Concerns Regarding Possible Misconduct by Synapse with Respect to the Usage of ARB Incentives Allocated Through the STIP

Arbitrum Research & Development Committee (ARDC) Research Member
1

As one of the Research Members of the ARDC, Blockworks Research has been gathering data and conducting an analysis of the STIP process, as well as recipients’ performance and utilized mechanisms. During this analysis, concerns have arisen regarding the usage of ARB incentives by Synapse.

As part of STIP Round 2, Synapse received an incentive allocation of 2M ARB, which was streamed to the project’s dedicated Funding Address (0xd31d3a2c19123b8ff48560c20a08ffb16ad62dfe) between January and March 2024. Following the STIP’s conclusion on March 29th, 2024, 750K ARB from the Funding Address was sent to three separate wallets on April 12th, 2024:

0x95aAA6B27D6001dAb496c9FB229dE4CBd443C648 (~360K ARB)
0x7db3441406C34aF060eC64C31c4943A0234d8b36 (~150K ARB)
0xf6a3928F8E6820d78465Ef2675a8ad2438dd2a83 (~240K ARB)

These wallets still hold all of the transferred ARB and have received small amounts of ETH from a wallet connected to the ENS socrates0x.eth (0xfc7A6e0b80b2cfcABBa789ef1565Af9BC5d00aa0), who is the co-founder of Synapse Labs. All of the ARB across the three wallets is currently delegated to socrates0x.eth, as can be seen in this Dune query. Moreover, ARB from the Funding Address was sent to a Distribution Address (0x48Fa1EBDa1AF925898c826c566F5Bb015E125EAd) before tokens were distributed to users. This Distribution Address still holds ~3.3K ARB.

These actions raise questions about compliance with the rules established by the STIP, which stipulate that protocols receiving incentives should return any unused ARB to the DAO and prohibit the use of the grant in governance. We would appreciate an explanation from Synapse regarding these observations.

CCing: @Socrates & @moses

8 Likes
2

Looking forward to hearing a response from Synapse about this. The txn trail that leads to the 750k ARB being used in governance and custodied by an EOA that seems to be owned by Socrates is very clear and worrisome. I’m curious if the DAO has any viable recourse here if this is the misuse of funds that it seems to be, outside of social pressure.

2 Likes
3

We would like to provide some information on this topic. We asked this question during the STIP Bridge program and this was the answer we received, it is posted on LTIPP’s discord [Arbitrum LTIPP].

image
image813×931 88.3 KB

And here is the proposal in the synapse forum: Allocation for 2M ARB STIP Grant - Synapse Forum

This is what the @SEEDGov team reported to Syanapse

Note: our intention is to provide data, the Synapase team answered our questions a few weeks ago.

4

The Synapse STIP Proposal included two main budget items: 1.5M ARB allocated to support slippage free bridging, and 500k ARB towards supporting Arbitrum Partners. The aim of the first allocation was to:

“for any Arbitrum user to bridge up to $5M slippage-free. Concentrated liquidity bridging is similar to going from Uni V2 to Uni V3, allowing slippage-free bridging. This will massively improve Arbitrum’s UX, lowering costs for users and incentivizing users to bring their assets in from other chains.”

To achieve this specifically, the SynapseDAO bootstrapped SynapseRFQ. SynapseRFQ turns every bridge transaction into an auction. Users submit their bridge requests, and relayers compete with each other to provide the cheapest possible quote. The relayer with the best quote is selected and immediately gives the users their funds on their desired destination chain. 750k of the 1.5M ARB was allocated to bootstrapping the relayer ecosystem, encouraging more competition, leading to cheaper prices and more asset and chain support for users.

More importantly, SynapseRFQ delivered its promise of delivering zero-slippage bridging in under 15 seconds. Today, SynapseRFQ makes up nearly all Synapse Volume related to Arbitrum, and is cheaper than aggregators on all Arbitrum routes for native USDC.

