Topic: How does this Bridge make a profit exactly? (Read 280 times)

I don't think bridges will ever operate at a loss. Although there might be a loss in some transactions, it won't be for all transactions. Most people prefer to transfer from the Ethereum network to other networks, and they mostly pay gas fees. As long as people continue to bridge out of Ethereum to other networks or from one L2 network to another L2 network, bridges will always be profitable.

Yeah I noticed this also. Almost all the bridges except from/to Ethereum are extremely cheap. So I am thinking they take a loss when someone bridges into ETH and if someone bridges in reverse from say ETH to ARB they will break even on that fee.

Since the user bridging from ETH will have to pay a large fee to initiate the bridge while the destination chain such as ARB will have a very low fee.

Ever since the last ETH fork, it’s extreme cheap to perform most transactions on L2 networks. Hopefully they don’t start to add fees to destination ETH bridges because it’s affordable at the moment.

But if ETH fees go back to the constant 50-100 gwei congestion, then I am pretty sure they won’t be eating a $50 loss on every transaction.

Of course, the percentage will be smaller for larger transactions. A small percentage can still represent a decent profit. Here is a transaction where a user bridged 525.13 USDC on Ethereum and received 522.69 USDC on Base. The difference is 2.44, even though the bridge contract only used $0.004 in gas on the Base network. https://explorer.synapseprotocol.com/tx/1990271054d10b0af3ffc5aa31b92a89ca63b41e8dda604d0fda709f5b9c6b99?chainIdFrom=1&chainIdTo=8453

The only transactions they don’t seem to profit from are when bridging from any network to Ethereum, because Ethereum fees are so high. The spread is only enough to break even or have a slight loss, although there are very few transactions where Ethereum is the destination chain.

I think it's not like that; they still have a profit there. I don't believe that they don't have a profit from such a transaction. Maybe the OP just thinks that the bridging that he did on the platform doesn't make any money, but the truth is that there are still small earnings from the transaction that happened.

Then it's a bit like I'm not that familiar with Synapse, but when I looked at Coingecko, it turns out that there are many exchanges where it's listed. You can transact on CEX platforms so that you don't end up with a fee like that. But if that's what the OP wants, there's nothing we can do if he wants the Dex platform.

pretty sure thats because we are still in early phase, moving forward they could impose fee.
some other bridges though already impose fee and sometime the money we received in the other blockchain also greatly reduced to pay for the fees.

each of these bridges project actually have differing business model anyway, some bridge are more expensive than other depending on routes, i think bridge like stargate consistently making comparation with other bridge and it shows difference in the fee alone, probably due to code not gas optimized or some reason.

also to remember, these bridges also usually have the plan of TGE up to their sleeves where the founder and the entire team got their big share of allocation, we can say that they are investing for future TGE where they can reap much more money than just imposing fee where the competition is fierce, sort of offering free service but gaining all the profit later on in just one event such as TGE, where they gonna release governance token, moving on later, there might be proposal about the imposing of fee in the future if its getting sufficient vote from the governance token holders.

so its sort of business scheme, not to mention that these bridges usually got seed funding from big investors, they probably already have enough money to run for several years.

I think there is a site that we can check, if how much is current gas fees or transaction fees. The one that I remember is Gas Station but I'm not sure if it was only limited to ETH or not, although there might be other sites similar to this which caters other cryptos.

With the help of them, it is truly possible to always have a reasonable fee. This is not only for the impatient people or those who are always in a hurry but they might still make more than their gas/transaction fees if they will be on time with their transactions/deals. This is the reason on why the bridging platforms can also earn an income. They can also set up some ads if they want to, to earn even more.

Wow this is an L1 to L2 right? It seems you manage to brudge during a very low gas fee plus that bridge is wow on operating at a lower fees. Its quite unusual for a bridge to charge little compared to what was the actual cost but thats how they wanna entice users by offering lowered fees. Somehow they will get it back from other product or maybe impose an increase later on.

With too many bridge services out there, one must have a standout offer so customer would use them than others. I guess this is their strategy.

Synapse is a very well-known and very frequently used bridge (I think it was once the most frequently used bridge of all), so the service itself is certainly trustworthy.

However, Synapse does not earn its money by running bridges per se, but with additional services that it also sells via the platform. Bridging is therefore more of a cross-financed feature.

