Liquidity Efficient DEX Models for Cardano

[GENERAL] Name and surname of main applicant

[GENERAL] Email address of main applicant

Additional applicants

Non

[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 3 months after launch.

[METADATA] Category of Proposal

[IMPACT] Please describe your proposed solution.

Our proposed solution aims to tackle the problem of inefficient liquidity utilization and impermanent loss in Cardano's decentralized exchanges (DEXs). We will conduct thorough research to develop novel liquidity provision models that are specifically tailored for Cardano's eUTXO model. These models will optimize liquidity use and minimize impermanent loss, providing a more efficient and user-friendly experience for liquidity providers and traders.

Our research findings will be transformed into open-source smart contracts, which will be made available to the entire Cardano community. We will ensure the safety and reliability of these contracts by conducting comprehensive smart contract audits and seeking external consultation from traditional finance experts.

By developing and implementing these liquidity efficient models, we aim to enhance the competitiveness of Cardano's DeFi ecosystem. These models will attract more users to participate in decentralized finance on Cardano, offering a compelling alternative to centralized finance platforms. Furthermore, we will actively share our research outcomes, development progress, and audit results with the community to foster transparency, collaboration, and knowledge sharing.

Overall, our proposed solution empowers the Cardano ecosystem with cutting-edge liquidity provision mechanisms, driving innovation, and expanding the possibilities of DeFi applications on the platform.

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

Our proposed solution directly addresses the challenge of inefficient liquidity use and impermanent loss in Cardano's decentralized exchanges (DEXs). By researching and developing liquidity provision models optimized for Cardano's eUTXO model, we aim to bring several benefits to the Cardano ecosystem:

1. Enhanced liquidity utilization: Our solution will enable DEXs on Cardano to utilize liquidity more efficiently. By introducing innovative models specifically designed for Cardano's unique eUTXO model, liquidity providers will experience improved returns on their assets, attracting more participants to provide liquidity and increasing overall liquidity depth.
2. Reduced impermanent loss: Impermanent loss is a major concern for liquidity providers. Our solution will mitigate impermanent loss by designing liquidity provision models that are better aligned with Cardano's architecture. This will minimize the potential loss experienced by liquidity providers and encourage long-term participation in liquidity provision.
3. Increased competitiveness of Cardano's DeFi ecosystem: By offering liquidity efficient DEX models, Cardano will stand out as a platform with robust and user-friendly decentralized finance options. This increased competitiveness will attract more users and projects to build on Cardano, driving further adoption and growth of the ecosystem.
4. Empowering decentralized finance innovation: Our proposed solution will create a foundation for developing a wide range of innovative DeFi applications on Cardano. Efficient liquidity provision models open up new possibilities for creating diverse financial instruments, enabling advanced decentralized trading strategies, and fostering the growth of decentralized lending, borrowing, and asset management solutions.
5. Knowledge sharing and collaboration: Through open-source code, research papers, and transparent audit processes, our solution will actively contribute to the knowledge sharing and collaboration within the Cardano community. Developers and researchers will have access to our findings, enabling them to build upon our work and collectively push the boundaries of decentralized finance on Cardano.

Overall, our solution directly addresses the challenge by providing liquidity efficient DEX models tailored to Cardano's eUTXO model. This will bring significant benefits to the Cardano ecosystem, including enhanced liquidity utilization, reduced impermanent loss, increased competitiveness, innovation, and a collaborative environment for further advancement in decentralized finance.

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

We intend to measure the success of our project through various key indicators and metrics. These include:

