Syntropy: A Modular Cross-Chain Data Layer Protocol

What is Syntropy?

Syntropy is developing an open alternative for data security and routing systems that operate atop the existing internet protocols. The Syntropy ecosystem encompasses three main components: Application Chains (App Chain), Data Layer, and the PubSub protocol (i.e., Publish-Subscribe protocol).

At its core is the Data Layer. Syntropy places a high value on cross-chain functionality and interoperability, making the Data Layer a customizable, modular execution layer protocol. This enables developers to build composable, use-case-specific, interoperable dapps to access any data across any chain. Application Chains are the networks that run this Data Layer, based on the Cosmos ecosystem’s Layer 1 infrastructure. Through the Data Layer, anyone can obtain and publish data from full nodes and subscribe to real-time data streams across multiple chains, in contrast to the static and more delayed data provided by Etherscan. The ecosystem based on the Data Layer essentially forms an on-chain oracle market.

VC Financing Analysis

Previously, Syntropy completed its seed and seed extension funding rounds, raising a total of $9M from institutions such as Alphemy Capital and Maven 11 in December 2021 and May 2023, respectively.

Syntropy’s 2024 financing efforts were supported by Goldrich Consulting, which announced on March 14 the completion of a strategic funding round led by CMCC Global. Follow-on investments came from P2 Ventures (Polygon), HV Capital, Faculty Group, Wave Capital, Moonrock Capital, DVNCI Capital, TRGC, Mapleblock Capital, AntAlpha, and Public Works. However, the specific amount raised was not disclosed.

According to the team’s plan, the mainnet of the application chain built on Cosmos SDK will launch in Q2 of 2024, along with a brand repositioning during the same quarter. Should the ecosystem’s data grow significantly, Syntropy plans to seek further Series A funding.

Development Team Background and Evolution

Syntropy is a team that began its journey in the cryptocurrency sector relatively early, being founded in 2018 under the original name NOIA Network. The founding team includes the following co-founders: Domas Poviliauskas, currently serving as the Vision & Strategy lead; Jonas Simanavicius as CTO; Kipras Kazlauskas as CFO; and Domantas Jaskunas as COO.

CTO Jonas initially worked in the technology sector within the e-commerce industry before transitioning to investment banking and trading. During his time at JP Morgan, the emergence of Ethereum piqued his interest in the cryptocurrency field. Around 2017-2018, they began to explore which foundational infrastructures for Web3 held significant potential for growth. At that time, they believed that developing or optimizing network protocols similar to TCP specifically for Web3 could represent a massive opportunity. However, this idea was somewhat premature for the overall environment and blockchain ecosystem. Gradually, as their concerns within the cryptocurrency ecosystem evolved, Syntropy pivoted to its current direction, focusing on developing a data layer protocol.

What Problem Does Syntropy Solve?

The blockchain ecosystem, which ostensibly emphasizes “decentralization,” operates each blockchain within its isolated ecosystem (such as Bitcoin, Ethereum, Solana, etc.), with each ecosystem running its own RPC nodes or foundational infrastructure servers. Developers within these ecosystems can retrieve data from these blockchains. When developers need data, they purchase API services from oracles, which rely on multiple centralized off-chain data providers for data. These providers’ APIs/databases are at constant risk of shutdown with the cessation of service. As adoption increases, data becomes either not immediate (due to indexing by multiple data providers) or difficult to trust. Therefore, at least three issues have arisen:

• Poor interoperability of blockchain data across the cross-chain ecosystem
• Lack of immediacy (relatively high latency)
• Difficulty in trusting data sources (reliance on centralized oracles/data providers)

So, why do we rely on centralized oracle services that index multiple data providers?

For example, in the past, I worked at an NFT trading marketplace where our NFT lending protocol required purchasing Chainlink API services to provide the floor price of specific NFT collections. This price data needed to be fair and non-manipulable because changes in the floor price would determine the health index of users’ NFT collateral. If the price dropped significantly, users would receive a notification to repay ETH to ensure their NFTs were not liquidated and auctioned off.

A well-known price manipulation case involved the NFT lending protocol Bendao, which had a 0.2E liquidation penalty paid directly by the liquidated to the final buyer in the liquidation auction. A whale, Franklin, exploited this rule by massively selling Bored Ape NFTs, causing a sharp price drop quickly. This led to the liquidation and auction of many users’ NFTs, which he then bought in a short period, earning a significant amount of liquidation penalties. If the Bendao protocol had chosen an oracle that indexed multiple data providers as the standard for determining the floor price, the floor price data source would have been an average price over a period, not subject to sharp fluctuations in a short time. Lending protocols, susceptible to time and price data, rely on centralized oracles for good reasons.

