SECTION 1: APPLICANT INFORMATION
Applicant Name: beachball, Synonym Finance
Project Name: Synonym Finance
Project Description: Synonym is a next-generation cross-chain lending market that is built for power users and new users alike. Synonym is highly flexible and takes advantage of CCTP, Wormhole messaging and its core hub contracts housed on Arbitrum One. Synonym is positioned to become the defacto cross-chain lending tool for users looking to move and access liquidity across L1s, L2s and non-EVM environments. Synonym allows you to deposit collateral on your preferred chain, borrow against it, earn and repay from any supported chain.
While Synonym is natively cross-chain, our hub contracts live solely on Arbitrum - all potential $ARB received via this application will be used strictly to incentivize activity on Arbitrum.
Team Members and Roles:
beachball - Core Contributor, Strategy & Marketing (Twitter/X)
cheguevara - Core Contributor, Product (Twitter/X)
vladyslav - Core Contributor, Strategy & Operations (Twitter/X)
Andrzej Gis - Core Contributor, Lead Developer
Kryzystof - Full Stack Developer
Bartek - Front End Developer
Mateusz - Back End Developer
Popeye - Front End Developer
JT - Designer & UI/UX
Project Links:
Twitter: https://twitter.com/synonymfinance
Discord: https://discord.gg/synonymfinance
Website: https://www.synonym.finance/
Documentation: https://synonym-finance.gitbook.io/synonym-finance/documentation/overview
Developer Documentation: https://synonym-finance.gitbook.io/developer-docs/
Github: https://github.com/SynonymFinance
Dune Dashboard (WIP): https://dune.com/x3research/synonym
Contact Information
Point of Contact: beachball
Point of Contact’s TG handle: beachball_0x
Twitter: https://twitter.com/0xbeachball
Email: beachball@synonym.finance
Do you acknowledge that your team will be subject to a KYC requirement?: Yes.
SECTION 2a: Team and Product Information
Team Experience
Our team has experience in nearly every vertical within crypto and DeFi at the DAO, venture fund and core protocol level. Backgrounds include time at LayerZero, Amazon, Redacted, Y2K Finance, Jones DAO and more. Full backgrounds and experience deep-dives will be provided to the Arbitrum Foundation directly. Synonym has secured multiple grants from the Wormhole Foundation, Circle and Arbitrum and has established itself as a leading protocol in the push for truly cross-chain DeFi primitives.
What novelty or innovation does your product bring to Arbitrum?
Our product delivers the easiest to use, most flexible and most powerful version of cross-chain lending to Arbitrum users. Synonym delivers a UI that DeFi both new users and power users are familiar with but with the added ability to seamlessly originate borrowing and lending transactions from any chain to another. In practice, this means:
- No more confusing wrapped and double wrapped assets with low liquidity at your destination
- Less liquidity fragmentation overall, especially when our Universal CCTP pool is used
- The ability to keep your assets on Arbitrum or Ethereum, but be active in other ecosystems at the same time (non-EVM support will be added soon)
- The ability to make assets like $ARB prime cross-chain DeFi collateral
These are capabilities that are sorely needed in the space overall. Moreover, our core hub contracts are and forever will be located on Arbitrum. This means that whenever actions are taken on Synonym, even if it’s between other completely separate chains, activity always occurs on Arbitrum.
Architecture Impacts
Synonym’s overall flexibility will translate into a much needed improvement in cross-chain borrowing for users. That said, Synonym also has clear benefits for Arbitrum and its goal of remaining the definitive L2. In practice, Synonym architecture present on Arbitrum means:
- Stickier TVL for Arbitrum
- Flexibility for users
- Growth of cross-chain applications native to Arbitrum will likely push more value to Arbitrum over time given preference for interacting with Arbitrum hub contracts directly (ex. liquidation)
- More attention on cross-chain applications native to Arbitrum means more attention from cross-chain technology partners, competing bridge providers and service firms (ex. Wormhole, Pyth) that will drive more competition, better pricing and more efficient services for Arbitrum overall
Concentrating cross-chain product activity and attention to Arbitrum will allow the ecosystem to dominate increasingly large cross-chain asset flows.
