Collectibles Exchange: An Innovative DEX for NFTs

[GENERAL] Name and surname of main applicant

Rares Kövesdi (NewMindflow)

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

Entity (Not 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)

A prototype DEX enabling users to swap NFTs directly. Final product will include an innovative on-chain, partially on-chain, and off-chain offer mechanics, increasing transaction volume.

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

We will open source all the smart contracts developed for this project. However, the project will not be fully open source as we will not be open-sourcing the off chain code, and the UI components.

[SOLUTION] Please describe your proposed solution.

Much of the existing Cardano NFT services and infrastructure are centered around financial aspects. Marketplaces, lending protocols, staking platforms and statistics websites are all focused on the financial aspect. However, most NFTs are primarily digital collectibles, not financial products. Yet there are almost no services built specifically with collectors in mind. Tapping into this unexplored side of the NFT space, Collectibles Exchange aims to provide a comprehensive and complex platform for the swapping of non-fungible Cardano native assets.

Current data from taptools.io indicates that less than 10% of NFTs within the top 25 Cardano collections by market cap are listed on marketplaces. This implies that a substantial majority of NFT owners are not seeking to liquidate their assets into ADA. Yet, there is an untapped interest among holders in exchanging their assets for other NFTs, whether within the same collection or across different ones. If even a fraction of NFT owners were to engage in swap transactions, the Cardano network could see a significant increase in transaction volume.

Our proposal is to develop the prototype of a service that facilitates the swapping of any non-fungible asset for other non-fungibles. This would create multiple new opportunities for trades and transactions, enriching and contributing to the Cardano ecosystem. To facilitate exchanges with greater flexibility, we want to allow for more complex trades and swap conditions. This could include trading multiple NFTs for one, trading one NFT for multiple, and so on.

All of the implementation methods presented below rely, for now, on manual transactions for swaps. However, our medium to long-term goal is to create a system that can automatically match new swap offers with existing swaps in various swap pools deployed by projects and collectors. In this way, the individual swap pools become akin to liquidity pools in a conventional DEX for fungible tokens. For partially on-chain and off-chain offer models, we aim to develop an infrastructure that collects data from individual Swap Pools, uses data aggregated from marketplaces and statistics services, and automatically sends counter-offers to Proposers (details about all roles in a swap below).

To our knowledge, Collectibles Exchange represents a pioneering initiative, not just within the Cardano ecosystem but across the entire blockchain industry.

We have already established the technical feasibility of the swapping concept through a working demo, developed in recent months for The NFT Swap Pools project [https://github.com/NFT-Guild/NFT-Swap-Infrastructure-Templates].

Final Product Vision

Although this proposal focuses on the prototype development, we have a clear vision for the final product that we will describe below.

We propose three distinct modes of implementation: fully on-chain offers, partially on-chain offers, and off-chain offers. Each method has its unique appeal and use-case, catering to different levels of user engagement and familiarity with the platform. 

All offer types will eventually result in an on-chain transaction.

We view the main purpose of developing multiple transaction types - partially on-chain and off-chain offer systems, as ways to attract and familiarise users with the platform, or as ways to engage users who are uncertain about the kind of trades they are open to.

Fully on-chain offers:

A Proposer visits the platform website, connects their wallet, lists an NFT, and sets the trade conditions. Once the swap conditions are set, the NFT is held by the smart contract until the conditions for unlock are satisfied, or the Proposer cancels the offer. Once the list transaction is finalised the offer is displayed on the service front-end, alongside the desired NFT or NFTs requested in the trade (the unlock conditions).

A Fulfiller can view the offer and initiate the swap by sending a transaction with the requested NFT(s) to the smart contract, which validates the transaction and completes the swap.

This method works best in situations where the Proposer knows in advance exactly what he is willing to exchange for his asset and is not interested in counter-offers.

We envision the service eventually incorporating a price discovery mechanism similar to an oracle, capable of assisting the Proposer in setting up the trade, determining its conditions, and potentially making trade recommendations based on real-time aggregated data for price, traits, and other criteria from marketplaces and NFT statistics services like https://www.jngl.io/ , https://cnft.tools/ or https://www.taptools.io/?Top%2025&NFTs .

