PROTOFIRE <> MAYZ PROTOCOL $gToken: Aligning Governance, Utility & Liquidity in a single token

[GENERAL] Name and surname of main applicant

DIego Torres

[GENERAL] Are you delivering this project as an individual or as an entity (whether formally incorporated or not)

Entity (Incorporated)

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

6

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

No

[GENERAL] Summarize your solution to the problem (200-character limit including spaces)

Governance Funds solve this dilemma by creating positions that provide liquidity and exposure to price upside.

[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?

Yes

[GENERAL] Please provide here more information on the open source status of your project outputs

On-chain Github repo will be public

[METADATA] Horizons

Governance

[SOLUTION] Please describe your proposed solution

Addressing Problem

The problem we are addressing specifically stems from the lack of sustainable incentives for medium and small protocols to secure liquidity in secondary markets. These protocols typically struggle to retain long-term liquidity providers (LPs), as their tokenomics models fail to provide ongoing value capture mechanisms that incentivize loyalty. Without adequate incentives, LPs migrate to higher-yielding opportunities, leaving the protocol vulnerable to liquidity shortages and instability in secondary markets.

How has this problem raised and how is it faced in other ecosystems

In the early stages of DeFi, Tokenomics designs were primarily rudimentary, with tokens often serving as short-term incentives and speculative profit tools. The simplicity of these structures left them vulnerable, particularly in liquidity mining farming strategies to bring adoption and liquidity. For instance, decentralized exchanges (DEXs) commonly allocated all emissions and fees directly to liquidity providers (LPs), creating a short-term gain dynamic without fostering long-term commitment. This flawed design caused many LPs to exit pools when token prices dropped, resulting in frequent collapses due to minimal switching costs.

Over time, DeFi protocols have evolved to incorporate more advanced Tokenomics, such as token supply and demand regulation, game theory, and redistribution models. These changes have linked Tokenomics directly with protocol logic, emphasizing value flow and real income distribution to participants. 

Our solution addresses the core issue of failed tokenomics in smaller protocols by introducing governance and utility models that create lasting incentives for liquidity provision and long-term support. By doing so, we aim to reshape value distribution mechanisms, ensuring sustained liquidity and stability.

Our Approach

Our approach is driven by the need to address the limitations in current tokenomics models for medium and small protocols. We aim to create a sustainable value capture mechanism that ensures long-term incentives for liquidity providers (LPs) and supports the protocol's growth. The decision to focus on governance and token utility stems from our observation that protocols often fail to incentivize liquidity in markets, utility & governance, at the same time.

Our main targets are Small & Medium Protocols & their communities. Cardano has hundreds of S&M protocols struggling to bring liquidity to their tokens. We believe that to have a healthy protocol community all these roles must be aligned:

Liquidity Providers (LPs): LPs are crucial for the project as they provide the liquidity that powers secondary markets. By offering long-term incentives and value capture mechanisms, we ensure they remain engaged.

Governance Participants: We will attract token holders who are interested in actively participating in decision-making processes. Governance participants will be crucial to shaping the protocol’s evolution, ensuring it remains aligned with community needs.

Community Members and Token Holders: The broader community will be engaged through incentives to hold and use the tokens, contributing to protocol adoption and market stability.

What is the solution?

Inspired by Curve’s & Balancer’s veModel, we will develop a decentralized infrastructure to mint $gTokens for protocols. 

$gTokens is a derivative token, meaning that it represents an underlying token portfolio of liquidity tokens & single tokens. By doing this, the utility token (used for governance, access to protocol features, protocol earning distribution, etc) embedded not only a long position in the protocol value but also liquidity for the single token on secondary markets.

The $gToken can be minted under specific configurations:

• Different proportions of single tokens & Liquidity Pool tokens
• With locking mechanisms and an increasing time-lock minting formula
• With a relocking Max Time mechanism to maximize voting power

We believe that implementing this kind of solution will improve the following KPÏs: 

Liquidity Retention: We will track the volume of liquidity provided over time, focusing on the retention rate of long-term LPs compared to the baseline.

Token Price Stability: Stability and growth of the token’s value will be a major indicator of success, reflecting effective demand regulation and value capture mechanisms.