Is your project composable with other projects on Arbitrum? If so, please explain:
Absolutely - Synonym strives to serve as a true power tool for users from all experience levels. Our markets and cross-chain borrows use the purest form of every asset to remain highly composable with any other application on Arbitrum and beyond. Our universal USDC pool takes this concept even further. With CCTP-enabled USDC, any stablecoin liquidity that is deposited into Synonym becomes universally available to users and applications at any source or destination chain. Moreover, Synonym will be introducing composable debt tokens in Q2 which will allow other protocols to tap into positions within the application at a deeper level.
With native USDC borrowing across chains, Synonym borrowing and lending is composable with an overwhelmingly large amount of DeFi products. Our features give users and applications on Arbitrum a highly composable tool to move, access and maximize the value of liquidity to and from any supported chain.
Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?
Within Arbitrum, we are often compared to Radiant given our focus on cross-chain DeFi activity. That said, there are some core architectural differences between us and Radiant.
Synonym is built on a hub-and-spoke model where all state, accounting and balance change logic is handled on the Arbitrum hub. Deposits of native assets on other chains (spokes) interact with our hub on Arbitrum via Wormhole messages. This means that Synonym does not face the risk of interest rate desynchronization across chains, nor does it face substantial bad liquidation risks. Other cross-chain applications are typically either:
- Leveraged farming/looping pools with a simple generalized bridge between chains
- Point-to-point models, which suffer from desynchronization risks
Synonym is neither of the above and marks a significant improvement in what can be achieved in the lending sector. Beyond the Arbitrum ecosystem, the closest comparable protocol is Pike Finance, which is architecturally very similar but operates its core hub contracts on Base.
How do you measure and think about retention internally? (metrics, target KPIs)
From a general metrics perspective, we focus primarily on:
- Daily Active Users: A time series metric representing the daily count of unique addresses interacting with the protocol’s contracts.
- Daily User Growth: A time series metric representing the daily user growth (in addresses) interacting with the protocol’s contracts.
Given that we are at the beginning of our growth phase, we are focusing primarily on acquiring new users from ecosystems outside of Arbitrum (a positive for Arbitrum overall) and introducing them to cross-chain lending. All of our selected KPIs are aligned with our goal of increasing TVL, aggregate unique users and overall lending and borrowing volumes originated on Arbitrum.
Specific to our category, lending, Synonym measures the following KPIs:
- TVL: A daily time series expressed in USD, calculated as deposits minus borrows.
- Withdrawals: A daily time series expressed in USD for the amount of net withdrawals out of the protocol
- Borrowed Amount: A daily time series measured in USD for each asset and in total.
- Daily Borrowing Volume: A daily time series measured in USD for each asset and in total.
- Daily Deposits Volume: A daily time series, presented in USD for each asset and in total.
- Utilization Ratio: Optimize the ratio of borrowed to available assets, indicating healthy demand and potential for higher interest revenue.
- Loan Origination Volume: Track the volume of new loans created to measure growth and market penetration.
- Default/Liquidations: Minimize the rate of defaults to ensure platform trust and financial health.
We will be able to provide all data per chain, per asset. These KPIs give us the clearest picture into the growth of overall user activity and actual utilization within our protocol. At the time of writing, our total deposits have grown to ~$10M (with an all time peak of $14M) with nearly $6M in active borrows. Deposit breakdown is as follows:
- Arbitrum: ~60% of deposits
- Ethereum: ~33% of deposits
- Optimism: ~7% of deposits
Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan: Yes.
Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal? If so, please disclose the details of that arrangement here, including conflicts of interest: No.
SECTION 2b: PROTOCOL DETAILS
Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.
Is the protocol native to Arbitrum?:
Yes - our core hub contracts, which are called every time activity occurs (even if between two chains that don’t include Arbitrum), are located on Arbitrum One.
On what other networks is the protocol deployed?:
The protocol is also deployed on Ethereum and Optimism. We have several more spoke deployments planned in the near-term, EVM and non-EVM included.
What date did you deploy on Arbitrum mainnet?:
We deployed our core Arbitrum hub (which all of our spoke/chain deployments connect to) on January 24th, 2024. Our mainnet officially went live on February 6th. This initial deployment was followed by more testing and eventual spoke registrations and deployments.