The wallets in question are owned by the relayers pursuant to the STIP proposal and the Synapse DAO proposal. None of the wallets are owned by Socrates. Socrates did ask these relayers to delegate to him and they agreed. This is not against the STIP regulations the same way the tens of thousands of users who received ARB through bridge rebates can delegate to whoever they please. That said, we agree that it could be seen as a quid pro quo arrangement and although it’s not against the rules, we have asked the relayers to undelegate from Socrates. Additionally, none of the delegated ARB has been used in any way through voting thus far.

Regarding the ARB distribution address that still holds 3.3k ARB, Synapse is happy to return those funds. We haven’t found the appropriate address to send it back to but are happy to do it once that’s made available.

Update:
The 3.3k ARB was returned on 5/14 here: Arbitrum Transaction Hash (Txhash) Details | Arbiscan
Important Links:

STIP Proposal

Synapse DAO Forum Post

5

Thank you for bringing this up @BlockworksResearch. I wanted to respond in addition to @moses’s response to give a quick TLDR of Synapse’s STIP grant:

  1. The original STIP allocation was to enable “slippage-free” bridging, faster and cheaper bridging.

“Slippage-free bridging - 1.5M ARB will be used to support faster and cheaper bridging. Using Synapse’s concentrated liquidity pools and traditional stableswap pools, Synapse’s aim is for any Arbitrum user to bridge up to $5M slippage-free”

Source: [Synapse Protocol] [FINAL][STIP - Round 1]

  1. Synapse DAO built RFQ bridging. An intent-based architecture that allows relayers to complete bridge transactions. We thought this would be the best architecture to reduce bridging times(from 17 minutes to 15 seconds) and make bridging cheaper.

Sources: https://twitter.com/SynapseProtocol/status/1765107103746662888, can share Dune queries as well.

  1. Synapse DAO voted on how to break down incentives between bridges and relayers to bootstrap this RFQ ecosystem best and chose to allocate 750k for RFQ relayers who complete bridge transactions and 750k for bridgers.

Source: Snapshot

  1. By all measures, I’d consider this a massive success, delivering on Synapse’s promises in STIP as much as possible:
  • Bridge times fell from 17 mins to 15 seconds
  • Slippage free bridging(cost savings for users)
  • Over $3B in bridge volume & 60k unique bridges
  • We reduced stagnant TVL liquidity, increasing safety for LPs and the Arbitrum ecosystem

Sources for this are above but can also be seen in the bi-weekly updates, for example: Synapse Protocol Bi-Weekly STIP Backfund Updates - #4 by moses

  1. 750k ARB was distributed to bridgers as fee rebates, and 750k was distributed to RFQ relayers. I asked those relayers if they’d consider delegating their Arb to me which they did. As mentioned in @moses’s reply, I can see how this could be viewed as some sort of “quid-pro-quo” and have since asked them to undelegate or vote themselves. That said, I don’t think it’s against STIP rules; my understanding is the ARB shouldn’t be used by the DAO for governance, but after it’s distributed to relayers, users, LPs, etc, they can use it for governance.

In regards to the 3.3k Arb that was left unused, that was transferred back to the Arbitrum DAO(Arbitrum Transaction Hash (Txhash) Details | Arbiscan). Thank you for pointing this out.

The two concerns raised by @BlockworksResearch are about the unused ARB and the use of ARB in governance.

As mentioned, the unused Arb(3.3k) has been returned.

In regards to the use of Arb in governance, a clarification of the rules here would be helpful. The original STIP proposal says, " Grants are not to be used in DAO governance". Our understanding of this was that Arb tokens given to the respective STIP DAOs shouldn’t be used in governance but once they’ve been distributed, it could be used. Similar to how LPs & traders that received Arb from GMX’s STIP program could use the Arb in governance.

Either way, I see why this could be confusing and have asked the relayers to undelegate. That said, I don’t think this is a breach of STIP rules in the first place, and it certainly wasn’t done with malicious intent.

Would love to hear @BlockworksResearch’s thoughts with more context now and answer any other questions others have on this matter. Appreciate everyone’s diligence on the matter.

6

The following message is a personal opinion, doesn’t represent any of the protocols i work with, nor the other contributors to the STIP Bridge program (Pm, advisors, others).

