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Crypto interoperability protocol Synapse (SYN) has enjoyed its best week ever, with the $SYN token rising 96% in the third week of August 2024.
A big chunk of the gains came on 16 August 2024 (+58%) after Binance launched SYN perpetual futures contracts on its exchange.
Having hit an all-time low of $0.267 in early August 2024, SYN holders hope the worst is behind them.
In this article, we explain why Synapse Protocol is more than just a cross-chain bridge and how it is solving cryptocurrency‘s issue of liquidity fragmentation.
What is Synapse Protocol?
Synapse Protocol is a cross-chain interoperability network that allows users to bridge and swap cryptocurrencies across different blockchains.
The project started as a cross-chain bridge for EVM networks in 2021 but has now evolved into an interoperability infrastructure ecosystem.
It involves an Ethereum-based rollup called Synapse Chain and a cross-chain messaging network called Synapse Interchain Network.
Let’s understand how each part of the Synapse Protocol functions:
Synapse Bridge
Synapse’s bridge connects 22 EVM chains, including Ethereum (ETH), Arbitrum (ARB), Avalanche (AVAX), Base, Blast (BLAST), BNB Chain (BNB), Optimism (OP), and Polygon (POL). The network also has a Solana Bridge that connects Solana (SOL) with Ethereum, Arbitrum, Optimism, and Base.
As of August 19, 2024, Synapse was the 10th largest cross-chain bridge, with a trailing one-month volume of $272.3 million across all supported chains. In comparison, Stargate was the largest cross-chain bridge with a trailing one-month volume of $1.39 billion, data on DeFiLlama showed.
Synapse also provides token swap features on its platform powered by its liquidity pools. Liquidity providers on Synapse can choose from a range of pools to earn a share of bridging fees and SYN emissions.
Synapse Interchain Network
The Synapse Interchain Network is an optimistic proof-of-stake (PoS) blockchain that enables communication and settlement between connected cryptocurrency networks.
It is a key feature, currently in testnet phase that is expected to help Synapse unify liquidity across various chains and enable users to interact with decentralized applications regardless of what chain they are on.
The Synapse Interchain Network is powered by three off-chain agents: notary, guard, and executor.
When a user initiates a cross-chain transaction, a notary sends the transaction message from Chain A to Chain B. The notary must first deposit a stake to be eligible to perform the function and receive a percentage of the bridging fees on successful completion.
A guard listens to new messages from the origin chain and watches for fraud. If the guard proves the notary’s fraudulent data, they will earn the staked crypto deposited by the notary.
The guard also has to post a stake to be eligible to perform its function. This staked amount will be slashed if the guard is found guilty of committing a fraudulent transaction or filing a false fraud report.
Once, the wait period for fraud checks is over, an executor will complete the transaction on the destination chain, receiving a part of the transaction fees in the process. Executors are not required to stake to participate in the network.
Synapse Chain
The Synapse Chain is an Ethereum-based optimistic rollup that acts as the data availability and execution layer for the Synapse Interchain Network.
It stores the state of all chains connected to the Synapse Interchain Network. Anytime a transaction is sent across the Synapse Interchain Network, it is settled on the Synapse Chain.
Stakes posted by notary and guard agents are made on the Synapse Chain.
Furthermore, the Synapse Chain also serves as the interchain hub on top of which developers can build applications.
Synapse & Ethereum’s Rollup-centric Scaling Roadmap
Synapse’s compatibility with Ethereum and its rollup-centric scaling roadmap is a bullish narrative being pushed by Synapse supporters.
Ethereum currently hosts 71 layer-2 chains, according to L2 Beat. This number is expected to increase as rollup-as-a-service protocols and blockchain modularity solutions make it easier than ever to bootstrap rollup chains.
“While cross-chain bridging volumes will continue to grow exponentially as the crypto economy expands multichain, bridging is just scratching the surface of the opportunity. The future is generic cross-chain messaging systems – a superset of cross-chain exchange,” tweeted Daniel Cheung, co-founder of crypto hedge fund Syncracy Capital.
The increasing number of L2s in the market has resulted in liquidity being fragmented across independent chains, ultimately leading to capital inefficiencies, cross-chain asset management issues, and poor user experience.
Synapse Bulls believe that the Synapse Chain and the Synapse Interchain Network have the potential to unite the Ethereum L2 sector under a standard cross-chain messaging system.
“Applications inherently want to be cross-chain to access the most users maximizing protocol revenue whilst users want to leverage cross-chain compute to access global liquidity,” wrote McKenna, co-founder of crypto investment firm Arete Capital, on X.
“The core reason why I believe SYN is undervalued is [the] majority of people are underestimating the demand for interchain compute on a 5-year time horizon,” added McKenna.
$SYN Token Price Analysis
Early SYN token price available on Coinmarketcap showed the coin trading between $1.3 to $2.3 in September 2021.
SYN rode the 2021 crypto bull wave to rise to an all-time high of $5 in late October 2021.
Since 2022, SYN crypto price has been trading rangebound unable to break a key resistance level of $2.
In March 2024, SYN managed to hit a one-year high of $1.96 as the broader crypto market rose following the approval of spot Bitcoin ETFs in the U.S.
However, by August 5, 2024, SYN slumped to an all-time low of $0.267.
The listing of SYN perpetual future contracts on Binance helped the SYN reverse losses and post its best weekly gain (+96%) in the third week of August 2024.
As of August 20, 2024, SYN is the 309th largest crypto in the world, with a market cap of over $101.7 million.
Rival interoperability-focused crypto projects Wormhole (W) ranked 99th with a market cap of over $563 million, Axelar (AXL) ranked 122nd with a market cap of over $411 million, and LayerZero (ZRO) ranked 131st with a market cap of over $336 million.
The Bottom Line
Synapse Protocol is one among many crypto projects trying to solve the problem of liquidity fragmentation. The competition is fierce, and the future remains uncertain.
For now, the world is eagerly waiting for the mainnet launch of the Synapse Chain and Synapse Interchain Network.