Do you have a native token?:
Yes - our $SYNO token is deployed on Arbitrum with all on-chain liquidity also on Arbitrum (Balancer). Details on SYNO and deployment information can be found in our documentation:
Synonym Economy & Tokenomics | Documentation.
Past Incentivization
We fully launched our protocol on February 6th, 2024. Since launch, we’ve been running a token incentives program alongside a robust liquidity locking model with all liquidity housed on Arbitrum. Our $SYNO token incentives are planned to continue for a long period of time - more details on our emissions can be found in the documentation linked above. In general, our incentives program has been successful and we expect to onboard significantly more liquidity into our LP locking mechanism in the near future.
Current Incentivization:
We incentivize our protocol directly with $SYNO tokens and have a bonus program we’re about to launch that entitles our most aligned users to additional token rewards.
Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program?
At the time of writing we have been approved for a 50,000 ARB grant from the Arbitrum Foundation (non-incentives focused) and are awaiting receipt of the initial tranche of tokens. We have a robust treasury for protocol operations so we intend to be very conservative with this pending grant. We’d expect to use this ARB to help pay for additional future security audits.
Protocol Performance:
Recent performance data can be analyzed and visualized via our work-in-progress Dune Dashboard: https://dune.com/x3research/synonym. Highlights include:
- Total Market Size exceeding $10M and trending upwards
- $2.5M in cumulative $ARB token deposits since launch
- Over $40M in cumulative deposits since launch
- 60%+ of aggregated cross-chain deposits originated on Arbitrum
Protocol Roadmap:
The following is a general overview of our roadmap from now through Q1-2025. Most of our improvements in the next 6 months will be focused on driving more TVL to our spokes and Arbitrum Hub while also making the Synonym dApp more flexible for users.
- Q1-24: Launch & Performance Improvements
- Finalizing UI improvements and upgrades to our hub designed to improve the speed of cross-chain borrows without sacrificing security
- Q1-24: Asset Listings & LRT Markets
- Drive TVL growth to Arbitrum via multiple LRT listings and additions of other emerging DeFi assets
- ARB will be used to help bootstrap the migration of more LRTs to Arbitrum (ex. Those with native cross-chain restaking like Renzo’s ezETH)
- Q2-24: New Chains Added: EVM-based
- Support for other L1s will be added during this period
- We will market and encourage strategies that include a migration of liquidity from other chains to Arbitrum
- No ARB will be used to incentivize activity on other chains
- Q2-24: New Chains Added: First Non-EVM chain
- Our first non-EVM will mark a major upgrade for users looking to be active on non-EVM ecosystems without moving their liquidity from Arbitrum.
- Q3-24: New Features: Internal Collateral Swaps & Liquidity Unification Improvements
- Internal collateral position swaps will give users far more flexibility, especially across multiple chains
- We intend on unifying as much liquidity as possible via Circle CCTP-enabled USDC; additional rewards may be used to push users to eliminate USDC.e from their portfolios and move to a fully unified stablecoin position
- Q3-24: New Asset Listings & Finality Risk Improvements
- More assets to be added during this phase, incentives will be deployed here to keep as much liquidity on Arbitrum as possible
- Asset focus will be on protocol tokens and Wrapped Bitcoin variants
- Q4-24: New Chains Added: EVM-based
- We intend to continue to add networks as we approach the end of the year.
- No ARB incentives will ever be deployed to these chains.
- Q1-25: New Features: Factory Markets
- User-originated markets/factories will eventually ship next year
- By this point we expect to have a gauge system and vlSYNO optimizers built on top of our markets
- Given the presence of gauges, we don’t expect to deploy ARB incentives here
Audit History & Security Vendors:
We have been focused on security from day one and have had the privilege of working with security partners not often available for a protocol of our age. We completed two comprehensive security audits with OtterSec and Runtime Verification. The results of these audits can be found here:
Moreover, we’ve consistently worked with Gauntlet, a leading provider of quantitative optimization analysis services, to shape Synonym into a highly efficient and resilient cross-chain lending platform since day one. Gauntlet is responsible for research and advisory services that impact and protect billions of dollars in DeFi TVL. Gauntlet has provided the following advisory services to Synonym since launch:
- Individual LTV, borrow/deposit caps and supporting parameters per asset, per chain
- Liquidation parameter testing, simulation and implementation recommendations
- Advisory on more exotic assets, including upcoming structured products/stablecoin derivative listings
- Cross-chain liquidation simulation, finality threshold testing, messaging evaluation
Gauntlet has provided us with an edge in terms of safety and market stability. We prioritize security, efficient liquidation and the safety of user funds above all else. At the time of writing, we are currently finalizing our bug bounty and audit competition program with Sherlock which will be detailed shortly. No security incidents have occurred.
