DeFi on Hydra and Mamba (Bynet Protocol continuity)

[GENERAL] Name and surname of main applicant

Maciej Krasowski

[GENERAL] Email address of main applicant

maciej@byron.network

Additional applicants

1. Byron Network - IOG Vendor, Bynet Protocol creator - we work on projects connected to Mamba as IOG vendor. Also we spent a lot of time working and testing Hydra while Bynet Protocol development. Bynet Protocol is a set of dapps like mobile wallet, DEX (obp), matching engine and prime liquidity
2. Binar.com - Software House (150 people) based in Lodz, Poland

[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] 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.” .

1. BinarApps.com software development agency, 10 years old - Byron Network is supported by the team of 150 devs (the same founder - Maciej Krasowski)
2. IOG - our software is based on the results of work from IOG

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

Yes

[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

DeFi

[METADATA] SDG rating

• SDG 9 (Industry, Innovation, and Infrastructure): The project promotes technological progress and innovation in the mobility sector, enabling the creation of decentralized applications integrating vehicle data with blockchain.

• SDG 11 (Sustainable Cities and Communities): By fostering innovation in the mobility sector, the project indirectly supports the development of sustainable transport systems. 

• SDG 17 (Partnerships for the Goals): The open-source nature of the project encourages collaborations and partnerships among developers, fostering a global technology community.

[IMPACT] Please describe your proposed solution.

The development of Cardano blockchain technology is divided into eras. We can now benefit from the advantages of smart contracts on mainnet, while scalability, and interoperability is in the next phase called the Basho era. This part of development is crucial for the Bynet Protocol, and we aim to take part in the development of the core of the Basho era. 

Whereas previous development eras focused on decentralization and new functionality such as smart contracts, Basho is about improving the network’s performance with high transaction volume. This part of the development phase introduces sidechains: interoperable with the main Cardano chains. Sidechains are designed to off-load work from the main chain and increase the network’s capacity. Overall, the goal is to make Cardano one of the most high-performance, resilient, and flexible blockchains. 

Another project developed by the Cardano team is Hydra – a set of protocols designed to address network security and scalability capabilities. It offers increased throughput, minimized latency, and cost-efficient solutions without substantial storage requirements. Having this part of the evolution of Cardano, our team approaches a rethought way of running an on-chain order book execution (matching and transacting) on Layer 2.

Bynet Protocol is a set of DApps and tools designed to minimize entry barriers for all DeFi participants. It includes tools like Prime Liquidity and Matching Engine, as well as the BynetDEX and Bynet Wallet infrastructure.

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

• Prime Liquidity (Layer 1)

Bynet Protocol offers a foundation to build trading products, utilizing an infrastructure layer that enables development on top of it. Shared liquidity among DApps that is initiated by BynetDEX’s Liquidity Providers aims to solve the problem of lack of initial liquidity that many new projects face. Having mass adoption in mind, Bynet Protocol’s goal is to provide a development layer that is ready to implement and combine with projects like BynetDEX. Therefore, we enable builders to shift their focus to innovation. Considering the constant-changing blockchain ecosystem’s pace, projects need a foundation not to burn resources on providing initial liquidity or market-making.

Creating an ecosystem of DApps that are intertwined with each other leads to more significant opportunities for match-making. The infrastructure that Bynet Protocol gives access to consists of initial liquidity, swapping Cardano native tokens, an off-chain Matching Engine, and mobile wallet integration. Thanks to the On-chain Order Book pattern used in the protocol, trading applications can use CEX-known trading options like limit or stop-loss orders. 

That way, Bynet Protocol can contribute to the ever-growing Cardano Community and provide developers with tools that help with expanding the Cardano ecosystem.

• Liquidity providers

Liquidity Pools are sets of discrete Liquidity Orders, where each order has a slightly different rate. Every Liquidity Order is an independent exchange offer, but all of them together simulate the operation of the classic Liquidity Pool. The Liquidity Provider can add their funds in particular sets of liquidity instead of through one or more Liquidity Orders with identical rates.

• Liquidity Pool

The liquidity pool with both tokens is depicted in Figure 2. In this case, we look at a pair of tokens A and B as an example, where different functions have been applied. The spot price for A tokens would be P3 in the initial liquidity pool of UTxOs. It portrays a typical situation in centralized order book exchanges in terms of price discovery. Because the Liquidity Provider imposes a fee, the actual exchange rate will be slightly affected, creating a small spread. Its size would depend primarily on Liquidity Provider’s fee. The DEX will provide historical data to help adjust trading strategy to match trends, typical spread size in a given token pair, or the transaction sizes. 

• Matching Engine (Layer 2)

Cardano, at its base, has three rules. Those are scalability, interoperability, and sustainability. Along with the Basho era and works around these three rules, Bynet Protocol aims to deliver Layer 2 for scalable and secure matching orders and executing transactions. 

