DAO Treasury & Protocol Parameter Management via On-Chain Governance - By MuesliSwap

[GENERAL] Name and surname of main applicant

[GENERAL] Email address of main applicant

Additional applicants

Not applicable.

[GENERAL] Please specify how many months you expect your project to last (from 2-12 months)

[GENERAL] Please indicate if your proposal has been auto-translated into English from another language.

[GENERAL] Does your project have any dependencies on other organizations, technical or otherwise?

[GENERAL] If YES, please describe what the dependency is and why you believe it is essential for your project’s delivery. If NO, please write “No dependencies.” .

No dependencies.

[GENERAL] Will your project’s output/s be fully open source?

[GENERAL] If NO, please describe which outputs are not going to be open source. If YES, please write “Project will be fully open source.”

The project will be fully open-source.

[METADATA] Category of proposal

[IMPACT] Please describe your proposed solution.

Governance generally comes in a variety of forms: Its implementations may range from simple non-binding community votings, to completely decentralised treasury management and protocol parameter control. Each such form of governance comes with its own requirements in terms of the trade-offs to be made regarding decentralisation, transaction cost, ease-of-use, etc.

In Fund9, the Cardano community supported us in developing a secure off-chain governance solution that has since been open-sourced and successfully used for the first elections on the MuesliSwap governance platform. The advantages of such an off-chain solution are that there is no transaction fee, no load is put on the chain, and yet the system is still completely secure and even comes with many desirable properties regarding privacy and ballot auditability. Such a solution is ideal for involving the community in further development of a platform, i.e. for elections whose result does not directly trigger other on-chain events.

Governance however also includes processes for which such an off-chain voting system is not well suited: Many DAOs are interested in maintaining a treasury, e.g. to fund further development of their products. For this kind of treasury management, having to rely on a trusted party to execute the outcomes of a vote is obviously undesirable. Instead, the treasury should be smart-contract governed and hence directly linkable to voting outcomes - enabling the DAO to operate in a fully decentralised way.

Another instance where election results should ideally directly trigger on-chain events are protocol parameter updates: For example, DEX protocols suitable for stable coins, such as concentrated liquidity pools (as implemented on MuesliSwap) or other stable swap mechanisms have lately seen increasing adoption on Cardano. Such protocols involve certain parameters governing the exact behaviour of the protocol. These parameters can either be manually set by a trusted party. A more desirable solution though is of course to perform parameter updates via smart contract controlled community governance.

Currently, simple on-chain voting protocols exist on Cardano. However, a key part of leveraging the power of such elections is to link their outcome to other on-chain events as described in above examples. Such integrations are still lacking on Cardano. In particular, we are not aware of any smart contract based treasury implementation that may be used together with such votings. Cardano also does not yet have any (DeFi) protocols whose parameters are controlled via on-chain governance. We think that providing and open sourcing these missing pieces will pave the way for realising the vision of truly decentralised DAOs on Cardano.

[IMPACT] How does your proposed solution address the challenge and what benefits will this bring to the Cardano ecosystem?

Our goal is to provide a full-fledged open-source community governance platform that can easily be adopted by any project building on Cardano that aims to turn into a DAO. This governance package includes our already deployed secure off-chain voting system from Fund9 and will be complemented by the now proposed on-chain voting with treasury management and parameter update integration.

Having such a governance solution available will significantly simplify the process of building DAOs on Cardano. This may lead to an increasing number of DAOs choosing Cardano as their home which in turn enriches the Cardano ecosystem: DAOs <3 Cardano, and Cardano <3 DAOs.

[IMPACT] How do you intend to measure the success of your project?

The Cardano Voltaire era is all about turning the Cardano blockchain into a self-sustaining system at a global scale. With our efforts of developing dApp-level governance infrastructure, we hope to greatly contribute to effective and secure governance at a project-level scale. We consider this project a success if not only MuesliSwap itself can benefit from decentralised treasury management and community governed protocol parameter control (which it definitely will!) but also many other projects can reuse our open-source code or even extend it further.

[IMPACT] Please describe your plans to share the outputs and results of your project?

We have a comprehensive plan to share the outputs and results of our project with the Cardano community and the broader blockchain ecosystem. Our goal is to ensure transparency, knowledge sharing, and wide accessibility to the outcomes of our research and development efforts. Here are our plans to disseminate the project's outputs over a reasonable timescale:

1. Blog posts: We will publish regular blog posts outlining our insights and proposed solutions, their implementation on Cardano, and other findings from our research. These blog posts are also used to share detailed updates on our progress with the community and to give outlooks on future steps and directions.
2. Open-source repositories: The development process, including the codebase will be shared on open-source platforms like GitHub. We will create dedicated repositories that provide the community with access to the code, documentation, and updates on the development progress. By regularly updating and maintaining these repositories, we ensure that developers and researchers can access and contribute to the project's outputs throughout its duration.
3. Community engagement: We plan to actively engage with the Cardano community through various channels, including social media, forums, and community events. We will conduct regular Twitter spaces sessions, where we will provide updates on the development process, share insights from our research, and invite community feedback and suggestions. These sessions will foster dialogue, collaboration, and knowledge exchange among community members.
4. Documentation and tutorials: To facilitate adoption and understanding, we will create comprehensive documentation and tutorials that explain the implementation, usage, and integration of our governance solutions. These resources will be made available on our project's website and other relevant platforms. By providing clear and accessible documentation, we aim to empower developers to integrate our governance mechanisms into their own projects and contribute to the growth of the Cardano ecosystem.