SECTION 3: GRANT INFORMATION
Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.
Requested Grant Size: 400K ARB
We intend to grow Synonym’s total deposits for key DeFi assets to $40M within 12 weeks of our incentives program beginning (12 weeks). Our key asset categories include USDC, ARB and our upcoming LRT category. As an Arbitrum native lending market, Synonym already has an ARB market with over 400,000 ARB tokens deposited ($2.5M of ARB has been cumulatively deposited and used as cross-chain collateral since launch). Rationale for these categories is as follows:
-
USDC Markets: USDC markets are core to any lending market. Our Crosschain Pool, powered by Circle CCTP, allows users to access and route seamless stablecoin liquidity from any connected chain (with no wrapped stablecoin variants). Any additional incentives provided to USDC markets will also aid in the transition away from USDC.e in the Arbitrum ecosystem. We plan to grow our USDC market from ~$1.25M to ~$14.5M.
-
ARB Markets: ARB is becoming increasingly available in DeFi and is primed to become ideal DeFi collateral. With Synonym, ARB can become increasingly productive as it can now be leveraged across multiple chains. We want to transform ARB into prime DeFi collateral and kickstart activity in this market. We plan to grow our ARB markets from $850K to $14M.
-
LRT Markets: Synonym is on the verge of launching support for multiple ETH LRTs (pending oracle improvement audits, nearly complete). We want to drive more LRT activity to Arbitrum and kickstart a new class of collateral on the chain. Early signs of success with teams like Renzo (via Connext on Arbitrum) are proving out the potential for LRTs on Arbitrum. We plan to grow our LRT markets to $11.5M.
In total, these growth pushes represent ~$40M of new deposits for Synonym. We believe that these three categories will have a positive tangible impact on the Arbitrum ecosystem overall.
At a historical weighted average of $0.08, SYNO has attracted deposits at an emission to deposit ratio of approximately 47.8x (for every $1 in SYNO we receive approximately $47.8 in deposits). Note that we are still early in our emissions program and that emissions will trend down over time to find more efficiencies).
- Synonym will grow the aforementioned USDC, ARB and LRT markets by $40M in total
- At a deposit ratio of 47.8x, achieving $40M in new deposits would require approximately $836K in incentives
- This informs our 400K grant request size (assuming $2 ARB = $800K)
- We plan to allocate these incentives to both the deposit and borrow side of the markets
- Incentives will be allocated 40% to ARB (to incentivize its use as prime collateral), 20% to LRTs (to incentivize migration to Arbitrum) and 40% to USDC (to kickstart borrows against these collateral types)
We have observed that incentives coverage on both the deposit and borrow side of the market create a flywheel effect for utilization. Borrow-side incentives appear to create the same or better market growth as deposit-only incentives. This effect is compounded by our fee sharing model and additional SYNO emissions. We do recognize that as other protocols receive ARB LTIPP incentives that this relationship will likely vary from this linear allocation approach. The question for Synonym then becomes, if other protocols have incentives, why will users still allocate here? Put simply, it comes down to composability and the variety of incentives that are coming to Synonym users:
- Synonym’s cross-chain strategies can enhance a part of any other LTIPP-related strategy, likely siphoning liquidity from other chains (like Ethereum and Optimism) in the process
- New incentives on newer collateral types like ARB and LRTs paired with substantial USDC incentives will create a scenario where users are incentivized to use these asset categories as prime collateral throughout their strategies, across multiple chains
- We are early in our incentives distribution schedule and will also be distributing additional token incentives from our technology partners in addition to our own, $SYNO
Our emission to deposit ratio will become more efficient over time. Any surplus incentives will be used to continuously grow our TVL and borrowing volumes. Using other protocols that have received Arbitrum STIP incentives as a bench mark, we believe our target is very achievable. For example, both Dolomite and Silo saw their Arbitrum lending TVL grow significantly after deploying STIP incentives. Arbitrum lending TVL, based on DeFi Llama data, grew 365% and 33% for Dolomite and Silo Finance respectively.