Synapse isn't only offering bridge service, but they also have their own token and pools, people who purchase their token will make them to earn profit and if they can manage the money on their pools, they can earn too. It's a marketing strategy, they can loss in one service, but they're earn in other services.

Just like IKEA, they sell cheap ice cream and other foods, but they're making money by selling household appliance and furniture.

It’s 7% because they only sent a dollar. If they sent $10,000 I am pretty sure the fees wouldn’t of been $700. It was some transaction fee or transfer fee that they deducted from the USDC.

With stablecoins some chains have slightly different prices but they are never off by 7%. Try and find some other transaction which has a larger value being bridged than $100 and see if the fee will still be 7%?

Hamza is right, like any other business, they're covering the cost so that many users are going to share what they have experienced on them and how cheap it is to use their bridge. And on your case, it was a successful business strategy that they're able to give each and everyone who has read this thread to check them out and soon might convert into sales. It is just a matter of time until when they're going to change that subsidy for the swap that are being done on their platform, it's all part of the budget.

This is what came to my mind when OP mentioned that they're operating that bridge at a $1.6 loss, I think that they're in partnership with some of the companies that would use their bridge for that partnered company's transaction. I forgot what this market strategy is called but I think it works the same as the one that Costco is doing with their Rotisserie chicken and their $1 hotdogs, is it Loss Leader or something like that but it's a really effective marketing strategy because in the case of this bridge service, people will be curious about how you're making money and then they discover you've got other stuff you're doing besides that and then they'll check it out definitely.

That makes more sense as I did not read the reply you made to OP before, but if you also share the same facts then I think most of the members might have the same POV that they must have shared here too. I think its unfair, they should not be charging some people more and for some giving fees from there own pocket. If they are charging some people more its mean they are not giving the money from there own pockets, as  they are charging others more and using there money to compensate the profit and loss.

This is a good move from a business angle but not a good one from trust angle so if they really want to build a reputation in the crypto industry they should think of both users equally. As unfair fee system will put a bad image on them. So far the member who read and replied on this thread must know the reality of the platform and try to avoid it for other services but try to use it for bridging haha.

Aside from that explanation, I highly believe that in some transactions, their fees are quite higher than what the OP paid for his transaction. As the gas fee depends on activity of the network, it doesn't mean he will always get a reasonable or lower gas fee. He was just lucky at the time of his transaction. For sure, the platform is not running their business just to go bankrupt. As others have said, they are surely earning profit in some transactions or other services.

Hmm well, I've explained the role of their ecosystem in this service, as they are not making a random stunt, because the user experience and providing the cheapest service attract more volume on the platform with that, I've mentioned their services from where they are making decent gains, and its likely possible they are not treating their singular service profitable or not, they are more focused on the profitability fo the entire ecosystem and growth to establish a name in the market among different competitors.

If we look at the following transaction, somebody bridged 1.09 USDC from one network and only received 1.01 on a different network. That’s more than 7% difference. They are making a profit by having a spread in the transfer and receive amounts.

True, but this is an open-source non-custodial platform where you don't necessarily need to let them hold your funds for not less than 10 minutes unless you want to provide liquidity.

Not saying a rug pull can't happen (because it definitely still can), but it's a lot harder to pull off.

Before I made the transaction I did my research and it’s a valid service. Even found on Arbitrium website when you try and bridge and they recommend it as one of their 6 third party bridges.

On twitter they have an old account and good reputation and I’ve heard the name before. So I knew it was safe.

The funds came in like 2 minutes and it was the correct contract and amount. So it definitely wasn’t a scam.

I am 100% definitely not saying they are a scam, because they could be 100% legit and a great place. However, it is always valuable to be always careful about every business that offers a service for nearly free, or at a loss. Because their aim could be getting as many customers as they can, and in return they could end up with basically stealing your money when they have enough money on their accounts.

I have seen this on centralized exchanges, we have basically seen them get as many customers as they can, working on a loss, making no profit at all, eat up their funds, and eventually when they reach near zero, they start to use customer money and just leave with most of them and called it a "hack" when in fact they were the ones who took our money.

I saw some transactions on their Explorer and did not find any transactions that have consumed more fees I did not see many so maybe there are some where they chose to pay fees from their own pocket, although how would I know the real and the pain from their own pocket fee? I checked their site domain, it's almost 3 years old now so I would not say they are trying to get some traffic or traction.