Bynet Layer 2 aims to bring scalability into transactions between orders from On-chain Order Book. We especially look at Hydra development, which can influence the speed and efficiency of transactions. Our goal is to introduce the concept of decentralized matchmaking machines that take part in the whole Bynet Protocol as providers of effectiveness and efficiency. 

• Matchmaker

Matchmaker is an algorithm that matches and executes trades against each other. With long-term plans in mind we look at SPOs (Stake Pool Operators) that could run Hydra nodes along with Bynet Layer 2 software services.

Stake Pool Operator is a node of the Cardano P2P network that takes part in creating blocks. The more ADA is delegated to SPO, the higher the chance SPO will become a slot leader, which means he creates a block shared in the network. There can be an incentivization involved in being a block creator. These rewards are divided between SPOs and could be shared with wallets that delegate ADA with them.

In Bynet Protocol, SPOs have a crucial role. The first is making Cardano decentralized, and the second is caring about the Community. We want them to be incentivized additionally for being Bynet Protocol’s Layer 2. They have the opportunity to become Matchmakers. Their role in Cardano is to give computing power to the network. This computing power may be used to keep Bynet Protocol working well.

1. Matching process

Matching is a service that executes transactions on Layer 2 chain. Moreover, Matchmaker decides how much it earns. There are two sources of transaction parameters: described by the order owner (how much they want for the tokens) and described by Bynet On-chain Order Book (mostly incentives parameters). The role of Matchmaker is to create transactions between orders and meet expectations defined in orders’ parameters. It’s up to the Matchmakers what reward they take. Their compensation is based on the spread between the bid and ask. Matchmaker plays on its own in a game of incentives by playing the same rules for everybody. If they want to earn more, they will focus on searching for orders that bring them many rewards. But at the same time, they understand that those types of matches occur less frequently than the smaller fees ones. Matchmakers can also execute partially fulfilled swaps when the exchange rate is matched. However, there is a difference in the expected number of tokens. 

It's a self-balancing open market—a minimum of algorithmics. Initially, there will be one Matchmaker machine, a BynetDEX one. Once this model is confirmed, the Community will get access to the code (software) to create their algorithms and participate in the “matching game”. We will support SPOs Community to join the protocol as Matchmakers on specified markets. SPOs as separate instances of the DEX working on the On-chain Order Book from Bynet.

• API - Prime Liquidity access

In our protocol, we introduce API endpoints to be accessible by Matchmakers. Thanks to this layer, Matchmakers can easily ask for data from On-chain Order Book. Data response (JSON) consists of a list of orders and order details. Requests are parametrized, meaning Matchmaker can decide what type of orders they want to get, how many of them, sorted and ordered, etc. It is similar to database queries.

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

1. Effectiveness of our solution
2. Usage (dev teams and users)
3. Community feedback

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

We'd love to bring scalable solution for every dev team to build Layer 2 dapps and ecosystems. We will use this solution to implement it into BynetDEX and Bynet Wallet.

Bynet DEX and Bynet Wallet are set to be open sourced. Our work will be continued on these dapps.

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

• Byron Network is a Plutus Pioneers Program Attendee (2021-2022), creator of www.bynet.io protocol, Bynet Wallet, Order Book Pattern DEX (Bynet Dex)
• Byron Network works with IOG as an outsourced vendor - team of developers helping to build projects. We work on projects like Sidechains and VVA (Voltaire Voting App)
• BinarApps (Byron Network mother company) is 150 developers with 10 years of experience in software development
• Maciej Krasowski (founder of both companies) is a Polish Blockchain Association Founding Member, Fintech Central Poland creator and fintech + blockchain enthusiast for 5 years now. Working closely with two communities: Cardano and Dash

Process

• scrum/kanban with Jira software
• CI/CD on Github
• PRs on github
• direct contact with the team on slack / TG / github

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

• stars and forks on github
• positive comments
• community feedback
• tests results

[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.

Q4, 23

1. R&D over actual status of Hydra and Mamba
2. Prime liquidity works continuity (Layer 1)
3. Matching engine tests on Hydra and Mamba (Layer 2)
4. Wallet and DEX updates and tests

Q1, 24

1. Prime liquidity on production
2. Matching engine community tests
3. Matching engine first version on production
4. Wallet and DEX implementation of Prime liquidity and Mathchng engine as tests

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

Milestone 1 (Q4, 23)

• status and knowledge updated - Hydra, Mamba
• DEX and Wallet updated and working on production (Wallet) od preprod (DEX)
• First matching engine runs and examples (wideos, tests)

Milestone 2 (Q1, 24)

• DEX and Prime liquidity working on production
• DEX features working on Mobile Wallet on production
• Matching engine first production runs

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

• 1,5 haskell / scala / rust devs per month: 14k USD
• 1 devops per month: 7k USD
• 1 frontend dev per month: 6k USD
• 1 PM per month: 3k USD

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

Team members are the majority of the cost. The rest are servers and design.

Each team member is hired in Byron Network OU or in BinarApps (both companies working together). Their cost contains company's margin.

[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