So far, on all contentious topics regarding several proposals in STIP/LTIPP, I have taken a neutral stance due to being actively involved in the program itself; but I feel now is the time to directly intervene on this specific discussion. I currently don’t have enough information to understand who operates the entities behind the relayers in question; nor I currently have enough information to understand the mechanism and the economics involved in this process. If anybody, either in synapse or others, can shred some light on these topics, I think it would be quite helpful.

What I know is that in crypto in general, in incentive programs specifically, and in the arbitrum dao above all, we should all gun not only for a “good” behaviour, but also for a behaviour that is perceived as “good” from the outside. Whatever good means.

We all work in an industry that, for outsiders, is more often than not synonym of scams, grift and others.
We also all contribute in a dao that, according to some users (few? a lot? can’t quantify but they are definitely out there), creates incentive programs to just “reward ourself”. Ourself = dao contributors, protocols contributors and so on. In my view, the only way to change the above is to strive for transparency and good behaviours. This translates not only doing stuff accordingly to the rules, but also doing them in a way that is clear, at first glance, that there was no malicious intent. If there is the sensation of malicious intent, even if the underlying actions are clear, any doubt on maliciousness should be dissipated in public.

This post is not to accuse synapse of any wrong doing. I honestly don’t have the data to pinpoint, with high confidence, that there was a misues of funds. But, is a call to clarify what has happened, to turn what is a negative perceived event in a potentially positive one. Clarifying why there are only 3 relayers who have been able to collectively accrue 750k arb in rewards, who these relayers are, why there are transactions tied to the ens of socrates, is something that, without any authority neither from the dao nor in this program (because advisors are not watchdog, and currently I am speaking as a simple dao enjoyer), I strongly suggest synapse to clear. Because this the only way i currently see to turn something negative in something potentially positive for all the stakeholders involved: synapse, the dao and the contributors.

7

I don’t take the step of posting this lightly as Synapse has been a bridge partner of GMX for multiple years, and one of the earliest and most active protocols on Arbitrum, but as a delegate and member of the STIP multisig responsible for the STIP funds (including on various times approving changes and stopping streams for other protocols) it is important to shine a light when there are matters in doubt.

Having taken the time to read Synapse’s original STIP application and Synapse governance vote (SIP-32) that were referenced but also the four weekly updates to the Arbitrum DAO, Synapse governance forum discussion and additional Synapse governance votes (SIP-35 onwards), was left with more questions than answers.

Hoping that the Synapse Team can answers these questions, while they also recognize what could have been done better. This way delegates can take that additional feedback into account.

Dislosure of the change

  • Synapse changed the use of 1.5m ARB originally proposed to support ‘Synapse’s concentrated liquidity pools and traditional stableswap pools’ to instead support your new RFQ system. Appreciate that you have presented the RFQ system as being far superior product and wanted to move your incentivization in that direction.
  • Your reports do mention RFQs regularly but in a more incidental fashion, ex. ‘In aggregate, bridge incentives have driven > $880m in bridge volume and thousands of transactions in its first week of distributions. The program is also driving adoption of RFQ versus other forms of bridging, as RFQ transactions made up nearly 10% of all transactions to/from Arbitrum in its first week.’
  • From a disclosure standpoint your ongoing reports to the DAO never mention the Synapse vote, continuing to state ‘There are no changes to the original distribution plan’ and your final report stated ‘The final tranche of ARB rewards has been claimed. In the last week of the program, the rest of rewards will be distributed according to the original proposal.’

Protocols must have a degree of flexibility so the process should not be bureaucratic, STIP very much allowed for some flexibilty but Synapse could (and probably should) have done a much better job on disclosure and consultation of such a material change.

Relayers

This is the area where your responses lead to more questions than answers.

This past week the Synapse DAO passed a proposal that will drastically increase the liquidity for some of the initial relayers. This proposal should drastically increase the size of transactions that RFQ can offer competitive rates to.