The more common choice in the current ecosystem is to prioritize data trustworthiness and security, even if it means relying on more conservative oracle services with higher latency. However, even as oracles obtain data from off-chain data providers, the underlying logic remains centralized. The fundamental logic of Syntropy is to establish a data layer that allows developers to directly retrieve data from blockchain full nodes, achieving low latency. At the same time, multiple roles within the application chain will ensure data trustworthiness based on incentive measures and a slashing mechanism.

A More Cost-Effective PubSub Protocol

The PubSub protocol adopted by the Syntropy data layer is a branch compatible with NATS, serving as a framework for exchanging messages between data publishers and subscribers. Both publishers and subscribers require specialized software integration to participate, and Syntropy provides a PubSub SDK maintained by the team to enable developers to build dApps quickly.

Economically, this solution may be more affordable because the PubSub protocol is a messaging protocol rather than a centralized API model, eliminating the computational burden on data sources: in the standard call-response model, each request performs some computation on the data source. With the PubSub protocol’s publisher-subscriber model, computation is performed only once at the source, making this solution more scalable and competitive in price with existing blockchain data solutions (such as RPC nodes and centralized APIs).

As it scales, the growing demand within the Syntropy data layer will reduce the price per GB of data. At the large data price end, the vast majority of total costs are fixed hardware server costs, while at the small data price end, service costs are expected to account for 30-40% of total costs. Here, service costs refer merely to the expense of transmitting data to users through the network.

How Does Syntropy Work?

The Syntropy ecosystem comprises three main components: Application Chains (App Chain), Data Layer, and the PubSub protocol. Within this framework, the Application Chain is responsible solely for maintaining the state of dApps. It implements carefully designed staking and incentive mechanisms to ensure all parties act in their best interests and to protect the network against malicious activities. The Data Layer protocol provides data that meets user needs, while the PubSub protocol allows for the free flow of data streams within the network of the Application Chain.

Source: Official Documentation

Roles within the Data Layer Protocol

Anyone can become a data publisher by connecting to the full nodes of any blockchain network, providing real-time data streams, and then selling this network-generated data through Syntropy’s application chain to receive token incentives. Developers building various dApps can purchase these data streams using tokens.

In summary, there are three main roles in the data layer that need to be played:

1. Subscribers: Subscribers are users who want to purchase specific data. They need to pay two types of fees:

• Service Fee: Data publishers can set the amount of $NOIA tokens required per 1GB of data obtained.
• Network Fee: A system-defined static network transmission fee, where a fixed number of $NOIA tokens must be paid for every 1GB of data transmitted.

1. Data Publishers: Publishers are the ones who provide data to subscribers and can set an appropriate service fee to profit.

2. Data Brokers and Observers: These two roles maintain the data transmission network. They need to lock a certain amount of tokens as collateral first. Afterward, they can earn a share of the network fees based on the actual amount of data transmitted; observers receive a smaller share of the earnings.

In summary, since subscribers are the buyers of data and the primary value contributors to the system, the tokenomics are mainly designed to cater to subscribers. Publishers can compete in the market on aspects such as price, richness, and completeness of their data offerings. Data brokers do not participate in price competition, as they are paid fixed protocol fees. They are responsible for conducting transaction accounting off-chain and constructing delivery proofs, while observers ensure that data brokers do not act maliciously and then submit transactions and proofs together to the application chain.

To understand how the various roles within the data layer protocol interact with each other, refer to the diagram below:

Source: Official Documentation

Application Chain

Syntropy’s application chain is built using the Cosmos SDK and CometBFT. After transactions and proofs are submitted to the application chain by observers, they are confirmed by a group of validators running the consensus protocol before being added to the blockchain. The application chain has two main roles:

1. Validators

Sources of income:

• Responsible for running the consensus protocol and collecting gas fees from on-chain transactions;
• Unlocking $NOIA tokens from the incentive pool. Additionally, validators earn commissions from their delegators.

1. Delegators

Sources of income:

• Stake tokens with validators and earn token rewards for maintaining the security of the chain and protocol;
• If validators engage in malicious behavior (such as double-spending), they receive a Slashing penalty similar to the Ethereum PoS algorithm. In this case, both validators and their delegators lose the same proportion of tokens, so delegators should spread their risk by staking tokens with multiple validators.

On March 25, 2024, the first batch of community validators joined the Cosmos chain testnet environment. They consist of users who have previously served as Syntropy validators, and the team is also encouraging validators with node operation experience to get in touch proactively. The Cosmos chain mainnet is expected to launch around June 2024.

