bonding SYN tokens over attestations. “Broadcaster” is the next participant type, here the role’s responsibility includes forwarding updates from so-called home contracts to replica contracts. Next, comes the “guard”, this role is responsible for observing all cross-chain messages occurring over the Synapse protocol, and submitting fraud proofs when malicious alterations of state updates are detected. The final type is called “executor” and its responsibility is to post final transactions once the latency window (a period of time, during which transactions can be contested) is completed.

Furthermore, the Synapse bridge provides its users with canonical token bridging and liquidity-based bridging services. The first refers to bridging of wrapped assets across all supported EVM and non-EVM blockchains, while the latter covers the bridging of native assets across cross-chain stableswap pools. 

The workflow of the Synapse Bridge protocol includes wrapped assets being minted on the destination network when the protocol receives confirmation of the transaction. However, to provide for scenarios where users may want their bridged assets to arrive on the destination chain in the form of native tokens, the Synapse team utilizes its Synapse AMM. 

The Synapse AMM employs a stableswap algorithm when pricing transactions and incentivizing asset rebalancing in its liquidity pools, deployed on each chain the project is integrated with. Through this, the Synapse platform provides dynamic pricing for all assets supported by it depending on the demand and ensures capital is constantly being relocated to the most utilized pools. When experiencing imbalance due to one-directional capital flow, arbitrageurs are incentivized through the AMM’s dynamic pricing model to rebalance its pools through various on- and off-ramps, while also generating fees for the protocol’s revenue. 

Synapse utilizes Nexus USD (nUSD) – a cross-chain stablecoin backed by the Nexus stablecoin liquidity pool on the Ethereum network, which consists of DAI, USDC, and USDT. This pool is incentivized on each Synapse’ supported blockchain, in the form of bridge fees and SYN token emissions supplied to its liquidity providers. Each time a stablecoin is being bridged between chains through Synapse, funds are converted to nUSD before reaching their destination, where they are swapped to a native stablecoin through the local pool.

Along with nUSD, Synapse also utilizes Nexus ETH (nETH), a cross-chain asset pegged to ETH and backed by Nexus’ ETH liquidity pool on the Ethereum mainnet. nETH is used to provide for bridging ETH to and from L2 networks. 

In April 2022, Synapse introduced xAssets – multi-chain enabled assets that can be transferred to and stored on multiple blockchains. This is made possible by creating a new ERC-20 token contract on each desired destination chain, serving as a peg for the native asset. When users bridge assets between xAssets-supported chains, the original tokens are locked on the bridge’s smart contract, a cross-chain message is sent by the protocol to instruct the destination smart contract to mint xAssets amounting to the desired quantity, and finally – the newly minted tokens are sent to the users’ wallet, along with a gas airdrop. When transferring back to a native asset, the xAssets that were minted are burned as soon as the target destination receives the transaction. 

How to use Synapse

The Synapse Bridge has been made available for developers interested in integrating cross-chain swapping natively into their dApps. These may include DEXs, lending platforms, derivatives markets, yield aggregators, and others. For this, the Synapse team has provided a Synapse SDK along with detailed guides on its use on the project’s documentation portal. 

Moreover, various video tutorials on how to use the Synapse app are also available on the project’s documentation webpage. There are six types of fees Synapse charges its users, depending on the service being provided. These include a swap fee, taxed when swapping assets between different blockchains, a bridge fee – charged when moving assets between blockchains, an admin fee used to pay for the costs of maintaining and developing the project, a deposit fee charged on deposits, a withdrawal fee charged upon withdrawal, and finally a validation fee charged by Synapse validators in exchange of their services. 

Synapse wallet support includes MetaMask, Binance Wallet, Coinbase Wallet, Terra Station, and all other wallets integrating the Wallet Connect protocol. 

The SYN token

SYN is Synapse’s governance token. It has a total supply of 250,000,000, 27% of which are allocated to a SYN/ETH Sushi LP on Ethereum, 22% to a nETH pool on Arbitrum, 18% to a nUSD pool on Avalanche, 18% to a nUSD pool on BNB Smart Chain, and 15% to a nUSD pool on Polygon. The token’s use cases include, managing the protocol by enabling its holders to propose and vote on upgrades; paying for fees on for swaps on Synapse; and finally, until the token’s maximum supply is reached it is used to incentivize liquidity providers by rewarding them with it for their contribution to Synapse.

Is Synapse safe

In November 2021, a hacker attempted to exploit the Synapse nUSD pool on Avalanche, however the network's validators identified the unusual activity and prevented the fraudulent transaction. The exploit targeted a bug in the way the AMM smart contracts handled virtual price calculations against the base pool’s virtual price. To prevent draining the funds, the platform went offline, its validators voted on reversing the transaction before it could be confirmed, and the funds in the pool remained safe.

Synapse’s stablecoin AMM smart contracts have been audited by Certik, while the project was still named Nerve Finance. There were only two minor issues found, and six marked as “informative”. All problems have been fixed by the Synapse team. The bridge’s smart contracts are currently undergoing multiple audits, as announced by the Synapse team, and the network’s validator code is not audited. The rewards contract for SYN tokens is said to be forked from SushiSwap’s MiniChefV2 smart contract.

The Synapse team is anonymous.

Partners 

Synapse’s latest partnership is with Canto Network, the cross-chain bridge will add support for the Layer-One network in the upcoming days. A collaboration with Optimism and Galxe, allows users to claim a Synapse Optimism Quest NFT after depositing either $20 worth of ETH or the same amount of stablecoins into any Synapse stableswap pool. 

Projects interested in turning their tokens to Synapse’s xAssets can do so by filling a form available on the Synapse documentation portal.

What's next

The current priority on the Synapse roadmap is launching the Synapse Chain. A smart contract execution layer built atop the project’s cross-chain messaging system, the blockchain is claimed to be “the first sovereign execution environment dedicated to the development of cross-chain applications and primitives”.

The design of the Synapse Chain will follow that of Ethereum-based optimistic rollups. Officially announced in July 2022, the network is expected to go live in Q4 2022.

Links

https://docs.synapseprotocol.com/reference/contract-addresses 

https://analytics.synapseprotocol.com/

https://forum.synapseprotocol.com/

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