It would be helpful to know if directly or indirectly Synapse Labs or anyone affiliated with it ran, or had an interest in one or more of the initial relayers or the relayer that is funded here if not part of the initial relayers. In short did Synapse or its Labs receive a portion of the ARB incentives?

Couldn’t find any information on your site or docs on how someone could participate as a relatyer, so additional information on how someone becomes a relayer, the process of recruiting them to participate for a share of the 750,000 ARB relayer incentives made available for growth?

Looking at the dune dashboard (https://dune.com/synapse_labs/synapse-stip-reporting), it looks like the RFQ system performed ~2000 transactions and bridged $23 million out of the 3 bilion in volume over STIP. Am i reading the chart correctly? If so in addition to the 750,000 ARB for relayer incentives how much of the 750,000 ARB in bridger rebates were used towards the RFQ system.

Appreciate your contributions to growing Arbitrum, am hopeful of your response and apologize in advance if anything i’ve flagged above is based on an incorrect understanding of the facts. Hopefully this can all be addressed.

8

The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.

While L2BEAT is also the DAO Advocate for the ARDC, we’re also delegates in Arbitrum DAO and we want to make it absolutely clear that the below reflects our opinion in our capacity as delegates and not as the DAO Advocate.

Although the situation with Synapse’s STIP allocation isn’t as severe of a misconduct as the initial findings led us to believe, Blockworks’ research and the discussion it spurred raised some concerns for us as delegates that we want to take the opportunity and seek further clarifications.

We would like to understand why such a big amount (750,000) was allocated to relayers, which at first glance seems like part of Synapse’s infrastructure and not of your user base. There’s no information on why the relayers need ARB incentives, who operates the relayers, and why there was such a big concentration of incentives for only 3 relayers? Even if not strictly against the rules, this does not seem to be an efficient incentivisation plan and raises questions about the rationale behind it.

Another thing that looks suspicious at first sight, is the fact that all 3 addresses have received small amounts of ETH from a wallet connected to the ENS socrates0x.eth (0xfc7A6e0b80b2cfcABBa789ef1565Af9BC5d00aa0) as highlighted in Blockworks report. Something that hasn’t been addressed in any of the responses by either @moses or @Socrates.

Lastly, we agree with @Jojo’s comment above that all participants in the DAO, including ourselves, should not only aim to abide by the rules but also be above board both in practice and in optics. We would like to echo @coinflip’s appreciation for Synapse’s contribution to the ArbitrumDAO so far and we encourage you to use this case as an opportunity to explain better the mechanics behind your RFQ system and the rationale behind decisions made for the incentive program.

1 Like
9

Blockworks Research would like to provide additional relevant information on our Synapse STIP analysis and ask further clarifying questions in a transparent manner.

We have been able to identify two “FastBridge” (RFQ) contracts. FastBridge Contract #1 (0x6c0771ad91442d670159a8171c35f4828e19afd2), shared by Synapse in their Bi-weekly STIP updates, and FastBridge Contract #2 (0x5523d3c98809dddb82c686e152f5c58b1b0fb59e), which became operational in mid-March, fully replacing all RFQ bridging activity to/from Arbitrum (i.e, 0x6c077 was discontinued once 0x5523d went live). Given this reflects standard procedure for upgrading an immutable contract, we are left to assume this will be the current implementation of the FastBridge contract going forward.

FastBridge Contract #1 (0x6c077) launched in early January (pre-STIP distribution) and had one relayer, referred to as Relayer #1 (0xdd50676f81f607fd8ba7ed3187ddf172db174cd3). On March 12th, FastBridge Contract #2 (0x5523d) went live and began operating with Relayer #1 (0xdd506). The next day, a new relayer, referred to as Relayer #2 (0xdc927bd56cf9dfc2e3779c7e3d6d28da1c219969), began relaying for FastBridge Contract #2 as well. Below you will find a chart that shows the number of relays by each relayer dating back to when FastBridge Contract #1 went live. You can find the dune query here. Additionally, Intent Markets, a site dedicated to intent-based protocols, also only identifies the two relayers mentioned above (the site calls relayers fillers).