By executing these plans and ensuring a consistent and transparent approach to sharing outputs, we aim to maximize the impact of our project, foster collaboration, and contribute to the overall advancement of DAOs on Cardano.

[CAPABILITY/ FEASIBILITY] What is your capability to deliver your project with high levels of trust and accountability?

The MuesliSwap Team is well-known in the community and credited with delivering high-tech solutions. We started the first DEX on Cardano, months before its competition launched and to date provides the only hybrid AMM-Orderbook DEX with integrated DEX Aggregator.

In particular, MuesliSwap Team members are known to be particularly strong in developing secure smart contract based dApps, pioneering the development of DeFi protocols since the early days of SCs on Cardano. The described SC-based treasury and voting mechanisms hence fall into our area of expertise.

The Team has also already completed two projects funded in Fund 9 of Catalyst among which is the described off-chain governance solution: During the first successful elections conducted via this platform with the MuesliSwap community, we have received very positive feedback. As a large team of dedicated techies, we have the competence, capacity, and motivation to also complete this second part of our governance infrastructure in time and with high quality.

[CAPABILITY/ FEASIBILITY] What are the main goals for the project and how will you validate if your approach is feasible?

The main goal is to first develop a treasury smart contract, as well as a generic interface for updating protocol parameters. Then, we will implement integrations enabling to trigger treasury as well as parameter update events as a direct (i.e. linked via smart contract) consequence of on-chain voting outcomes. Regarding on-chain voting, we will consider and evaluate the suitability of various existing implementations and if necessary make adjustments to enable adoption in our setting.

To validate the approach, the team will start by designing a high-level concept of the transactions involved in the process of secure treasure management and parameter updates, and what conditions need to be ensured by the respective smart contracts. We will also deep dive into the codebases of existing on-chain voting solutions to validate their security and applicability. Once this first validation step has been concluded, the second phase of the project will then be devoted to implementation of the designed contracts, respective off-chain back-end infrastructure, and front-end transaction building that is required to interact with the system.

[CAPABILITY/ FEASIBILITY] Please provide a detailed breakdown of your project’s milestones and each of the main tasks or activities to reach the milestone plus the expected timeline for the delivery.

Milestone 1: Research (2 months)

• Design & outline basic functionality that needs to be provided by treasury contract and protocol parameter update interface
• Comprehensive comparison, in-depth code review, and testing of existing on-chain governance solutions
• Planning integration of new governance components into existing off-chain voting platform developed by us in Fund9
• Writing blog post presenting out findings and detailing the resulting proposed solutions

Milestone 2: Development (4 months)

• Treasury smart contract
• Implementation of contract itself
• Development of off-chain backend infrastructure for interaction with smart contract
• Testing and internal security audit
• On-Chain voting
• Adjusting existing on-chain voting solutions to our setting
• Integrate on-chain election into our existing off-chain voting platform
• Testing and internal security audit
• Protocol parameter update mechanisms
• Integration of parameter updates at the example of one or multiple widely used open-source DeFi protocol (to be selected) including changes to smart contracts, testing, implementation of required off-chain tooling
• Providing documentation for integration of further protocols
• Testing and internal security audit

Note: The timeline provided is an estimate and may vary depending on the availability of resources and external factors.

Throughout the project, we will also engage in Twitter spaces and regular technical updates to keep the Cardano community informed about the development process.

By following these milestones and associated activities, we will progress from research, design, and security analysis to development, testing, and documentation. This structured approach ensures the orderly execution of the project and allows for the validation and refinement of the proposed liquidity provision models.

[CAPABILITY/ FEASIBILITY] Please describe the deliverables, outputs and intended outcomes of each milestone.

Milestone 1: Research (2 months)

Deliverables:

1. Design and outline of basic functionality required for the treasury contract and protocol parameter update interface.
2. Comprehensive comparison, in-depth code review, and testing of existing on-chain governance solutions.
3. Plan for integrating new governance components into the existing off-chain voting platform developed in Fund9.
4. Blog post presenting research findings and proposing solutions.

Outputs:

1. Detailed design and functional specifications for the treasury contract and protocol parameter update interface.
2. Comparative analysis report on existing on-chain governance solutions.
3. Integration plan outlining the steps for incorporating new governance components into the off-chain voting platform.
4. Blog post outlining the research findings and proposed solutions.