Governance Participation: We will measure the engagement of token holders in governance decisions, monitoring the number of active participants, proposals submitted, and votes cast. This will provide insights into the depth of community involvement.

Secondary Market Activity: By analyzing the activity on secondary markets, such as token trades and staking participation, we can gauge broader market confidence in the protocol's sustainability and value proposition.

[IMPACT] Please define the positive impact your project will have on the wider Cardano community

Our project will have a far-reaching impact on the broader Cardano community by addressing key challenges in DeFi, particularly in terms of governance, token utility, and liquidity sustainability. By offering a comprehensive solution that enables small and medium protocols to retain liquidity and maintain long-term value, we will strengthen the overall stability and appeal of the Cardano ecosystem. This, in turn, encourages more developers, innovators, and liquidity providers to build on and participate in Cardano.

The positive impacts of our project include:

• Enhanced Liquidity Stability: By providing sustainable incentives for liquidity providers (LPs), the wider Cardano DeFi landscape will benefit from improved liquidity retention, reducing the risk of market instability.
• Decentralized Governance Engagement: Our governance model encourages more active participation from the community. This deeper involvement ensures that projects built on Cardano are aligned with community values, promoting transparency and decentralized decision-making.
• Support for Small and Medium Protocols: Smaller protocols often struggle with liquidity issues, which hinders their growth and innovation. By empowering these protocols, we contribute to a more diverse and innovative Cardano ecosystem, which benefits everyone.

Measuring Impact

We will measure the impact of our project using both quantitative and qualitative metrics to ensure a comprehensive understanding of its effectiveness.

Quantitative Metrics:

1. Liquidity Retention: We will track the volume of liquidity in participating protocols over time, measuring retention rates, and comparing them to historical data. Success will be demonstrated by a sustained or increased level of liquidity after the implementation of our solution.
2. Token Value Stability: We will monitor the price stability and growth of tokens that adopt our governance and utility model. Stability in token prices will indicate that our solution effectively regulates supply and demand, and generates long-term value.

Governance Participation: The number of token holders engaging in governance decisions (e.g., voting, submitting proposals) will be a key metric. Higher participation rates will demonstrate community buy-in and increased decentralization.

[CAPABILITY & FEASIBILITY] What is your capability to deliver your project with high levels of trust and accountability? How do you intend to validate if your approach is feasible?

Our capability to deliver the project with high levels of trust and accountability stems from the experience, expertise, and organizational processes we have in place. Here's why we are well-suited to execute this project:

Protofire's Track Record

Protofire, the driving force behind this project, has built a strong reputation in the Web3 ecosystem by delivering decentralized infrastructure, protocols, applications, and developer platforms. Our specialized skills in fostering developer adoption and increasing network usage are critical for ensuring the success of this initiative.

Skilled and Multidisciplinary Team

Our team consists of professionals from diverse fields, including blockchain development, smart contracts, security, data analytics, and project management. This multidisciplinary approach allows us to tackle complex challenges from multiple perspectives, ensuring that we apply industry best practices in all aspects of the project.

Cardano Development Experience

We have a dedicated team with over a year of hands-on experience in Cardano smart contract development. Our work on the MAYZ Protocol, Rats Staking Portal, and ongoing projects like Developer Studio and UTXO DB abstraction demonstrates our deep understanding of Cardano’s unique ecosystem and technical requirements. This experience ensures that we can effectively build solutions tailored to Cardano’s decentralized infrastructure.

Balancer Implementation & development experience

Protofire’s long-standing partnership with Balancer further reinforces our credibility. We have collaborated for years on numerous initiatives, highlighting our ability to form strong, enduring relationships within the blockchain industry. This partnership brings additional trust and experience into our approach.

Conclusion

Our extensive experience, transparent processes, and commitment to best practices, combined with our active engagement with the community, position us as trusted and capable stewards of this project. We are confident that our approach will deliver tangible and long-term value to the Cardano ecosystem.

[PROJECT MILESTONES] What are the key milestones you need to achieve in order to complete your project successfully?