This growth, which outweighs our $40M target, was achieved in nearly the same amount of time we’ve allocated (12 weeks). For example, Dolomite surpassed the 300% mark at approximately 87 days, nearly the same amount of time we’ve allocated in our growth plan (84 days).
Grant Matching:
Synonym will continue to offer our existing SYNO emissions alongside ARB incentives according to our existing incentives schedule.
Grant Breakdown:
Requested grant size: 400,000 ARB. We will be deploying incentives only to our Arbitrum markets to incentivize activity there. We are weighting bonus ARB incentives towards borrowers to incentivize more activity and the efficient use of ARB and capital. Deployment plans are as follows:
- 400K ARB: Deployed as incentives alongside our existing SYNO emissions to our ARB deployment:
- Incentives will be deployed to our USDC, ARB and upcoming LRT markets
- 60% allocated to borrowers
- 40% allocated to depositors
- Incentives will be deployed to our USDC, ARB and upcoming LRT markets
We plan to allocate ARB received to a select number of asset pools on Arbitrum. We are opting to incentivize pools that encourage the migration of new classes of collateral, optimize Arbitrum stablecoin liquidity and make the ARB token prime DeFi collateral. Our split is as follows:
- USDC - 40%, 160K ARB (Encourages borrowing against ARB and LRTs and drives additional migration away from USDC.e)
- ARB - 40%, 160K ARB (Encourages the use of ARB as prime DeFi collateral)
- LRTs - 20%, 80K ARB (Brings new collateral types to Arbitrum)
We plan to front-load initial incentives in our drive towards our deposit and activity goal. Incentives will gradually taper down as we move through each of the deposit milestones (10M, 20M, 30M and 40M). If we are slow to hit certain deposit milestones we will modify our incentives schedule accordingly to bootstrap additional activity.
Our incentives allocation per select asset by deposit milestone are charted below. Our incentives plan is designed to allocate slightly more upfront to kickstart the utilization of assets like ARB and LRTs as prime collateral. The approximate decline in ARB allocated is visualized below:
Rewards allocated over time gradually taper as the select markets grow and the collateral to loan-origination flywheel becomes stable. In any scenario, Synonym will never be in the position to incentivize more on a market that has hit its growth plateau. The allocation of incentives will be reviewed if growth targets are not being met.
Note: No rewards from this grant process will be used to directly incentivize activity on any other connected chain. The goal of this program is to incentivize users to deposit and remain on Arbitrum, using Synonym to be active elsewhere without moving core assets away from the Arbitrum ecosystem.
Funding Address:
0xAa999c8Eb59661e719dc317b10F5672D6D35B45A
This is our Arbitrum Multisig, which is separate from our core treasury address. This address is a 2/3 multisig consisting of core contributors/treasury controllers. All wallets are hardware signed with keys stored in cold storage. The multisig is able to accept and interact with ERC-721s.
Treasury Address:
Main Treasury (ETH): eth:0x00f24E40b2306Bb59202d6b0Cd2A0DbbBeB155c7
Arbitrum Multisig (ARB): arb:0xAa999c8Eb59661e719dc317b10F5672D6D35B45A
Contract Address: All rewards distributor contracts are available here.
SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES
Objectives:
Our key objective for this grant is to increase the overall deposit and borrow volumes on Synonym and drive an increased amount of new-users to our cross-chain lending product. In practice, this growth will likely bring in a large number of net new-to-Arbitrum users who would’ve never necessarily interacted with the chain otherwise. Our previous cross-VM activations (see Pyth example) drove users from the Solana ecosystems to deposit into Synonym, many of which did so for the first time (with any EVM ecosystem). Over 700 new users originated from our Pyth activation - we have several more partner activations like this one planned.