1. Adoption and integration: We will track the adoption and integration of our proposed liquidity provision models by Cardano DEXs. The number of DEXs implementing our models and the volume of liquidity provided through these models will serve as indicators of successful adoption.
2. Liquidity utilization improvement: We will measure the impact of our solution by monitoring the improvement in liquidity utilization within the Cardano ecosystem. This includes assessing the increase in liquidity depth, the reduction in idle or unutilized liquidity, and the overall efficiency of liquidity provision.
3. Impermanent loss reduction: We will evaluate the reduction in impermanent loss experienced by liquidity providers utilizing our proposed models. By comparing the impermanent loss metrics before and after the implementation of our models, we can gauge the effectiveness of our solution in mitigating this loss.
4. User feedback and engagement: Gathering feedback from liquidity providers, traders, and users of the DEXs implementing our models will provide valuable insights into the user experience and satisfaction. Positive feedback, increased user engagement, and active participation will indicate the success of our solution in meeting user needs.
5. Community impact: We will assess the impact of our project on the Cardano community by analyzing the level of knowledge sharing, collaboration, and contributions within the ecosystem. The dissemination of research findings, open-source code, and active participation in community discussions will demonstrate the project's success in fostering community growth and engagement.
6. Market share and competitiveness: Monitoring the market share and competitiveness of Cardano's DeFi ecosystem relative to other blockchain platforms will serve as an overall indicator of success. Increased user adoption, the growth of decentralized applications, and the platform's attractiveness to developers and projects will reflect the positive impact of our solution.

By tracking these metrics and continuously evaluating the progress and impact of our project, we can effectively measure the success and effectiveness of our proposed liquidity efficient DEX models on Cardano.

[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. Research paper: We will publish a detailed research paper that outlines our proposed liquidity provision models, their implementation in the Cardano eUTXO model, and the findings from our research. This paper will be made publicly available through academic platforms, research repositories, and our project's website. We aim to release the research paper within the first few months of the project's timeline.
2. Open-source repositories: The development process, including the codebase for our liquidity efficient DEX models, 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. Audit process transparency: We will make the audit process transparent by sharing the details and results of the security audits conducted on our smart contracts. This will instill confidence in the community and provide valuable insights into the robustness and reliability of our solutions. We will share audit reports and summaries with the community, highlighting any improvements or refinements made based on audit findings.
5. Documentation and tutorials: To facilitate adoption and understanding, we will create comprehensive documentation and tutorials that explain the implementation of our liquidity provision models. 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 models 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 decentralized finance on Cardano.

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

MuesliSwap Labs, has the capability to deliver the proposed project with high levels of trust and accountability. As the developers of MuesliSwap, one of the largest decentralized applications on Cardano, we have extensive experience in DeFi infrastructure development, Haskell programming, and smart contract audits. We have a strong understanding of the Cardano ecosystem, including its off-chain and on-chain components, and we have actively contributed to the growth and success of the Cardano community.

To ensure accountability, we will follow a detailed plan with key milestones and a clear timeline for delivering the project. Our plan includes conducting research, developing open-source smart contracts, and undergoing a thorough audit process. We will maintain transparency by sharing updates with the community through Twitter spaces and technical updates. By documenting our development process on open-source repositories like GitHub, the community will have visibility into the progress and be able to track our project's advancements.

Furthermore, we will engage external experts in traditional finance to consult on liquidity provision models, ensuring a well-rounded approach to our research and development. We will also prioritize security by conducting thorough security audits and peer reviews of our smart contracts. The audit process will be made transparent, and the results will be shared with the community.

While the proposed project has some inherent risks, such as the possibility of suboptimal research findings, we believe that conducting parallel research projects in the area of efficient liquidity use in DeFi is beneficial for overall progress. We have a robust development team that will ensure the successful delivery of the project, and any additional costs beyond the requested funding will be covered by the MuesliSwap team, eliminating budget-related risks.

In conclusion, with our experience, expertise, and commitment to transparency, we are confident in our capability to deliver the project with high levels of trust and accountability, ultimately benefiting the Cardano ecosystem and contributing to the growth of decentralized finance on the platform.

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

The main goals of the Liquidity Efficient DEX models project are to address the inefficiencies and impermanent loss associated with the automated market maker (AMM) model used by many Cardano decentralized exchanges (DEXs) and to propose novel liquidity provision models that leverage the unique Cardano EUTXO model. The project aims to improve the use of liquidity, attract more users to DeFi on Cardano, and provide a competitive advantage over account-based blockchains.