Milestone 1: Project Planning and Architecture Setup

Duration: 4 weeks

A. Milestone Outputs

• Defined architecture (on-chain/off-chain solution)
• Initial GitHub repository setup with project structure
• Documentation outlining key components and interactions (on-chain, off-chain, website)

B. Acceptance Criteria

• Public architecture document with key components (smart contract, UI, DB, off-chain modules)
• GitHub repository contains project structure and documentation

C. Evidence of Milestone Completion

• Report document with architecture description (public, clear, and simple to follow)
• Link to GitHub repository with project structure

Milestone 2: Smart Contract Development

Duration: 4 weeks

A. Milestone Outputs

• Smart contract for protocol settings
• Smart contract for governance token
• Unit tests for both smart contracts
• Documentation describing the functionality of both contracts

B. Acceptance Criteria

• Both smart contracts compile without errors
• Unit tests pass
• Public documentation, clear and simple to follow

C. Evidence of Milestone Completion

• Report document and video showcasing code changes and test results
• Link to GitHub with smart contract code and unit tests

Milestone 3: Off-Chain and UI/UX Design

Duration: 4 weeks

A. Milestone Outputs

• Off-chain infrastructure design and integration plan
• Initial UI/UX for the website
• Database setup 

B. Acceptance Criteria

• UI/UX design completed
• Database prepared
• Off-chain components outlined

C. Evidence of Milestone Completion

• Report document with UI design, DB schema, and off-chain integration plan (public, clear, and simple to follow)
• Link to GitHub with UI code and DB schema

Milestone 4: Smart Contract Integration and Testnet Deployment

Duration: 4 weeks

A. Milestone Outputs

• Full integration of both smart contracts with off-chain components and UI
• Testnet deployment of governance token and settings functionality
• Unit tests for interaction between the smart contracts and off-chain modules

B. Acceptance Criteria

• Smart contracts integrated with the website and UI
• Testnet deployment completed successfully
• Unit tests pass for core functionality
• Public documentation, clear and simple to follow

C. Evidence of Milestone Completion

• Testnet transaction IDs
• Report document and video showcasing functional website and test results (public, clear, and simple to follow)
• Link to GitHub with updated code

Milestone 5: Testnet Evaluation and Potential Refinements

Duration: 4 weeks

A. Milestone Outputs

• Feedback collection and analysis
• Refinements to smart contracts, off-chain modules, or UI (if necessary)

B. Acceptance Criteria

• Feedback collected and reviewed (even if no changes are needed)
• If refinements are necessary, they are implemented

C. Evidence of Milestone Completion

• Report document with feedback summary and refinements (if any), or confirmation that no changes were necessary (public, clear, and simple to follow)
• Link to GitHub with updated code (if applicable)
• Video showcasing testnet features and any improvements made (if applicable)

Milestone 6: Mainnet Launch

Duration: 4 weeks

A. Milestone Outputs

• Deploy both smart contracts on Cardano mainnet
• Finalized user documentation and guide
• Website fully functional with integrated governance and settings functionality
• Closeout report and final video for Catalyst submission

B. Acceptance Criteria

• Mainnet deployment successful
• All components (smart contracts, off-chain, website) operational on the mainnet
• Closeout report and video are public, clear, and simple to follow

C. Evidence of Milestone Completion

• Mainnet transaction IDs
• Report document and video shocasing webstite working with mainnet smart contracs
• Link to GitHub with final code
• Closeout video and report

[RESOURCES] Who is in the project team and what are their roles?

Protofire Experience

 

Protofire stands at the forefront of the Web3 revolution, offering a comprehensive range of services to empower and catalyze the growth of decentralized technologies. With our deep-rooted expertise and vast experience, we have established ourselves as a trusted partner for clients seeking to harness the full potential of blockchain and Web3 applications. From smart contract development and decentralized app creation to developer tools, integrations, DevOps, wallets, and TVL solutions, our team of blockchain mavericks has collaborated with prominent projects and platforms, such as Gnosis Safe Wallet, Chainlink, The Graph, Filecoin, MakerDAO, Fuse, CowSwap, and many others. We are committed to bringing your visionary ideas to life, combining technical prowess with effective project management to drive the success of your Web3 endeavors

 

Diego Torres Project Management

https://www.linkedin.com/in/diego-torres-borda-94b70912/

 

In 2018, I stumbled upon Bitcoin's White Paper, and it was love at first sight. Since then, I've immersed myself in the world of blockchain and studied numerous other protocols, from Ethereum to third-generation blockchains. To me, a decentralized protocol is more than just a buzzword - it's a community-driven decision-making organization with open and public records, enforced by consensus protocols that ensure permissionless access and censorship resistance. 