Pasted Graphic 2
Pasted Graphic 22784×630 67.7 KB

As @coinflip pointed out, in the third bi-weekly STIP update, Synapse references a passed proposal that extended a $5M loan to Synapse Labs to operate an RFQ relayer. Below you will find the two transactions connected to the transfer of funds from SynapseDAO to Synapse Labs, disclosed by the team under this forum post. Both transactions ultimately lead to these funds being sent to Relayer #2 (0xdc927) that was added to FastBridge Contract #2 in mid-March.

Pasted Graphic
Pasted Graphic1870×796 57 KB

In addition to the inquiries raised earlier by other community members, our main questions thus are: is there any relationship between Relayer #1 and Synapse Labs (as we know Synapse Labs is Relayer #2), and could you point us to a source from where we can find any other relayers that have facilitated/are facilitating transfers on Synapse?

We look forward to @moses and @Socrates responses and their continued support of the Arbitrum ecosystem as one of the leaders in intent-based bridging.

3 Likes
10
11

The below represents the opinion of Blockworks Research in its capacity as a delegate and does not reflect the entity’s work as a Research Member of the ARDC.

It has now been roughly two weeks since Synapse withdrew from the STIP-Bridge and stated that a detailed clarification would be posted to the forum. However, at the time of writing, no additional information has been made publicly available, and questions posed by community members under this forum post have yet to be answered.

Without additional context, based on the information presented above, we are left to assume that a substantial amount of the 750K ARB incentives to relayers have been sent to Synapse Labs. We request the project to publicly share additional information regarding this situation within the next 7 days and to return any ARB incentives distributed to insiders.

CCing @Socrates & @moses

12

Hey all,

I just want to chase up on this. Is there any conclusion yet? We (the Foundation) are monitoring the status to see what the next steps might be.

CCing @Socrates & @moses & @BlockworksResearch

1 Like
13

The below represents the opinion & viewpoint of Synapse Labs, not of Synapse DAO.

Overview & STIP Process

The Synapse DAO applied to the STIP program with high-level goals to improve the user experience for bridging into the Arbitrum Ecosystem. The grant’s primary aim was to introduce a new bridging paradigm that enabled sub-30 second bridging on large dollar sums for users, slippage-free.

The grant allocated 1.5m ARB towards “supporting faster and cheaper bridging”, as L2 ecosystems without reliable, fast, and cheap bridging dramatically suffer. Another 500k ARB was allocated to support existing Synapse supported Arbitrum tokens in the form of gas & fee rebates.

At the time of the STIP application, the objective of achieving incredibly low slippage bridging was imagined to be done through on-chain constant sum pools, incentivizing LPs. Contracts were being developed here, and were internally audited. The ARB grant was planned to be used to incentivize LPs to create on-chain concentrated bridge liquidity.

However, this initial plan was created over June - September 30, 2023.

The first round of STIP voting ended October 13th, and Synapse DAO’s proposal was not initially included in round 1 of STIP. Synapse DAO was included in the STIP Backfund proposal on December 6th.

Throughout this time, Synapse’s roadmap pivoted from on-chain concentrated liquidity pools to an intent-based RFQ architecture. The RFQ system was developed to achieve cheap and fast bridging, replacing 10-20 minute bridge times. It relies on off-chain liquidity vs AMM liquidity, so incentivizing and growing it required a new approach.

Thus, after the STIP Backfund was approved, the Synapse DAO(in SIP-32) specified in detail the grant allocation, particularly regarding the 1.5M ARB towards supporting the objectives of faster and cheaper bridging.

Given the shortened timeline, Synapse DAO had to be adaptable in how to best achieve the STIP goals set forth. The vote had two options with regards to allocation amounts, and Synapse DAO voted to use 750k ARB to incentivize RFQ relayers. Synapse Labs, its employees or affiliates did not vote in this proposal. Synapse DAO contributors posted regular updates regarding the speed and user benefits of the newly launched RFQ model in the bi-weekly update thread.

At the end of the grant period (ending March 29th), Synapse DAO, executed on SIP-32 1.24m ARB directly to users in bridge rebates (The remaining ~3k ARB was returned here). Once total relayer volume was calculated, the remaining 750k ARB was distributed to relayers.