To validate the feasibility of our approach, we will undertake the following steps:

1. Research and Analysis: We will conduct in-depth research on existing liquidity provision models, including a literature review and consultation with traditional finance experts. This research will help us identify the shortcomings of the current AMM model and explore alternative liquidity provision approaches that align with the Cardano EUTXO model.
2. Model Design and Development: Based on the research findings, we will design and develop new liquidity provision models that address the identified inefficiencies. This will involve leveraging the unique features of the Cardano EUTXO model and developing Plutus smart contracts.
3. Open Source Implementation: We will transform our research and development into open-source smart contracts that can be used by the entire Cardano community. This step ensures transparency and allows for collaboration and feedback from the community, validating the feasibility and effectiveness of our approach.
4. Audit and Security Analysis: We will engage reputable audit companies to perform security audits of our smart contracts. The audit process will evaluate the correctness, robustness, and security of our code, providing validation of our approach and ensuring that the contracts are safe for community use.
5. Community Feedback and Adoption: Throughout the project, we will actively engage with the Cardano community, seeking feedback, conducting Twitter spaces, and providing regular technical updates. Community engagement will help validate the feasibility and desirability of our approach, as well as drive adoption of the proposed liquidity provision models by other dApps and projects on Cardano.

By following these steps, we will be able to validate the feasibility of our approach through research, development, open-source implementation, security audits, and community feedback. The successful implementation and adoption of our liquidity provision models by the Cardano community will further validate the feasibility and effectiveness of our project's goals.

[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 (1-2 months)

• Conduct a comprehensive literature review of existing liquidity provision models (30 hours)
• Consult with traditional finance experts on liquidity provision models (10 hours)
• Develop a new liquidity provision model suitable for the Cardano EUTXO model (40 hours)
• Review and refine the new model to align with the eUTXO model (30 hours)
• Write a research paper outlining the proposed liquidity models (50 hours)
• Expected Timeline: Month 1 to Month 2

Milestone 2: Development (2-3 months)

• Architectural and model design for on-chain code (50 hours)
• Develop smart contract components using OpShin (175 hours)
• Develop a testing framework for on-chain code and write tests (75 hours)
• Perform peer review of smart contract code (25 hours)
• Conduct security analysis of on-chain code (75 hours)
• Document on-chain code (5 hours)
• Technical requirements analysis and development of off-chain code (30 hours)
• Develop components in specified programming language for off-chain code (100 hours)
• Develop off-chain tests and test the code (45 hours)
• Perform security analysis of off-chain code (50 hours)
• Peer review of off-chain code (20 hours)
• Document off-chain code (5 hours)
• Expected Timeline: Month 3 to Month 5

Milestone 3: Audit (1 month)

• Identify reputable audit companies and obtain quotes (5 hours)
• Coordinate the audit process with the selected company (to be determined)
• Provide necessary documentation and access for the audit (to be determined)
• Review audit findings and address any identified issues (to be determined)
• Expected Timeline: Month 6

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 and design to development, testing, security analysis, and audit. 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

• Deliverables:Comprehensive research paper outlining the proposed liquidity provision models leveraging the Cardano EUTXO model.
• Outputs:Literature review of existing liquidity provision models.
• Consultation with traditional finance experts on liquidity provision models.
• Development of a new liquidity provision model suitable for the Cardano EUTXO model.
• Review and refinement of the new model to align with the eUTXO model.
• Intended Outcomes:Clear understanding of existing liquidity provision models and their limitations.
• Identification of a new liquidity provision model suitable for Cardano.
• Documentation of the research findings in the research paper.

Milestone 2: Development

• Deliverables:Open-source repositories on GitHub for the developed code.
• Outputs:Architecture and model design for on-chain code.
• Development of smart contract components using Plutus and Haskell.
• Development of a testing framework for on-chain code and written tests.
• Peer review of smart contract code.
• Security analysis of on-chain code.
• Documentation of on-chain code.
• Technical requirements analysis and development of off-chain code.
• Development of components in the specified programming language for off-chain code.
• Development of off-chain tests and testing of code.
• Security analysis of off-chain code.
• Peer review of off-chain code.
• Documentation of off-chain code.