In short, when creating an offer, a user (Alice, the Proposer) would specify the NFT they're offering, and the NFT(s) they want in return. The smart contract locks Alice's NFT until someone accepts the offer or Alice cancels it. If another user (Bob, the Fulfiller) wants to accept Alice's offer, they interact with the smart contract, which checks if Bob is the owner of the desired NFT(s). If he is, the smart contract facilitates the swap, transferring Alice's NFT to Bob's wallet and Bob's NFT(s) to Alice's wallet.

Example of a typical user interaction for fully on-chain swaps:

Alice wants to trade her NFT A for NFT B. She lists NFT A on the exchange and specifies that she wants NFT B in return.

Bob owns NFT B. He finds Alice's listing and is interested in NFT A.

Bob initiates the trade through the exchange UI, which interacts with the swap contract.

The smart contract validates the transaction.

If the validation passes, the contract swaps the NFTs between Alice and Bob's wallets.

Alice now owns NFT B, and Bob owns NFT A.

Both Alice and Bob receive a confirmation of the successful swap.

We've already created a smart contract with complex on-chain validation conditions for NFT exchanges. The Swap Pools smart contract we've developed [https://github.com/NFT-Guild/NFT-Swap-Infrastructure-Templates] is a technological precursor to this solution. It allows NFT projects and collectors to set up their own Swap Pools easily. To our knowledge this hasn't been achieved before.

Partially on-chain offers:

Similar to the first model the Proposer creates a listing, locks an NFT in a smart contract and defines a series of unlock conditions representing the offers they would consider for exchange. Unlike the fully on-chain method, though, the Proposer indicates openness to receiving counter-offers.

This allows a Fulfiller to send an off-chain counter-offer, which the Proposer can accept or decline. If accepted, the conditions of the initial offer are updated to include the counter-offer, and the Fulfiller is notified that they can now complete the on-chain swap via the smart contract.

This method would work best in situations where the Proposer has a set of swaps he knows he would accept in exchange for his NFT, but is also willing to accept other offers.

To combat spam, the Proposer can predefine a list of counter-offer requirements, for which data aggregation about prices and traits from marketplaces and statistics services would be needed.

Off-chain offers:

In this model, the Proposer wishes to exchange an NFT but doesn’t have a specific exchange in mind. As a result, they cannot set up the smart contract with the initial offer and unlock conditions. Instead, they list their NFT as available for swap and open to counter-offers. After reviewing multiple counter-offers, the Proposer can accept one and initiate a transaction to a simple escrow smart contract, which only involves the counter-offer, without any additional conditions.

To minimise the potential for spam and scam attempts, the same options for setting up counter-offer filters as described above apply.

Business Model:

Our business model is simple and straightforward: we plan to charge a small fixed fee for each facilitated exchange transaction. This structure will allow us to scale the service organically. Additionally, we're exploring the possibility of launching a governance and utility token, if we determine it will be a good fit for the project once we launch. Although this is a potential future implementation, such a token could enable users to influence the platform's development, unlock premium features, or earn rewards, enhancing our platform's value and community engagement.

The main goals for the Collectibles Exchange project are as follows:

1. Develop a Secure, Efficient, and User-Friendly NFT Swap Platform on Cardano: The primary goal of our project is to build a platform that facilitates the swapping of NFTs on Cardano in a secure, efficient, and user-friendly manner. We will validate this by successfully launching the platform and conducting extensive testing to ensure that it works as intended. User feedback and usability testing will also be key in verifying the platform's efficiency and user-friendliness.
2. Increase the Utility and Liquidity of Cardano-based NFTs: By providing an efficient and trustless way to swap NFTs, we aim to significantly increase the utility and liquidity of Cardano-based NFTs. We will measure this goal by tracking the number of successful swaps on our platform.
3. Attract New Users to Cardano: By offering a unique and compelling service, we aim to attract a significant number of new users to the Cardano network. We will measure this by tracking the number of new users registered on our platform.
4. Strengthen Cardano's Position as a Leading Blockchain for NFTs: We aim to further establish Cardano as a leading platform for NFTs by introducing innovative services like NFT swaps. We will gauge this by tracking community sentiment and observing the growth of the Cardano NFT marketplace.
5. Enrich the Cardano Ecosystem: Through the implementation of our proposal, we hope to encourage more artists and collectors to mint and trade NFTs on Cardano, thereby contributing to the growth and diversity of the ecosystem. We will validate this by monitoring the level of activity in the Cardano NFT marketplace and the feedback from the community.

