Cosmex– Level 2 ⚡-speed Cardano Native Assets Order Book Exchange

[GENERAL] Name and surname of main applicant

Alexander Nemish

[GENERAL] Email address of main applicant

anemish@gmail.com

Additional applicants

Alexander Nemish

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

8

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

No

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

No

[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?

No

[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 Cosmex backend and Cardano node listener will not be open-sourced to avoid cloning of the exchange. The project Whitepaper with full protocol description and the on-chain code will be open-sourced, so there are no security risks for users.

[METADATA] Category of Proposal

RealFi

[IMPACT] Please describe your proposed solution.

Centralized order book exchanges allow fast trading but they often lack solvency proofs and ownership guarantees for your assets. Think FTX or MtGox. 

Decentralized AMM exchanges are mostly secure, but those are quite slow and expensive due to slippage and “gas” fees.

Hydra L2 solution requires all parties to participate and be always online with milliseconds response, otherwise the Hydra head is closed. It’s not feasible for a large number of clients who can go offline at any moment.

COSMEX uses a novel approach that uses multiple star-shaped two-party Hydra-like state channels. This solution allows parties to join and leave trading whenever they want without disrupting others.

How does it work in a nutshell?

1. Alice deposits funds into a Cosmex smart contract to open a state channel
2. Alice trades off-chain using Cosmex's API as if she were using a regular exchange
3. When Alice is ready to close the channel and withdraw her funds, she can send a transaction with the latest signed snapshot on-chain to initiate the process
4. To keep the channels balanced, Cosmex periodically arranges on-chain transactions that transfer funds between parties
5. If Alice doesn't cooperate or behave, Cosmex will close the channel and settle the balance on-chain. In any case, all her funds are guaranteed to be sent to her.

Overall, Cosmex's channel system provides a secure and efficient way for traders to trade off-chain with the added benefit of reducing transaction fees and increasing transaction speeds.

It's faster and cheaper than on-chain trading, yet still secure and provably solvent.

No slippage, no front-running, no flash-loans, no IOUs. Your keys – your crypto.

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

Cosmex directly addresses this challenge by providing a high-impact product that significantly enhances the Cardano ecosystem and stimulates further adoption.

Expanded Use Cases: Cosmex, as a semi-centralized L2 order book exchange for Cardano, introduces an efficient and high-speed trading solution for Cardano native tokens, thereby expanding the range of possibilities and use cases within the Cardano ecosystem.

Seamless Integrations: Cosmex will offer an API to enable seamless integrations with other platforms, applications, and services within the Cardano ecosystem. This allows for increased collaboration and mutual enhancement of services, further enriching the Cardano ecosystem's utility and value.

Driving Adoption: The unique combination of high-speed transactions, low costs, and robust security provided by Cosmex is expected to attract a wide range of users, including traders and developers, fostering greater adoption of the Cardano ecosystem.

Privacy and Autonomy: Cosmex operates in a permissionless manner, not requiring KYC, and guarantees users' control over their funds. This feature is likely to appeal to users who value their privacy and autonomy, encouraging them to prefer Cosmex over traditional exchanges.

Cosmex will be the first and the only one fast L2 exchange allowing cheap trading. This should greatly benefit arbitrage traders, and be useful specifically for algorithmic stablecoins like Djed.

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

Success of the Cosmex project will be primarily measured by three key indicators:

User Adoption: The number of users actively engaging with and testing our platform on the Cosmex Testnet. Increased user activity signifies market interest and successful adoption.

User Feedback: We'll actively seek and analyze feedback from our users. Positive user experiences, alongside constructive suggestions for improvement, will be considered a measure of success.

Proof of Concept Validation: The successful demonstration of our concept, its feasibility, and its appeal to traders will be crucial. Validation that our system works as intended, and that it brings noticeable benefits to traders, will be considered a significant marker of success.

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

The Cosmex Whitepaper and Cosmex Smart Contract will be fully open source.

All the outputs and results will be published on GitHub and Cosmex site.

The documentation will be published online on https://cosmex.io

The news, updates and announcements will be published on the official Cosmex Twitter: 

@CosmexExchange

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

I’m a former compiler engineer at IOG, I worked on Marlowe DSL (https://marlowe.iohk.io).

I’m a senior Scala engineer with more than 10 years of Scala development experience with companies like UBS and Deutsche Bank.

