Market Making and High Frequency Trading on Cardano

[GENERAL] Name and surname of main applicant

[GENERAL] Email address of main applicant

Additional applicants

None

[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.”

Project will be fully open source.

[METADATA] Category of Proposal

[IMPACT] Please describe your proposed solution.

The importance of market-making bots for enhancing liquidity in exchanges cannot be overemphasized. However, a challenge arises due to the lack of trading bot frameworks compatible with Cardano. The reason lies in the distinctive nature of Cardano's eUTXO model, which necessitates completely different functions to manage inventory or place buy and sell orders.

This project aims to bridge that gap by providing an open-source framework and templates specifically designed for trading bots on Cardano. Our primary objective is to develop market-making bots to boost liquidity, with our focus on MuesliSwap. 

We recognize that different users may have varied trading strategies. Therefore, our framework will provide a default market-making strategy and allow users to extend and customize it according to their trading strategies.

Our aspirations extend beyond market-making as we strive to offer templates tailored for various strategies and use cases. These encompass liquidity mining, arbitrage, and other tactics, thus enhancing the adaptability and versatility of our bot framework to diverse market conditions. Given the open-source nature of our framework, users have the unique opportunity to modify and extend its application to other DEXes, allowing for market-making across an array of exchanges.

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

Having an open-source framework brings more liquidity not only to MuesliSwap but DEXes across Cardano. It increases decentralization by giving the control of trading bots into the hands of the community.

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

We aim to foster widespread adoption within the Cardano community by delivering a versatile, easily customizable tool to enhance liquidity across diverse platforms. Thus, we perceive success not merely through the functionality and efficiency of the tool but significantly through its acceptance and usage. We will measure this via our open-source GitHub repository.

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

The output of the Project will continue to be shared continuously through commits on MuesliSwapTeam repositories and explanatory Tweets through the @MuesliSwapTeam Twitter account.

[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. They 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.

The MuesliSwap Team combines a rich experience in Cardano's intricate blockchain ecosystem and market-making. With in-depth knowledge of Cardano's distinctive eUTXO model, we possess the unique technical know-how to build a trading bot framework fully compatible with this innovative blockchain platform. Beyond understanding the technicalities of Cardano, our team members are also skilled in devising and implementing effective market-making strategies. By combining our Cardano-specific expertise with our proficiency in market-making, we are well-equipped to deliver a bot framework that can significantly contribute to the liquidity and dynamism of Cardano-based DEXes.

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

The primary objectives of our project revolve around creating an open-source trading bot framework that aligns with Cardano's structure, increasing liquidity on MuesliSwap, and decentralizing the market-making process. We aspire to cultivate a tool that users can intuitively modify and expand. Our confidence in the feasibility of our approach stems from our extensive experience in market-making.

[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.

Step 1: Research: The initial phase involves in-depth analysis and understanding of the technical requirements. (1 month)

Step 2: Design and Develop the Open-Source Trading Bot Framework: Design and development of a robust, open-source trading bot framework that is specifically compatible with the Cardano platform. (2.5 months)

Step 3: Integration with MuesliSwap: Upon completion of the framework, it will be integrated with MuesliSwap. (1.5 months)

Step 4: Implementation of Customizable Templates for Various Trading Strategies: The final stage involves developing and implementing customizable templates to accommodate various trading strategies, empowering users to tailor the bot to their specific trading needs and extending its versatility and utility. 

(1 month)

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

Step 1: Research and Understand the Market and Technical Needs

• Deliverable: Report detailing requirements and technical needs.
• Output: A thorough understanding of the technical requirements and potential challenges
• Intended Outcome: Setting a solid foundation for the development phase.

Step 2: Design and Develop the Open-Source Trading Bot Framework

• Deliverable: An open-source trading bot framework compatible with the Cardano platform
• Output: Release of the open-source code on GitHub
• Intended Outcome: Providing an open-source codebase for a Cardano-compatible bot framework

Step 3: Integrate with MuesliSwap and Test for Performance

• Deliverable: Integration of the bot framework with MuesliSwap.
• Output: Open-source code to connect the market-maker to MuesliSwap to improve liquidity
• Intended Outcome: Ensuring the bot is working as expected on MuesliSwap

Step 4: Implement Customizable Templates for Various Trading Strategies

• Deliverable: Multiple customizable templates that support various trading strategies
• Output: Release of these templates as part of the bot framework for users to utilize
• Intended Outcome: Empowering users to easily adapt and extend the bot according to their trading strategies

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

Step 1: (120 hours, 12000 ADA)

Step 2: (240 hours, 24000 ADA)

Step 3: (120 hours, 12000 ADA)

Step 4: (120 hours, 12000 ADA)

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

Offering an open-source framework significantly impacts the DEX landscape by driving more liquidity, a critical aspect of successful, efficient trading. This tool elevates decentralization to a new level by placing the reins of trading bot control directly with the community, democratizing access, and empowering individuals.

Moreover, it creates a conducive environment for innovation, giving users the flexibility to formulate their unique trading strategies. This freedom extends to constructing their connectors, creating a fully personalized trading experience. By enabling such customization, we can encourage a broader range of strategies and approaches, further diversifying and enriching the trading landscape on DEXes.

[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.