 

Web3 Experience

• Protofire FCTO: Business Development. Education. Team Leadership.
• The Graph: Indexing Operation Leadership. Subgraph development. Hosted services to third parties.
• Polkadot Ecosystem: Contract Wizard & Multisg development. Infrastructure as a service to Parachains.
• Cardano Ecosystem: RastDAO Founder, Core team at Mayz & Cardano Ambassador. 

 

Manuel Padilla Lead Software Engineer & Blockchain Specialist

https://www.linkedin.com/in/manuel-ale-padilla/

 

Manuel Padilla is a versatile and highly motivated software engineer with a Bachelor's degree in Technology from the National Technological University. Having a plethora of programming languages under their belt, including but not limited to SQL, Basic, C, C++, VB, .NET, Java, JavaScript, TypeScript, Python, and Haskell, Manuel Padilla brings over 13 years of experience in web development and software engineering.

 

Web3 Experience:

• Protofire (April 2023 - Present): Currently working as a Software Engineer, focusing on blockchain technologies including Cardano, Plutus, DeFi, and DApps.
• MAYZ Protocol (October 2022 - Present): Involved in full-stack blockchain development, specializing in Cardano, Plutus, and Haskell.
• RATS DAO (January 2022 - Present): Serving as a Web Developer, DApp Developer, and Blockchain Developer, primarily focusing on Cardano, Plutus, and Haskell.

dApps:

• https://aldea-nft-marketplace.vercel.app/
• https://staking.ratsdao.io/

 

GitHub: https://github.com/manupadillaph/

 

Camila Mancusi QA Engineer

https://www.linkedin.com/in/camilamancusi/

 

Camila wants to participate improving the user experience and usability in the web3 applications to make this world more friendly and accesible to everyone. She wants to be involved in making possible that using web3 functionalities is as simple and usual as those focused on web2

 

Web3 Experience:

• Protofire: QA & Project Management
• SimpleState: Design test cases. Participate in the definition of features. Design scenarios and test cases.Report errors, propose solutions and validate the correction. Ensuring that the product is ready for the customer
• UNICEF: Design test cases. Participate in the definition of features. Creates test executions. Reports bugs / issues. Monitor bug priorities.

 

Luis Lopez Full Stack Developer 

https://www.linkedin.com/in/luigibyte/

 

Luis likes the entire Blockchain ecosystem, and He has created a minting Dapp for BadgerDAO. Expert knowledge in NodeJS, Web3JS, SM, Solidity. Has experience with Smart Contracts. Polkadot, Polygon, Chainlink, Lens

 

Web3 Experience:

• Protofire: Full Stack Developer
• BadgerDAO: 
• MakerDAO: Subgraph development
• Messari: Built subgraph for harvest-finance yield-farming protocol Messari

 

Braian Leiva DevOps

https://www.linkedin.com/in/braian-leiva/

 

Fan of blockchain and decentralized systems. Infrastructure automation lover.

 

Experience:

• 15+ years of experience using Linux (Debian, Centos, Arch Linux, Red Hat, OpenSUSE, Fedora, Ubuntu, etc).
• 7+ years designing, maintaining and improving all size of application Infrastructure as System Engineer and now as Cloud Engineer.
• 4+ years using AWS. I'm Amazon Solutions Architect working on infrastructure automation using tools like Terraform, Cloudformation, Sam, Serverless, Fargate, CodePipeline, Docker, Python.
• Currently working as DevOps/Cloud Engineer
• 
  
• Also studying and learning Data Science and Machine Learning. He've got AWS Certified Machine Learning - Specialty (MLS)

[BUDGET & COSTS] Please provide a cost breakdown of the proposed work and resources

Milestone 1: Project Planning and Architecture Setup

• Project Manager: 30h * 67 ADA = 2,010 ADA
• Technical Architect: 60h * 80 ADA = 4,800 ADA
• Full Stack Developer: 20h * 93 ADA = 1,860 ADA