As at first, it might look like a stunt of marketing to get more traffic and users but in reality, I think they might be choosing to pay from their own pocket in some cases only, for example, if the users are bridging more money than some X price. Overall, its quite unique I never saw such behavior maybe its there is some kind of offer or they might be getting funds from there other services like liquidity etc.

Bridging is just about switching from one network to another and it's not that tough provided that the both network are paired to switched in between. Like sometimes I tried switching from BSC to bep2 chain although it wasn't that stressful but you would be charged from originator to the Creator, that is to say I was charged from BSC and if you want to convert 1 BNB (bsc) to 1 BNB (bep2) without additional gas fee you wouldn't be able to have that same value again except you have 1.1 BNB (bsc) then you will be able to back same 1 BNB (bep2).

I am not too familiar with bridging of coin or token but what I do is trading via exchange and swapping via Dex. I will say this that as long as  the exchange is concerned, they are organisation  and are profit oriented because they have staff and other things that requires funds to settle. So therefore, they would be subject to collect or charge fee per transaction.

Possibly, your case is likely a different one but I am curious how possible would it be that your transaction scaled through that the exchange paid your transaction fee or am I wrong?  Although they make money from other transactions but I am so curious to know what happened here.

That's very true, and I believe that could be the case of the bridge as well. They might make profit other way by adjusting slippage/spread and something similar. We don't understand their business model yet but I'm pretty sure they aren't losing money but making something with each swap.

Those businesses exist to make profit from such chain-chain conversions and from swaps. Some of the profits could be visible in the form of fees while other profits may be the ones that you mentioned. They might be earning profits from other tools that they are offering but I'm sure they're also making profit from the tool that OP mentioned in the thread.

I'm not 100% certain of this, but they're likely earning a small amount due to the swap pools. Because just like the likes of Uniswap, there's also an LP pool and a 'swap' taking place behind the scenes.

It's like with centralized exchanges — some exchanges have cheaper 'exchange fees' but it doesn't necessarily mean it's actually cheaper because it doesn't account for slippage/spread/etc which are fees that exchange may earn but don't fall under 'exchange fees'.

Bridging from layer 1 to layer 2 cost can be covered and refunded, saved by some DeFi platforms. I wondered same questions like OP and I did not know real answers but my guess goes on there are things behind the scene, between layer 1 and layer 2 that can bring benefit to those DeFi platforms.

As normal users, we can receive airdrops that are sometimes lucrative so what about these DeFi platforms?

My guess is they can receive grants, airdrops from Layer 1 projects too and they use part of it to cover bridging fee for users. It's type of mutual benefits for Layer 1, Layer 2, DeFi platforms and users.

I don't know it is a sustainable model for a long term business operations.

They are making profits on other services they offer, and think not all bridging is the same as yours, there are some times and some chains that you actually pay more than the actual costs of the transfers from the chain.
As I checked, Synapse Protocol has these Swap, Pools, and Stake features where they can make profits there, there will be some fees there that they can use to cover what OP encountered.

Yup, I can agree with your calculations, There's no doubt that from the common / Bussnies perspective, this looks like a bad deal that they are subsidizing their users and making a bad business move in loss/no profit.

But From where I'm thinking of it, buddy this is their business strategy to help their users reach goals and activity goals, as you can see this protocol provides, Staking, DEX intrachain, and other network bridging services as well, Once you find any product/service cheap you always prefer to go for it next time as well, so you are now familiar with them, you'll probably going to use other services provided by them as well due to your previous experiences. This is how they earn profit from diversified ecosystems dn utilize their some of profits to attract more users.

So for the first time I had to use a bridge from ARB to ETH. I waited until the ETH fees were low enough and last weekend we got some 3 Gwei fees and I figured it would be the perfect time to bridge from Arbitrium to Ethereum.

Found a bridge called Synapse. I put in my details about which chain to use and to what destination chain. It was only $2.5 cost. I was like wow, amazing. I assumed it would be $2.5 plus some other gas fees.

So I nervously made the transfer and to my surprise the quotes were correct. Only $2.50 went towards fees, plus a 1 penny transaction gas fee on Arbitrum.

Then out of curosity I checked the ETH transaction and it turns out the Bridge had to pay almost $4 in gas just to make the bridge. So its a loss to them. Why would they do this? I verified the sent token and its not a fake scam token, everything seems legit. So why is the bridge operating at a loss?