AdaHold: Decentralized Price-Can-Only-Go-Up Token, Solution For TRUE Ada Hodlers - Smart Contract

[GENERAL] Name and surname of main applicant

Dmytro Stashenko aka "AdaStat"

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

Entity (Not Incorporated)

[GENERAL] Co proposers and Additional applicants

Tetiana Stashenko

[GENERAL] Requested funds in ada

99700

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

4

[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)

Our team will make this token! The ADA Hodlers will get more profit. The Cardano ecosystem will get one more useful decentralized project.

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

Yes

[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.”

Well, that's an interesting question because it seems to me that absolutely all projects funded by Project Catalyst have dependencies. However, we use only open source software like cardano-node, cardano-cli, cardano-db-sync, etc. There are no external factors (such as third-party suppliers, external resources, third-party software, etc.) that may cause a delay.

[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

Project will be fully Open Source and licensed under Apache License 2.0

[SOLUTION] Please describe your proposed solution.

The idea of AdaHold is very simple and excellent at the same time. Now I'm going to tell more about it.

So, as you probably already guessed, AdaHold is a native token on the Cardano blockchain. The minting and burning of AdaHold are controlled by Plutus smart contract. The price of token is controlled by Plutus smart contract too. Unlike existing similar products, for example hodlCoin financial game for Ergo blockchain which was introduced during Ergoversary Summit 2023, where the token price increases only after token burning, our smart contract is much more complex. In our smart contract we use specific Cardano features like ADA delegation, as well as receiving staking and voting rewards. Therefore, there are other ways to increase the token price in our implementation.

Benefits for holders

The smart contract features described above are very important because they allow AdaHold holders to receive voting / staking rewards for ADA they paid for minting AdaHold just as if this ADA is in their wallet. Moreover, if AdaHold holders decide to redelegate their ADA to another pool, the ADA they paid for the AdaHold token will also be redelegated automatically. This can be particularly interesting for pool owners whose stake is used as a pool pledge. They can hold AdaHold tokens instead ADA and not to break pledge!

What holders should do

Just hold, that's all! The AdaHold holders goal is to hold the AdaHold tokens as long as possible.

How it works

When users buy (mint) AdaHold tokens they send appropriate amount of ADA to a treasury. No protocol fee is charged at that time. Users receive exactly the number of tokens for which they paid ADA. Additionally, users have the option to choose whether or not they want to continue receiving staking/voting rewards for Ada they used to purchase tokens. If they choose to 'Continue Receiving Rewards', they will continue to receive rewards for ADA they paid to treasury for minting AdaHold, just as if ADA is in their wallet. When they sell (burn) AdaHold tokens, they incur a protocol fee. The protocol fee is directed to the treasury, thus increasing the AdaHold token price. In case 'Do Not Continue Receiving Rewards', there is no protocol fee at the moment of token burning. This means that in this case the users pay no fee neither during the token minting nor during the token burning. Instead, staking/voting rewards for ADA they initially sent to the treasury for token minting, accrue to the treasury, contributing to the AdaHold token price appreciation. Thus, in both cases, the AdaHold token price is constantly growing, and never decreases. Those holders who wait long enough will sell tokens at a higher price than they bought. The holder who holds the longest will take the whole treasury accumulated by all the time.

Simple example

In case the text above sounds a little unclear, let's break it down with a bit of straightforward math. Let's assume we are on the start - the treasury is empty and no token is been minted. The initial token price is 1 AdaHold = 1 ADA. The protocol fee is 3%. All users choose option A (Continue Receiving Rewards)

1. Alice, Bob, and Clair each minted 100 AdaHold tokens, paying 100 ADA each. There is 300 ADA in the treasury. Each of 3 users has 100 tokens in their wallets, 300 tokens total. It's important to note that the minting process does not directly affect the token's pricing dynamics. So, after minting, the price remains at 1 AdaHold = 1 ADA.
2. After some time, Clair decides to sell (burn) tokens. As we mentioned, the price is 1 AdaHold = 1 ADA, so she receives 100 ADA for them. However, there is now a protocol fee, so Clair pays 3 ADA to the treasury and receives 97 ADA to her wallet. Here's where the magic happens: the AdaHold price increases from 1 ADA to 1.015 ADA per token. Why does this happen? Because now the treasury holds 203 ADA, and Alice and Bob both have a total of 200 tokens. Therefore, the token price is 203/200 = 1.015 ADA per token.
3. Next, Daniel (a new potential AdaHold holder) decides to mint 200 tokens. Remember that the price is now 1.015 ADA per token, so Daniel pays 203 ADA. There is 203 + 203 = 406 ADA in the treasury now, and Alice, Bob and Daniel have a total of 400 tokens. After minting the AdaHold token its price is still 406/400 = 1.015 ADA per token (remember that the minting process does not directly affect the token's pricing dynamics).
4. After some time, Daniel realizes he can't hold the tokens any longer and decides to burn them to get ADA back. Daniel sells 200 AdaHold tokens at a price of 1.015 ADA, receiving 203 ADA and paying 6.09 ADA protocol fee to the treasury. After this, the treasury holds 406 - 203 + 6.09 = 209.09 ADA, and Alice and Bob have a total of 200 tokens. So, the AdaHold token price is 209.09 / 200 = 1.04545 ADA per token.
5. Some time later, Bob also decides to sell his 100 tokens at price of 1.04545 ADA per token. Bob receives 104.545 ADA and pays 3.13635 ADA protocol fee. So Bob gets 101.40865 ADA back in his wallet. The treasury now holds 209.09 - 104.545 + 3.13635 = 107.68135 ADA, and Alice has 100 AdaHold tokens.
6. Eventually, since Alice is the only one remaining, she burns her 100 AdaHold tokens and claims the entire treasury of 107.68135 ADA.
7. Congratulations to the winners! Alice and Bob hold AdaHold tokens long enough to sell them for a higher price than they bought.