Total: 8,670 ADA

Milestone 2: Smart Contract Development

• Project Manager: 20h * 67 ADA = 1,340 ADA
• QA/Test Engineer: 40h * 93 ADA = 3,730 ADA
• Smart Contract Developer: 160h * 93 ADA = 14,880 ADA

Total: 19,950 ADA

Milestone 3: Off-Chain and UI/UX Design

• Project Manager: 20h * 67 ADA = 1,340 ADA
• Full Stack Developer: 120h * 93 ADA = 11,160 ADA
• UI/UX & FrontEnd Dev: 160h * 80 ADA = 12,800 ADA

Total: 25,300 ADA

Milestone 4: Smart Contract Integration and Testnet Deployment

• Project Manager: 20h * 67 ADA = 1,340 ADA
• QA/Test Engineer: 40h * 93 ADA = 3,730 ADA
• Smart Contract Developer: 80h * 93 ADA = 7,440 ADA
• Full Stack Developer: 100h * 93 ADA = 9,300 ADA
• UI/UX & FrontEnd Dev: 60h * 80 ADA = 4,800 ADA

Total: 26,610 ADA

Milestone 5: Testnet Evaluation and Potential Refinements

• Project Manager: 20h * 67 ADA = 1,340 ADA
• QA/Test Engineer: 40h * 93 ADA = 3,730 ADA
• Smart Contract Developer: 20h * 93 ADA = 1,860 ADA
• Full Stack Developer: 20h * 93 ADA = 1,860 ADA
• UI/UX & FrontEnd Dev: 20h * 80 ADA = 1,600 ADA

Total: 10,390 ADA

Milestone 6: Mainnet Launch

• Project Manager: 20h * 67 ADA = 1,340 ADA
• DevOps Engineer: 20h * 93 ADA = 1,860 ADA
• Smart Contract Developer: 20h * 93 ADA = 1,860 ADA
• Full Stack Developer: 20h * 93 ADA = 1,860 ADA
• UI/UX & FrontEnd Dev: 20h * 80 ADA = 1,600 ADA

Total: 8,520 ADA

Total: 99,440 ADA

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

The cost of this project represents value for money by delivering liquidity stability, enhanced governance, sustainable tokenomics, and community engagement for medium & small protocols, all while aligning with Cardano’s technical strengths and long-term vision. 

The solution also provides a scalable and interoperable model that can be reused across multiple protocols, further increasing the cost-effectiveness of the project for the Cardano community.

The cost of implementing a similar Balancer veModel on Cardano represents value for money in several key ways:

1. Increased Liquidity Retention and Stability

The Governance Fund encourages long-term liquidity provision, reducing the risks of liquidity providers (LPs) rapidly migrating to other opportunities when rewards decrease or token prices fluctuate. By incentivizing LPs to lock their tokens, the project ensures greater liquidity stability across the Cardano ecosystem. This stable liquidity is critical for the success of decentralized exchanges (DEXs) and DeFi applications, which rely heavily on liquidity pools.

Stable liquidity leads to smoother transaction processes, fewer liquidity crunches, and reduced slippage for users.

Enhanced user experience in Cardano DeFi, making it a more competitive platform against other blockchains.

2. Strengthened Governance and Decentralization

The project introduces a more robust governance model by aligning the incentives of long-term token holders with protocol decision-making. Token holders with vested interests (via veTokens) are more likely to make decisions that benefit the protocol and the ecosystem long-term.

3. Community Engagement and Ecosystem Growth

The project’s design emphasizes community involvement through governance participation and feedback loops. By empowering the community to make key decisions and benefit from long-term rewards, it fosters a more engaged and active ecosystem.

An engaged community is essential for ecosystem growth, attracting new developers and users.

By keeping the community actively involved in governance and protocol decisions, the project ensures long-term ecosystem health and alignment with Cardano’s decentralized vision.

4. Scalability and Interoperability

Although the upfront cost includes significant development resources to align the veModel with Cardano’s unique structure, the scalability of the solution allows it to be applied across multiple DeFi protocols within Cardano. Furthermore, it can serve as a template for future governance and liquidity models across different applications, creating a more interoperable DeFi ecosystem.