Bridges & Introduction of Intents
Bridges play a crucial role in the ecosystem of each blockchain, enabling on & off-boarding seamlessly as compared to native bridges. Optimistic rollups in particular benefit the most from deep external bridge support, as users desire to know they can quickly on or off-board without being subject to a 7 day withdrawal period.

To solve the tradeoff between chain finality and bridge time, bridge protocols started searching for solutions to solve the time constraint in an effort to create a cohesive ecosystem between L2s and Ethereum, resulting in intent based systems popularized by UniswapX.

Synapse RFQ aimed to provide maximum speed and minimal costs for cross-chain orders, ensuring reliable liquidity for onboarding and offboarding to Arbitrum. For these systems to thrive, initial incentives for early relayers were a compelling idea to mitigate fixed costs and build trust, helping to bootstrap an eventually robust relayer ecosystem.

Synapse RFQ

Synapse RFQ is an intent-based bridging architecture, with several benefits:

  • Fastest: average bridge time is less than 20 seconds
  • Cheapest: Synapse is the cheapest bridge on 75% of routes across the Ethereum L2 ecosystem
  • Most Capitally Efficient: RFQ bridging doesn’t rely on stale AMM pool liquidity

The architecture relies on off-chain “relayers” that compete with each other to offer the best quotes and speed to users.

While the benefits of the user are clear – incredibly fast cross-chain transactions, the benefits for the relayer are to earn a marginal fee spread.

However, these relayers take on a variety of risks and compete for the spread between the accepted quote and the requested bridge amount. This includes:

  • Re-org & Finality risk: Relayers only earn a spread if they are the first one to complete the destination transaction. This incentives relayers to take the maximum finality risk on, otherwise they do not earn any spread. If an origin blockchain the relayer supported reorgs, they would lose their own funds that they relayed for that period. In the case of L2s, this often means trusting a centralized sequencer and taking on L1 reorg risk.
  • Protocol Risk: Relayers are using a brand new set of smart contracts to complete transactions
  • Custody: Participating as a relayer requires large sums of money to be managed securely on chain, but also being able to automatically interact with different blockchains.

Relayers take on the responsibility of these risks, as well as the associated engineering costs.

Incentivizing early relayers was proposed as a way to skip the chicken & egg issue, decrease initial fixed costs, build trust with relayers, and bootstrap a healthy competitive relayer ecosystem. Given this, relayer diversity is a key goal of Synapse RFQ.

Synapse DAO engaged several funds, market makers, and developers that would be suitable relayers, but the process took longer than expected. Protocol contributors encountered several issues, from off-chain engineering problems, to building trust with operators to run new software. In some cases, providers were happy to provide capital but did not have any engineering resources to manage the implementation.

We were overly optimistic about integration timelines compared to the STIP timeline, and had underestimated the complexity and resources required to onboard new relayers. Not accomplishing our goal was a failure of Synapse DAO contributors.

Intent Based Protocols & Off-Chain Diversity

Given the nascent state of intent based protocols, Synapse DAO assumed that liquidity incentives, like 2020-era AMM incentives, could act as a catalyst for bootstrapping relayer ecosystems.

However, from the data, it’s clear that intent based protocols are an order of magnitude more work for market participants to provide liquidity to. Throughout the STIP campaign period, a number of research papers on intent based bridges came out, which I believe the Synapse DAO could have learned from in its approach.

Li.fi published a report on March 15th on trade-offs on intent-based bridges, particularly focused on which agents are responsible for what percentage of order flow. The conclusion was that categorically, there’s a strong principal agent problem for intent based bridges.

For example, “In Across, a single agent often wins the majority of orders over $500”, and for DLN, “ [on] orders above $25,000, [a single] agent captures over 95% of the order flow”. Intent based bridges face significant hurdles to building diverse ecosystems, and structurally have economic dynamics that create somewhat concentrated orderflow.