Intended outcomes & measurement of progress:

1. Clear understanding of the required functionality for the treasury contract and protocol parameter update interface.
2. Informed decision-making based on the comparison and evaluation of existing on-chain governance solutions.
3. Feasible plan for integrating new governance components into the existing off-chain voting platform.
4. Dissemination of research findings and proposed solutions to the wider community.

Milestone 2: Development (4 months)

Deliverables:

1. Treasury smart contract:

• Implementation of the treasury contract itself.
• Development of off-chain backend infrastructure for interaction with the smart contract.
• Testing and internal security audit.

1. On-chain voting:

• Adjustment of existing on-chain voting solutions to the project's requirements.
• Integration of on-chain elections into the existing off-chain voting platform.
• Testing and internal security audit.

1. Protocol parameter update mechanisms:

• Integration of parameter updates into one or multiple widely used open-source DeFi protocols (to be selected).
• Changes to smart contracts, testing, and implementation of required off-chain tooling.
• Documentation for the integration of further protocols.
• Testing and internal security audit.

Outputs:

1. Deployed and functioning treasury smart contract with backend infrastructure.
2. Integrated on-chain voting solution within the existing off-chain voting platform.
3. Successfully implemented protocol parameter updates for selected DeFi protocols.
4. Documentation outlining the process for integrating additional protocols.
5. Completed testing and internal security audit report.

Intended outcomes & measurement of progress:

1. Operational treasury contract enabling decentralized treasury management.
2. Seamless integration of on-chain voting into the existing off-chain voting platform.
3. Demonstrated capability to perform protocol parameter updates via on-chain governance.
4. Available documentation for integrating other protocols into the governance framework.
5. Assurance of system security and reliability through testing and internal security audit.

[RESOURCES & VALUE FOR MONEY] Please provide a detailed budget breakdown of the proposed work and resources.

The costs are based on the assumption 1 ADA ~ $0.3

Milestone 1: Research (2 months)

• Design & outline basic functionality that needs to be provided by treasury contract and protocol parameter update interface (120 hours)
• Comprehensive comparison, in-depth code review, and testing of existing on-chain governance solutions (160 hours)
• Planning integration of new governance components into existing off-chain voting platform developed by us in Fund9 (60 hours)
• Writing blog post presenting out findings and detailing the resulting proposed solutions (10 hours)

Total number of hours for Milestone 1: 350

Total cost for Milestone 1: $10,500

Milestone 2: Development (4 months)

• Treasury smart contract (total: 400 hours)
• Implementation of contract itself (200 hours)
• Development of off-chain backend infrastructure for interaction with smart contract (120 hours)
• Testing and internal security audit (80 hours)
• On-Chain voting (total: 580 hours)
• Adjusting existing on-chain voting solutions to our setting (130 hours)
• Integrate on-chain election into our existing off-chain voting platform (350 hours)
• Testing and internal security audit (100 hours)
• Protocol parameter update mechanisms (total: 520 hours)
• Integration of parameter updates at the example of one or multiple widely used open-source DeFi protocol (to be selected) including changes to smart contracts, testing, implementation of required off-chain tooling (360 hours)
• Providing documentation for integration of further protocols (40 hours)
• Testing and internal security audit (120 hours)

Total number of hours for Milestone 1: 1,500

Total cost for Milestone 1: $45,000

Total cost for Project (sum of cost for Milestones 1 & 2): $55,500

[RESOURCES & VALUE FOR MONEY] How does the cost of the project represent value for money for the Cardano ecosystem?

The cost of the project represents value for money in the Cardano ecosystem by reflecting the necessary investment in research, development, and expertise required to achieve the goals of decentralised governance.

In terms of justification, the costs are determined based on the estimated number of hours required for each milestone, considering the complexity of the tasks involved and the expertise of the team members. These costs are comparable to industry standards and reflect the market rates for blockchain development, ensuring that the project attracts and retains skilled professionals.

The detailed breakdown of hours and costs demonstrates a comprehensive approach, including research, design, testing, and security audits. This level of thoroughness is crucial to ensure the reliability, security, and usability of the governance platform. The costs associated with each milestone align with the effort required, ensuring a realistic budget that covers the necessary resources and expertise.

Furthermore, the investment in this project contributes to the long-term success and growth of the Cardano ecosystem. By enabling decentralised governance, the project aims to empower the community, foster innovation, and drive the development of decentralized autonomous organizations (DAOs) on Cardano. The value of achieving a truly decentralized ecosystem and the potential impact it can have on the Cardano community justifies the costs associated with this project.

Overall, the costs outlined for the project are proportional to the complexity of the tasks, the expertise required, and the potential value it brings to the Cardano ecosystem. The investment reflects a commitment to building a robust and decentralized governance infrastructure, providing value for money by laying the foundation for sustainable and community-driven growth on the Cardano platform.

[IMPORTANT NOTE] The Applicant agreed to Fund10 rules and also that data in the Submission Form and other data provided by the project team during the course of the project will be publicly available.