Extra bonus

The example above doesn't take into account the fact that the protocol fee users paid to the treasury is also involved in staking, and the rewards for it go directly to the treasury. Due to this the price of the AdaHold tokens is constantly growing even if no one burns them. In addition, users receive staking/voting rewards for Ada they paid for minting AdaHold tokens, as long as users hold them.

And lastly

I'd want to describe why the proposal is categorized under Concept and not Solution. Despite the fact the smart contract has already been written and is available in the GitHub repository, there is a small issue. At the moment AdaHold smart contract consumes slightly (~10%) more memory than public Cardano test networks allow. I.e. for its deployment it requires a pre-configured (with increased Plutus limits) private test network of Cardano. Further investigation and smart contract redevelopment for its functioning on public Cardano testnets/mainnet is needed. Additionally, at the moment managing the smart contract (creating minting and burning transactions, etc) can only be done through cardano-cli or similar tools, which are not accessible to the average Ada holder. We need to create a convenient user interface on the adahold.com site. So, the main goal of this proposal is to deploy AdaHold smart contract in the Preview testnet as well as to launch the website adahold.com where it will be possible to mint / burn AdaHold tokens.

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

The positive impact AdaHold will have on the Cardano community is:

1. Ada holders will be able to get more profit if they hold AdaHold tokens instead Ada
2. Pool owners also can hold AdaHold token instead Ada! Their pledge will still be met!
3. The Сardano ecosystem will grow and get the excellent decentralized open source project, which will potentially be used by many ADA holders

[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?

As the AdaStat.net developer and maintainer for the past 4 years, I'm probably well placed to assess the problems, needs and challenges of the project.

The reliability of the existing service, despite its shortcomings, and the quantity & quality of features released by the past should help ensure a high level of trust and accountability to deliver the new project.

Additionally, I want to mention once again that the smart contract has already been written and its code is available on GitHub. Also, you may have followed AdaStat on Twitter, and you may have seen that I've studied Function programming in Haskell and successfully graduated it with distinction in January, 2023

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

New smart contract architecture and development, website prototype

Duration 1 month

Output:

• Website prototype is available on https://adahold.com/

New smart contract development, website development

Duration: 2 months

Output:

• All basic mechanics (like Connect Wallet, etc) is available on https://adahold.com/

Preparing for Preview testnet release

Duration: 1 month

Output:

• Smart contract is deployed on the Preview testnet
• Preview testnet release is available on https://adahold.com/
• All source code is available on https://github.com/AdaHold
• Documentation is available on https://github.com/AdaHold

Catalyst Close-Out report

Duration: 1 week

Output:

• Catalyst Close-Out report - video, links, source code, etc

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

• Dmytro Stashenko - Lead developer, Founder of AdaHold, Co-founder of AdaStat.net
• Tetiana Stashenko - Front developer, Project manager
• Mariya Turlak - UX/UI Designer
• Olha Domornikova - QA Engineer

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

Assumptions:

• Company hourly rate: 50$ per hour
• 1 ADA = 0.36 USD (current price with slippage tolerance)

Project Cost:

• Improved SC / Website Prototype: 64 hours = $3,200.00
• Development: 480 hours = $24,000.00
• Project Management / Reporting: 64 hours = $3,200.00
• Testing / Improvement: 100 hours = $5,000.00
• Infrastructure: 12 months = $480.00

TOTAL: $35,880.00 = 99,666.67 ADA

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

• The cost of this project has been meticulously calculated, aligning with current market standards and labor cost considerations within the blockchain industry. My development experience validates that the projected timeline adequately reflects the complexity of tasks and does not exceed the realistically incurred time.
• Considering that a substantial amount has already been developed, initiating this project 'from scratch' would result in significantly higher costs. The project is economically viable as it leverages existing resources and expertise, contributing to an overall reduction in expenses.
• Moreover, the project brings substantial benefits to the Cardano ecosystem. It not only enhances functionality but also makes a positive impact on the community, fostering sustainability and growth. This investment ensures long-term advantages for the Cardano ecosystem, delivering benefits to Ada holders and pool owners, and increasing the number of decentralized projects within the ecosystem.

[IMPORTANT NOTE] The Applicant agrees to Fund 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