ARB Grant & RFQ Relayers

Synapse Labs built a reference implementation of a RFQ relayer and is open-source on GitHub here. This implementation supports a number of different tokens, as well as many different rebalancing methods, such as using CCTP for USDC, or native bridges where it makes sense.

This reference implementation was built for market participants to either directly use, or reference for their own implementation. While working with a number of potential relayers, we realized that their timelines were months out, and that to solve the market bootstrapping issue, someone would need to be the initial large relayer. Synapse Labs stepped up to run relayers, hoping to achieve the user oriented goals of SynapseRFQ and STIP.

Overall, Synapse accomplished the goals it set out in the STIP application, and consistently posted about our progress on the Arbitrum Forum. Some major goals we are particularly proud of seeing the protocol accomplish:

Given the short timeline, the intent based market dynamics, and engineering issues, Synapse DAO, throughout STIP, did not achieve its goal of a wide number of relayer participants. At the end of the program, the Synapse DAO executed on its SIP-32 passed proposal, and the 750k allocated ARB was transferred to the relayers who participated at the time of STIP, run by Synapse Labs.

The first relayer started running on January 12, funded in part by an external LP. Synapse Labs reached out to a number of participants to onboard them to run relayers using the reference implementation built. Throughout the course of 1.5 months, progress was being made to onboard relayers, but timelines were not fast enough in conjunction to achieve the STIP goals. Given the STIP mandate of “faster and cheaper” bridging, Labs stood up a second relayer to scale up RFQ liquidity, while additional relayers were onboarding. This second relayer went live March 13. ARB was distributed to Synapse Labs for its two relayers, and to the external LP that funded the first relayer.

Neither Synapse DAO nor Synapse Labs intended such relayer concentration. A combination of the shortened STIP timeline and unexpected engineering challenges led to the concentration in relayers, and thus RFQ grantees. In hindsight, we at Synapse Labs wish we had recognised the timelines of potential relayers’ and engineering implementation sooner, and went back to the Synapse DAO to propose a new vote to re-allocate the ARB sooner. Additionally, there were oversights in both the original STIP application as well as the Synapse DAO proposals to specify not only goals of the grant, but also more specific parameters around the grant process and mechanics, especially when unexpected issues arise.

Ultimately, Synapse Labs is aligned with the Arbitrum ecosystem and with the original intention of the Synapse DAO STIP grant. To that end, both Synapse Labs and the external LP are happy to return the ARB to the Arbitrum DAO, if the DAO/Foundation believes this wasn’t in the spirit of the STIP program.

Please reach out with next steps or any additional questions.

14

Thanks for the detailed response and explanation.

In regards to Arbitrum Foundation’s perspective, it is best to return the ARB tokens back to the ArbitrumDAOs treasury.

1 Like
15

This opinion is in our role as Synapse b.STIP Advisors:

hey @aureliusbtc, thanks for the explanations.

According to the STIP rules:

and also:

Given that the distribution of the funds was not executed as outlined in the STIP proposal and that those funds were used to delegate to one of your team members, we believe that the STIP rules have been broken and thus, the 750K ARB must be returned to the DAO.

16

The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.

The below response is made in our capacity as delegates and not in our capacity as the DAO Advocate for the ARDC. As already suggested by @stonecoldpat and @SEEDGov, we agree that the 750,000 ARB that Synapse Labs accrued by operating two relayers during STIP should be returned to the DAO’s treasury.

We appreciate Synapse’s addressing of the concerns, responsiveness to delegates’ inquiries, and willingness to return the ARB to the treasury.

Additionally, we must use this situation as an opportunity to establish a precedent for resolving similar issues in the future. We understand the nuances of navigating delicate circumstances in the context of a DAO. As such, we believe it’s important to have some guidelines to refer to in case something similar occurs in the future.

6 Likes
17

Synapse Labs and the external LP returned funds to the Arbitrum DAO last week in the following transactions:

3 Likes
18

Code of Conduct and its implementation is a very thin line to walk. I have been luring through the forum for a while now to go through the post and delegate responses. Arbitrum DAO should start conversation on how code of conduct issues will be handled with respect, neutrality and transparently.

2 Likes