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

Our proposed solution will provide a product that adds a unique and valuable use case to the Cardano ecosystem - a comprehensive platform for the swapping of non-fungible Cardano native assets. There are currently no known services that offer this kind of functionality, making Collectibles Exchange a pioneering initiative, not only within the Cardano ecosystem but across the entire blockchain industry.

As our other project - NFT Swap Pools - has already demonstrated, the necessary technical infrastructure exists within Cardano for our solution to be implemented. Furthermore, the maturity of the Cardano NFT ecosystem, along with the lack of existing solutions for NFT swaps, makes this an opportune time to introduce our service.

Since this is a prototype development proposal, the number and type of metrics we can gather and report will be limited. The primary metrics we will be reporting are those related to the development process - we will expand on these in the section describing our milestones. However, we plan to expand our metrics and KPIs in future phases of product development, if funded by Catalyst.

As described earlier, all smart contracts developed for this project will be open-sourced and made available on the project's Github page. This will allow other developers and projects in the Cardano ecosystem to leverage our work, thereby fostering collaboration and innovation within the community.

In addition to this, we commit to sharing all the outputs of the project with the Catalyst team and the community milestone reviewers. This will be achieved through comprehensive monthly reports and milestone proof-of-achievements that demonstrate our progress and deliverables.

Furthermore, we will actively seek collaboration with other relevant projects within the Cardano ecosystem. Our intention is to not only share insights and learnings but also to establish potential partnerships that could enrich the utility and user experience provided by our platform.

[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 a team, we were funded and we successfully completed and closed-out an NFT infrastructure development project.

NFT Swap Infrastructure Templates 1:

https://projectcatalyst.io/funds/8/f8-open-source-development-ecosystem/nft-swap-infrastructure-templates-1

We have a proven track record of successfully developing tools for the Cardano community. CENT (the lead developer for this project) is a long time developer in the Cardano community. After 20 years of experience as software developer, consultant and project manager, CENT has developed tools and technology on the Cardano blockchain since 2020.

In addition, as a team, we were also successfully funded for two standard setting proposals in Catalyst Fund 8, which we have successfully delivered on and closed out.

Standard for verification of NFTs:

https://projectcatalyst.io/funds/8/f8-open-standards-and-interoperability/standard-for-verification-of-nfts

NFT Royalty Standards:

https://projectcatalyst.io/funds/8/f8-open-standards-and-interoperability/nft-guild-nft-royalty-standards 

We have robust processes in place to ensure proper management and accountability of funds. Our operations are transparent, and we maintain an open line of communication with the community.

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

Design, User Stories, Specifications (1 month)

Intended Outcomes: Setting a clear direction for the development of the platform, ensuring that all features and functionalities align with user needs and expectations.

Key Activities:

User research, designing user interfaces, writing user stories, and creating detailed project specifications. Decide which offer type to develop as part of the concept stage.

Outputs:

Clear understanding of user requirements, design for the platform, documented user stories defining the user journey, and a comprehensive roadmap for development in the form of the project specification. A short report detailing why a specific offer model was chosen to be developed as part of the concept stage.

Acceptance Criteria:

Completion of all design documents, user stories that clearly outline the user journey, and a comprehensive specification document that provides a roadmap for development.

Evidence of Milestone Completion:

Design documents, user stories, and a project specification document.

Smart Contracts Development (2 months)

Outputs: A functional prototype for the NFT swaps smart contracts, and integration with the Cardano blockchain.

Acceptance Criteria:

Completion of all development tasks and successful internal testing. The smart contract code is published to the project repo.

Evidence of Milestone Completion:

Demonstration that the contracts operate as specified in the project specification document. The contracts will be able to interact with the Cardano blockchain to validate and execute transactions. As the contracts will be open source they will be published to a public GitHub repository.

Prototype Front-end and Back-end Development (2 months)

Outputs:

Functional prototype, including front-end and back-end, user registration and management systems, and integration with the Cardano blockchain.

Acceptance Criteria:

Completion of all development tasks, successful internal testing of the prototype's functionality, and demonstration that it operates as specified in the project specification document.

Evidence of Milestone Completion:

A presentation and link to a working prototype that allows users to register, list their NFTs, and perform trustless swaps with other users. The prototype will be deployed on the Cardano testnet and will be able to validate and execute transactions.

Final Reports (1 month)

The close-out report and video that will serve as both the deliverables and the evidence of the final milestone.

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

CENT (Lead Developer)

https://github.com/cent-development

Core Member of the Cardano NFT Guild [https://www.nft-guild.io]. Stake Pool operator of the pool CENT since December 2019. 20 years of experience in software development. Creator of the community tool Cardano Blockchain Intelligence. Graduate of the Plutus Pioneers Program cohort 1, 2021. Project Catalyst funded proposer since F6. 

Rares Kövesdi (New Mindflow) (Project Manager, Product Owner, Writer)

https://www.linkedin.com/in/rares-k%C3%B6vesdi-551260106/

Artist and entrepreneur, in the Cardano NFT space since Day 1. Core Member of the Cardano NFT Guild [https://www.nft-guild.io]. Creator of the Trybbles & Icons Cardano NFT projects. Cardano Project Catalyst funded proposer. Member in various Cardano & Catalyst projects, initiatives & communities over the past 2 and a half years.

Award-winning filmmaker, film and animation director, app and game developer.

In January 2021 he moved into the web3 economy granting new life to one of their projects in the form of an NFT collection on Cardano.

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

In our description of the project above we detailed all the components that are necessary to be developed for a feature-complete version of our product.

This proposal is for the development of a prototype of the solution. The following tasks are necessary for the successful development of the prototype.

Development

1. Smart contracts development - ₳25000
2. Integration with the Cardano blockchain - ₳2500
3. Smart contract testing - ₳5000
4. Github documentation for open source smart contracts - ₳2500
5. Prototype front-end and back-end development (including user registration and management systems) - ₳20000
6. Prototype testing - ₳5000

Total: 60000 ADA

Project Management, Specifications, UX & UI Prototyping

1. Project Management - ₳15000
2. Market Research - ₳5000
3. User Stories - ₳7000
4. Formal Specifications - ₳3000
5. UX Design - ₳3000
6. UI Prototype Design - ₳3500
7. Catalyst Administrative Tasks (monthly reports + milestone proof of achievement submissions + closeout report) - ₳3500

Total: 40000 ADA

Total: 100000 ADA

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

The cost of our project represents value for money for the Cardano ecosystem in multiple ways.

Firstly, our proposed budget reflects industry standards for software development, taking into account the unique requirements and complexities associated with blockchain and smart contract development. Our development team has years of experience in these areas and our rates reflect their level of expertise. This is especially true, since the lead developer for this project is based in Norway, one of the most expensive countries in the world.

Secondly, the costs of this project are not only linked to software development but also cover essential aspects such as project management, market research, user experience design, and marketing. These are crucial for the success of the project as they ensure that we develop a solution that is not only technically sound but also meets market needs and provides a user-friendly interface.

Furthermore, we are committed to transparency and responsible budget management. As part of this, we will share regular updates on our progress and budget expenditure with the Catalyst team and the Cardano community.

Lastly, the value proposition of our project is not just in its immediate outputs but also in its potential to stimulate further innovation within the Cardano ecosystem. By open-sourcing our smart contracts, we aim to contribute to the pool of resources available to other developers and projects in 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