DeFi
Synonym Finance joins the $22 billion DeFi money market with the launch of Ethereum, Arbitrum and Optimism – DL News
- Synonym Financ’s purpose is to bring together disparate crypto liquidity on separate blockchains.
- DeFi lending is worth $22 billion and is the largest submarket in DeFi, followed by decentralized exchanges.
- The founder says the project will not connect any “substandard networks.”
- The founder also addressed the risk of hacks and potential airdrops.
DeFi lending is a A $22 billion market – almost half of DeFi’s total market size – but much of this liquidity is siled in native protocols of different blockchains.
Synonym Finance launched on Tuesday and aims to solve precisely this problem.
Although the end goal is universal liquidity of the DeFi money market, the cross-chain protocol says it will only be linked to “high-quality ecosystems.”
“We are launching on Ethereum, Arbitrum and Optimism – all very high-quality ecosystems,” said pseudonymous Synonym Finance founder 0xbeachball. DL News.
0xbeachball has previously contributed to LayerZero Labs, developers of the eponymous DeFi interoperability protocol and crypto lending app Notional Finance.
“Our thresholds for inclusion in our markets are extremely high: we will not connect to lower quality networks. »
— 0xbeachball, co-founder of Synonym Finance
The lending market size of Ethereum, Arbitrum, and Optimism is $11.9 billion, more than half of the DeFi lending market. Most of this is on Ethereum.
These three blockchains are also EVM networks. EVM stands for “Ethereum Virtual Machine” and describes a class of blockchains that use smart contract logic similar to that of Ethereum.
0xbeachball, however, added that Solana support is in the works.
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This would allow users to obtain loans with collateral on EVM chains and provide USDC liquidity in DeFi protocols on Solana.
Although cross-chain lending is relatively new to DeFi, Synonym Finance is not alone.
Lending giants like Aave and Compound have already launched new versions enabling cross-chain lending – borrowing cryptocurrencies on one blockchain for collateral posted on another network.
USDC gets the green light
For Synonym Finance, USDC liquidity migration is crucial to focus on unifying DeFi liquidity. The protocol plans to achieve this goal via a bridged version of USDC called CCTP-enabled USDC.
The CCTP bridge allows users to transfer tokens, in this case USDC, between blockchains.
The USDC sent is natively engraved on the sender’s blockchain with an equivalent amount of USDC natively issued on the recipient’s blockchain.
“We plan to support blue-chip assets and stablecoins like USDC in the future, which can provide higher quality assurances of stability and liquidity depth,” 0xbeachball said.
Security issues
Even though most developer activity has become multi-channeluser engagement last year was still mostly single-chain transactionsaccording to a recent report from crypto intelligence firm Flipside Crypto.
Users who transacted cross-chain primarily did so to position themselves for airdrop opportunities.
But while protocols like Synonym Finance push users to perform more cross-chain activity, the security risks of a multi-chain world are high.
Some of the biggest hacks in the industry have taken place via exploits on different crypto bridges.
In 2022, for example, Chainalysis reported that $2 billion had been lost to cross-chain bridge exploits. Heco Bridge was stolen $86 million in 2023.
Cross-chain money market operations place even greater emphasis on transaction ordering, dynamic pricing, and interest rate rebalancing, which are key to preventing bad debt on DeFi loan positions.
Crypto collateral is volatile and price fluctuations affect supply and demand.
Trading robots also target this volatility in search of arbitrage opportunities that can be exploited to generate profits through specially ordered transactions on the blockchain.
0xbeachball said that current cross-chain lending protocol designs have failed to address these issues, but Synonym Finance has a solution.
“We are built on a hub-and-spoke model with a hub that lives on Arbitrum,” said 0xbeachball. “All rate pairs, rebalancing and ordering take place on the hub and are then communicated to the spokes.”
Since all operations happen on a single hub, coordination across the entire system is easier, 0xbeachball said.
No drop
Regarding the airdrops, 0xbeachball stated that the project would not take the usual route of initiate user engagement via all airdrop rewards.
The protocol will seek liquidity by encouraging users to lock their deposits on the protocol to earn yield.
“For us, the early liquidity of the system and the clear proof of utility provided by Synonym is best served by engaged users from day one,” one0xbeachball said.
Osato Avan-Nomayo is our DeFi correspondent based in Nigeria. He covers DeFi and technology. To share tips or story information, please contact him at osato@dlnews.com.