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

The main goals for the Cosmex project include:

Enhanced Trading Experience: Uniting the speed of centralized exchanges with the ownership security of decentralized protocols.

Security Assurance: Guaranteeing users' fund safety and unrestricted withdrawal access.

Innovative Infrastructure: Implementing a unique approach with star-shaped two-party state channels on the Cardano blockchain.

Whitepaper Development: Detailing the Cosmex system, benefits, and development roadmap in a comprehensive whitepaper.

We'll validate our approach through:

Proof of Concept (POC): Developing a working model to demonstrate the effectiveness of our system, including its speed, efficiency, and security.

Minimum Viable Product (MVP): Releasing a streamlined version of our product for user testing, ensuring practical usability and robust performance.

Whitepaper Peer Review: Inviting field experts to review our whitepaper, enabling us to refine our design and strategy based on informed feedback.

Through a combination of technical milestones and user-centered evaluations, we aim to build Cosmex as a pioneering, secure, and user-friendly exchange platform.

[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.

Milestones/Goals/Deliverables – Hours

Cosmex Whitepaper - 1 month

Write a whitepaper describing Cosmex protocol - 160

Cosmex Smart Contracts - 2 months

Develop Cosmex State Machine contract - 160

Tests for Cosmex State Machine contract - 160

Cosmex Exchange API - 4 months

Matching engine and Order Book implementation - 160

Exchange API implementation and tests - 160

Cardano Node integration - 80

Documentation, examples, tutorials - 80

Testnet Deployment and testing - 160

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

Cosmex Whitepaper

Deliverables: A comprehensive whitepaper detailing the protocol of Cosmex.

Outputs: An official document describing Cosmex's system, benefits, and development roadmap.

Intended Outcomes: The whitepaper will serve as a solid foundation for the project and a reference point for stakeholders, helping them understand the project's goals, methodology, and roadmap.

Cosmex Smart Contracts

Deliverables: Developed Cosmex State Machine contract and its corresponding tests.

Outputs: A fully functional smart contract that handles the operations of Cosmex, and a set of tests to ensure the reliability and security of the contract.

Intended Outcomes: The smart contracts will enable the core functionalities of Cosmex. The tests will ensure that the system is secure and operates as expected.

Cosmex Exchange API

Deliverables: Matching engine and Order Book implementation, Exchange API implementation, and tests.

Outputs: Software that handles the matching of trades, management of the order book, and provides an interface for interacting with the exchange. Tests will ensure the software performs as expected.

Intended Outcomes: The Exchange API will provide a fast and efficient interface for trading on Cosmex. The matching engine and order book implementation will ensure efficient and fair trade execution.

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

From the estimates above here is the budget breakdown:

Subtotal hours - 1120

Contingency Budget (20%) - 224 hours

Total engineering hours - 1344

Engineering hour price, including taxes etc, $/hour - 75

Development Budget - $100,800

Ada price (considering volatility) - 0.25

Budget in Ada - 403,200

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

The Cosmex project presents substantial value for money for the Cardano ecosystem due to several factors:

Fostering Adoption: By offering a Layer 2 solution with fast, cheap, and secure trading functionalities, Cosmex can attract more users to the Cardano ecosystem. The project may help to onboard users who might otherwise be deterred by the latency or high costs of on-chain trading.

Novel Approach to Trading: Cosmex presents a unique solution to common problems faced by centralized and decentralized exchanges. With its provably solvent, semi-centralized design, it brings together the benefits of both worlds, enhancing user experience and overall trust in the Cardano ecosystem.

Expansion of the Cardano DeFi Ecosystem: As the DeFi space is burgeoning, Cosmex can play a crucial role in the growth and diversification of the Cardano DeFi ecosystem. It can pave the way for new DeFi projects to be built on Cardano, reinforcing its competitive positioning in the DeFi market.

Research & Development Contribution: The Cosmex whitepaper and subsequent development will add to the academic and intellectual foundation of the Cardano project. These resources can be used by other developers and researchers in the community to build more advanced solutions.

Security and Ownership: By ensuring user ownership of tokens and guaranteeing solvency, Cosmex provides a significant layer of security for the users in the Cardano ecosystem, which in turn, can boost overall confidence in the system and potentially attract more users.

The estimated cost of the project, considering these benefits, signifies a robust return on investment for the Cardano ecosystem.

[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.

I Accept