Long Take: Synapse Bankruptcy vs. Stripe Expansion & $10B at risk in Ethereum LRT derivatives
Is BaaS Dying or Thriving? And a look at the trigger for a $60MM liquidation on Renzo protocol
Gm Fintech Architects —
We have two articles for you today, something for both the Fintech and DeFi lover. Enjoy!
Fintech: We explore the contrasting fates of Synapse and Stripe within the same industry week, highlighting divergent outcomes in the banking-as-a-service (BaaS) sector. Synapse, once a pioneer in BaaS, declared bankruptcy and was acquired by TabaPay for $10MM, demonstrating the harsh impacts of regulatory burdens and market shifts on middleware platforms. Conversely, Stripe, a major payments entity processing over $1 trillion in volume, is expanding its BaaS offerings independently of its payment solutions, signaling growth and resilience.
DeFi: We look at the risks associated with leveraged liquid restaking tokens (LRTs) and derivatives. These products, found in protocols like EtherFi and Renzo, involve significant sums, including $10 billion committed to EigenLayer. The model depends on the issuance of derivatives in exchange for staked ETH, creating a layered financial structure prone to volatility. This was evident when Renzo's derivative depegged significantly, causing a cascade of liquidations and losses of $60 million in protocols like Morpho and Gearbox. The use of derivatives as collateral, coupled with high leverage, led to these losses, highlighting the inherent risks in such complex financial systems.
Topics: Synapse, Stripe, TabaPay, Mercury, Evolve Bank & Trust, SoftBank, EtherFi, Renzo, EigenLayer, Morpho, Gearbox, Lido
If you got value from this article, let us know your thoughts! And to recommend new topics and companies for coverage, leave a note below.
In Partnership
Generative Ventures invests in the machine economy — the financial activity settled on blockchain protocols and accelerated by the machine labor of generative AI.
Synapse bankruptcy bearish on BaaS, while Stripe is bullish
We don’t get it. These are news from the same week.
Synapse, one of the original middleware banking-as-a-service companies, goes into bankruptcy and is sold off for about $10MM to TabaPay, a payments company. Everyone says BaaS is dead, and that regulators have killed middleware platforms — those connecting neobank apps and underlying banks — through their risk requirements.
Stripe, one of the largest payments companies with over $1 trillion in volume, decouples its payment processing product from its embedded finance platform, so that customers can use its banking-as-a-service and other fintech features while also being able to use PayPal or Adyen.
Which one is it? Is the idea of tech footprints and merchants launching underlying financial services pointless and dead, or is it the growth engine for one of the largest fintech unicorns?