[SIP-28] Using the Arbitrum Grant - Swap ARB for ETH

Background:

This proposal is looking to approve the usage of ARB incentives granted to the protocol by Arbitrum. In April 2023, the Synapse DAO was granted 1,030,161 ARB tokens to incentivize growth and usage on Arbitrum.

Arbitrum is an EVM-compatible layer 2 scaling solution developed by Offchain Labs. It enables faster and more cost-effective transactions by leveraging optimistic rollups technology. With Arbitrum, developers can deploy scalable decentralised applications (dApps) and users can enjoy improved efficiency and reduced fees on the Ethereum network.

Since launch, till date, on chain participants have conducted 7 Billion in combined swap and bridge volume using Synapse on Arbitrum. To facilitate more mutually beneficial usage, this proposal suggests swapping ARB, an unproductive asset, for ETH, a productive one that can be directly used by Synapse to further benefit Arbitrum.

Proposal:

Taking into account that Synapse currently has 1M ARB tokens sitting idle, I suggest we:

• convert the idle ARB allocation into ETH
• use the ETH received as POL liquidity on Synapse’s ETH pool on Arbitrum to create a more liquid bridge for ETH to move in and out of Arbitrum

Motivation:

Swapping ARB to ETH and deploying the ETH into the ETH-nETH pool on Arbitrum will allow us

• to be picked more often by bridge aggregators as the preferred route when users try to bridge ETH into Arbitrum from other chains
• the ability to reduce SYN emissions for the ETH pool on Arbitrum, improving SYN tokenomics
• to ensure the grant is used for the benefit of the Arbitrum ecosystem
• to add more ETH as permanent holdings to the Synapse Treasury
• to be less exposed to ARB price fluctuation
• to use the ETH as ecosystem rewards for teams developing on Synchain
• to use the ETH as gas reserves for mainnet and L2s that use ETH as gas

Conclusion:

Swapping ARB tokens to ETH and deploying them into Synapse’s ETH pool on Arbitrum benefits both parties more than allowing ARB tokens granted as incentives to sit idly.