Milestone 3: Audit

• Deliverables:Audit report detailing the findings and recommendations.
• Outputs:Coordination with reputable audit companies for the audit process.
• Provision of necessary documentation and access for the audit.
• Review and resolution of any identified issues from the audit.
• Intended Outcomes:Thorough evaluation and validation of the developed code for security and functionality.
• Assurance of the quality and reliability of the proposed liquidity provision model.

In addition to the deliverables and outputs, the project will also produce documentation throughout each milestone, including the research paper, technical documentation for the on-chain and off-chain code. These documents will provide detailed information about the project, its objectives, methodologies, and implementation guidelines, ensuring transparency and facilitating future development and adoption by the Cardano community.

[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

• Research of currently existing models (incl. literature review): 30 hours - $2,250
• Consultancy with traditional finance experts on liquidity provision models: 10 hours - $750
• Development of new model: 40 hours - $3,000
• Review of new model including adjustment to eUTXO model: 30 hours - $2,250
• Writing of research paper including review: 50 hours - $3,750
• External Consultancy on Traditional Finance Research: $5,000

Total Cost for Milestone 1: $17,000

Milestone 2: Development

• On-Chain Code:Architecture and Model Design: 50 hours - $3,750
• Development of smart contract components (Opshin): 175 hours - $13,125
• Development of testing framework for on-chain code and writing of tests: 75 hours - $5,625
• Peer-Reviewing smart contract (code and security review): 25 hours - $1,875
• Security Analysis: 75 hours - $5,625
• Documentation of on-chain code: 5 hours - $375

Subtotal for On-Chain Code: 405 hours - $30,375

• Off-Chain Code:Technical Requirements and Analysis of data structure: 30 hours - $2,250
• Development of components in Python: 100 hours - $7,500
• Development of off-chain tests: 25 hours - $1,875
• Testing of Code: 20 hours - $1,500
• Security Analysis: 50 hours - $3,750
• Peer-Review of Code: 20 hours - $1,500
• Documentation for Off-Chain Code: 5 hours - $375
• 
  

Subtotal for Off-Chain Code: 250 hours - $18,750

Total Cost for Milestone 2: $49,125

Milestone 3: Audit

Costs covered by MuesliSwap Team

[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 for the Cardano ecosystem due to the following reasons:

1. Research and Development: The project involves conducting extensive research on liquidity provision models and developing open-source smart contracts based on the Cardano EUTXO model. This research and development effort aims to address the inefficiencies and impermanent loss issues associated with the current AMM model used in Cardano DEXs. By investing in this project, the Cardano ecosystem can benefit from improved liquidity provision, enhanced user experience, and increased competitiveness compared to centralized finance.
2. Expertise and Experience: The project team consists of experienced developers and researchers with a strong background in Cardano development, Plutus smart contracts, and decentralized finance infrastructure. Their expertise and knowledge will be leveraged to deliver high-quality code and comprehensive research findings. By utilizing the team's skills and experience, the project ensures efficient use of resources and maximizes the value generated for the Cardano ecosystem.
3. Open-Source Approach: The deliverables of the project, including research papers, smart contracts, and documentation, will be open-sourced and made available to the entire Cardano community. This promotes transparency, collaboration, and knowledge sharing within the ecosystem. By sharing the project outputs, other developers and projects can build upon the work, further enhancing the Cardano ecosystem's growth and innovation.
4. Risk Mitigation: The project acknowledges the importance of parallel research and development efforts in the area of efficient liquidity use in DeFi. By investing in multiple projects and research initiatives, the Cardano ecosystem can mitigate risks and increase the chances of discovering optimal solutions. The value for money lies in the diversification of efforts, which increases the likelihood of finding successful approaches and best practices for the ecosystem.

Overall, the cost of the project represents value for money by fostering innovation, improving financial efficiencies, promoting collaboration, and mitigating risks within the Cardano ecosystem. The investment in research, development, and open-source contributions will have long-term benefits for the ecosystem's growth, adoption, and competitiveness in the decentralized finance space.

[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.