[SIP - 39] - Loan for Market Making

TL;DR Synapse DAO to provide a loan 1,250,000 USD (USDC or USDT) for 12 months to engage with Selini and DWF for market-making across various central exchanges.

Overview

Currently there are no active engagements with Market Makers (MM) for the SYN token on central exchanges (CEX). Previously, Synapse DAO engaged with Amber for market-making across multiple exchanges, but those engagements have concluded. Consequently, this has led to reduced liquidity on the CEXs, causing users to experience significant slippage during large-volume transactions. This proposal is presented to Synapse DAO to outline the terms for engaging with market makers (MM) to enhance liquidity on centralized exchanges significantly. The objective is to foster a robust market environment where traders can enter and exit positions with minimal slippage and reduced price impact.

Context

Synapse is a prominent protocol in the cross-chain sector, having facilitated $50 billion in cross-chain volume to over 2 million addresses since its inception. With significant protocol upgrades on the horizon, Synapse stands to gain from enhanced liquidity on centralized exchanges (CEX). Currently, some exchanges listing the SYN token are experiencing liquidity shortages, leading to substantial slippage when users attempt to execute sizable trades. Moreover, the absence of an active market maker may lead to the delisting of SYN from exchanges due to failure to meet volume and spread targets. Additionally, partnering with crypto-native market makers offers opportunities to pursue additional exchange listings and subsequently enhance liquidity provision. An expansion would broaden the trading landscape for SYN, potentially attracting new users who exclusively engage with centralized exchanges. Various market makers were approached to formulate this proposal and after careful consideration, we believe that engaging with two market makers, Selini and DWF, aligns best for the Synapse DAO.

Terms

Globally the terms are as followed, note that engagements differ in both the finer details and the loaned amount per market maker.

The Synapse DAO, through Synapse Foundation would engage with both Selini and DWF; The Synapse DAO would provide a 1,250,000 USD loan (USDC/USDT) for 12 months for market making purposes; In the event not enough liquidity is available to meet the terms set forth, Synapse DAO may swap non-$SYN assets held in treasury to meet obligations; At the end of the term the market makers can exercise a call option on the loan at 110% of the first 7-day TWAP price and repay the loan in stables or in $SYN; Exchanges covered by the MM are: Binance, Coinbase, Kraken, Gate, KuCoin, Phemex, Crypto.com, Bitget and MEXC; Subject to 95% uptime. About Selini

Selini is a global trading firm focused on systematic trading, liquidity provision, efficient execution, and venture investing—all within the digital assets space.

About DWF

DWF Labs is the new generation Web3 investor and market maker, one of the world's largest high-frequency cryptocurrency trading entities, which trades spot and derivatives markets on over 60 top exchanges.