Tokenomics

Token Incentive Mechanism

Syntropy employs three incentive mechanisms to attract different roles to participate, initiating and sustaining the ecosystem’s flywheel:

1. On-chain Security Incentives:

These are rewards given to node validators and delegators to ensure the security and stability of the blockchain network. The reward amount dynamically adjusts based on the total amount of tokens staked, with annual rewards ranging between 5%-20% when the staking rate reaches 50%-67%. Over the long term, as network Gas Fees increase, the proportion of these rewards will gradually decrease.

1. Data Layer Incentives:

These are designed to attract data brokers and observers to participate in the data transmission layer. They must first lock a certain amount of tokens as collateral, after which they can receive subsidy rewards similar to an annual yield of 20%-30%, encouraging them to join and maintain the data network. The quantity of these subsidy rewards will also dynamically adjust based on the number of participants.

1. Community Pool Allocation:

A portion of the tokens is allocated to the community pool, which community members can propose how to use, such as funding publishers who release valuable data to attract more users to the Syntropy network. However, this expenditure has a certain annual cap.

Currently, the amounts and annual yields of these incentive mechanisms are estimates from official documents and are still subject to dynamic adjustments based on the level of participation to ensure the balance of the overall economic model.

Token Utility and Governance Model

In the token economic model, the design of the $NOIA token aims to facilitate seamless access to real-time cross-chain data. It serves as the fuel driving the data layer, incentivizing a scalable, user-centric data economy. It has the following four utilities:

1. Chain Security: Providing security to the chain through staking, delegation, and Slashing mechanisms;

2. Data Layer Security: Ensuring the security of the data layer through ongoing staking, proof challenges, and Slashing mechanisms;

3. Governance of the chain through proposals and voting;

4. Used for payments within the data layer protocol.

The token governance model adopts the general model of on-chain governance found in the Cosmos ecosystem. Anyone with an address and a minimum amount of tokens can initiate proposals. Any validator with voting rights can vote.

A unique aspect here is that if you are a delegator who has staked $NOIA tokens with a validator, you cannot use the staked tokens to vote. This means the number of tokens a validator can vote with is the sum of their own tokens and all the tokens delegated to them. This design, similar to representative democracy, encourages users to carefully choose their validators, as they will represent you in exercising some or all of your governance rights.

Token Market Cap and Circulating Supply

The $NOIA token currently ranks around #368 in market cap. In centralized services, Syntropy’s competitors include oracles similar to Chainlink; in the data availability network space, its competitor is Celestia, whose FDV currently exceeds $12B. From the perspectives of FDV and market cap, Syntropy has significant growth potential.

In terms of circulating supply, by the end of 2023, approximately 73.5% of $NOIA’s supply was in circulation, with the remaining 26.5% of undistributed supply set to be used for various incentive measures on the Syntropy data layer and application chain, as well as for future financing. The mainnet is expected to launch on Cosmos in June when the project will also issue Cosmos native tokens and provide a bridge for users to transfer $NOIA to the application chain. This could increase demand for the $NOIA token and reduce the circulating supply.

Future Planning and Conclusion

Market Narrative

From the end of 2023 to the beginning of 2024, Syntropy capitalized on numerous opportunities: it successfully completed a strategic funding round, delivered on its roadmap commitments on time, and kept pace with the AI trend in its market narrative.

The market narratives related to Syntropy include:

• The integration of DePIN, AI, and real-time data: AI and machine learning models in Web3 projects will require more immediate and accurate data in the future. Currently, they operate under centralized SaaS models, while the data layer protocol facilitates node-to-node access, offering faster speeds and cost-effectiveness.
• Modularity, composability, and interoperability of on-chain data: In March, CTO Jonas and io.net’s COO Tory Green collaborated to devise interoperability solutions.

Roadmap Outlook

The Silverstone project for Q1 2024 was announced to launch on February 27th. This project introduced the Cosmos application chain testnet for the data layer protocol and welcomed the first batch of validators to the network. Following this, the Monaco project in Q2 2024 will see the release of Cosmos native tokens, the launch of the $NOIA token bridge, and the rebranding of Syntropy. For a detailed roadmap, please refer to:

Source: Official Website

Future Adoption of ZK-Proof Technology by the Team

By adopting ZK-proof technology, observers might eventually be phased out from the protocol layer. Currently, the primary function of observers is to monitor whether the proofs submitted by data brokers are correct. Their sources of income are:

1. Verifying that proofs are correctly constructed (verification)

2. Proving that proofs submitted on-chain are improperly constructed (challenges)

The same objectives could be achieved if transaction proofs are aggregated into delivery proofs using a Merkle tree, allowing data brokers to build and submit ZK proofs. In this scenario, constructing ZK proofs would enforce the correctness of submissions, eliminating the need for the observer role.

However, challengers are still needed when looking at the design of some current-proof markets, such as Succinct. This solution merely outsources proof generation to a decentralized market for lower costs.