Ultimately, we aim to drive $40M of growth to select asset markets within 12 weeks of receiving these incentives. In practice, we want these incentives to:
- Make Synonym, and therefore Arbitrum, the best place to keep all of your assets and initiate cross-chain transactions from; Arbitrum, not the L1, should be the home for users
- Position the ARB token as prime, cross-chain capable DeFi collateral
- Kickstart a wave of LRT migration to Arbitrum (on top of the protocols that have already done so)
- Immediately deliver more utility to those who would prefer to keep assets on Arbitrum, but want to be active elsewhere
- Help us integrate with other Arbitrum-native protocols and retain a high degree of positive-sum composability with our partners
Execution Strategy:
We will deploy ARB incentives alongside our existing SYNO emissions and allocate them according to our existing weighting plans detailed in the previous section. Incentives will be directly claimable in our existing weekly epochs with no modifications to the current user-claim flow.
In terms of creating stickiness, Synonym uses a liquidity locking mechanism that rewards users with outsized shares of protocol revenue and emissions. We are confident that an injection of ARB rewards will push users to deposit and lock liquidity within this mechanism, which exists solely on Arbitrum (our hub’s location).
vlSYNO provides a robust mechanism for Arbitrum liquidity retention and locking that will never be available anywhere else within the Synonym platform.
KPIs:
The best metrics for Synonym (as a cross-chain lender) would include measures of both overall deposit growth and new user acquisition:
- Average Deposit Growth Per Week
- Measuring our aggregate growth in Arbitrum deposit growth will be our primary metric
- Average New User Growth Per Week
- New user growth translates to more users who will become increasingly “sticky” for the Arbitrum ecosystem
Timeline & Milestones:
We intend to grow deposits in our selected markets by over $40M within 12 weeks of receiving and deploying our ARB incentives.
- Milestone 1, T+4 Weeks: Deposits grow to $20M in total
- Milestone 2, T+8 Weeks: Deposits grow to $30M in total
- Milestone 3, T+12 Weeks: Deposits grow to $40M+ in total
These milestones can be evaluated as we progress through our primary incentivization period. We believe that these milestones are very feasible but still represent tangible growth for both Synonym and Arbitrum TVL overall.
To best align incentives between the Arbitrum ecosystem and Synonym, we recommend allocating ARB based on the milestones detailed above and in Section 3. This would ensure that overspending or over-incentivization of a smaller group of users does not occur.
Fostering Innovation:
Receiving this grant will allow us to quickly scale the first easy to use and powerful cross-chain lending tool from within Arbitrum. We view Synonym as a powerful tool that users deserve - there is no better place for it than on Arbitrum and that will continue to be the case.
Synonym will ultimately become a highly composable component of multiple cross-chain strategies that will be a key part of driving user retention within Arbitrum. Without a clear way to be active in remote ecosystems, the likelihood of capital flight from Arbitrum will remain high. Existing solutions do not address this risk for the ecosystem. This is especially true in our current context - large volumes of TVL are shifting between LRT narratives, new L2s and more, resulting in withdrawals from Arbitrum that otherwise would not occur.
Acknowledgement of Grant Stream & Halt Powers: Yes.
SECTION 5: Data and Reporting
OpenBlock Labs has developed a comprehensive data and reporting checklist for tracking essential metrics across participating protocols. Teams must adhere to the specifications outlined in the provided link here: Onboarding Checklist from OBL 9. Along with this list, please answer the following:
OBL Data Compliance Acknowledgement: Yes.
Bi-Weekly Updates: Yes - data reporting capabilities are well developed and documented internally. All queries can be resolved via our reporting structures on our Hub and Spoke contracts. We are happy to provide updates to the Foundation in any format or cadence that they prefer. We have two work-in-progress Dune Dashboards that are about to be expanded and finalized:
https://dune.com/x3research/synonym
https://dune.com/x3research/chains
Update Offense Acknowledgement: We acknowledge all 3 offense tiers.
Close Out Report Acknowledgement: We acknowledge all reporting requirements.
Request & Halt Acknowledgement: Yes, we acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream.