Cosmex– Level 2 ⚡-speed Cardano Order Book Exchange

[GENERAL] Name and surname of main applicant

Alexander Nemish

[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)

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)

COSMEX combines ⚡-speed of centralized exchanges and ownership guarantees of decentralized protocols using state channels. No slippage fees, fast off-chain order book trading, L1 settlement, no KYC.

[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

The Cosmex Whitepaper and Cosmex smart contracts will be fully open source. All the outputs and results will be published on GitHub and Cosmex site.

The documentation will be published online on https://cosmex.io

The news, updates and announcements will be published on the official Cosmex Twitter: 

https://twitter.com/CosmexExchange

[SOLUTION] Please describe your proposed solution.

Centralized order book exchanges allow fast trading but they often lack solvency proofs and ownership guarantees for your assets. Think FTX or MtGox. 

Decentralized AMM exchanges are mostly secure, but those are quite slow and expensive due to slippage and “gas” fees.

Hydra L2 solution requires all parties to participate and be always online with milliseconds response, otherwise the Hydra head is closed. It’s not feasible for a large number of clients who can go offline at any moment.

COSMEX uses a novel approach that uses multiple star-shaped two-party Hydra-like state channels. This solution allows parties to join and leave trading whenever they want without disrupting others.

How does it work in a nutshell?

1. Alice deposits funds into a Cosmex smart contract to open a state channe
2. Alice trades off-chain using Cosmex's API as if she were using a regular exchange
3. When Alice is ready to close the channel and withdraw her funds, she can send a transaction with the latest signed snapshot on-chain to initiate the proces
4. To keep the channels balanced, Cosmex periodically arranges on-chain transactions that transfer funds between parties
5. If Alice doesn't cooperate, Cosmex closes the channel

Overall, Cosmex's channel system provides a secure and efficient way for traders to trade off-chain with the added benefit of reducing transaction fees and increasing transaction speeds.

It's faster and cheaper than on-chain trading, yet still secure and provably solvent.

No slippage, no front-running, no flash-loans, no IOUs. Your keys – your crypto.

We will publish:

• a full whitepaper with detailed protocol description
• state channel smart contracts
• a proof of concept implementation of the exchange

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

Cosmex directly addresses this challenge by providing a high-impact product that significantly enhances the Cardano ecosystem and stimulates further adoption.

Expanded Use Cases: Cosmex, as a semi-centralized L2 order book exchange for Cardano, introduces an efficient and high-speed trading solution for Cardano native tokens, thereby expanding the range of possibilities and use cases within the Cardano ecosystem.

Seamless Integrations: Cosmex will offer an API to enable seamless integrations with other platforms, applications, and services within the Cardano ecosystem. This allows for increased collaboration and mutual enhancement of services, further enriching the Cardano ecosystem's utility and value.

Driving Adoption: The unique combination of high-speed transactions, low costs, and robust security provided by Cosmex is expected to attract a wide range of users, including traders and developers, fostering greater adoption of the Cardano ecosystem.

Privacy and Autonomy: Cosmex operates in a permissionless manner, not requiring KYC, and guarantees users' control over their funds. This feature is likely to appeal to users who value their privacy and autonomy, encouraging them to prefer Cosmex over traditional exchanges.

Cosmex will be the first and the only one fast L2 exchange allowing cheap trading. This should greatly benefit arbitrage traders, and be useful specifically for algorithmic stablecoins like Djed.

[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?

I’m a former compiler engineer at IOG, I worked on Marlowe DSL (https://marlowe.iohk.io).

I’m a senior Scala engineer with more than 10 years of Scala development experience with companies like UBS and Deutsche Bank.

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

The Litepaper with the high level protocol description.

The full whitepaper with detailed protocol description, communication diagrams, state channel state machine description.

The State channel smart contract that implements the logic from the whitepaper.

A proof of concept implementation of the exchange that anyone can run on Preview testnet with the following functionality: opening a channel, trading off-chain, balancing the channels on L1, closing the channel, and payout.

As a result we'll publish on Cosmex GitHub:

• The Litepaper with the high level protocol description.
• The full whitepaper with detailed protocol description.
• The State channel smart contract imlementation.
• A proof of concept implementation of the exchange.

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

The main proposer, Alexander Nemish, will be actively working on the proposal.

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

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

• Innovative Proof of Concept: Efficient use of funds for developing COSMEX as a groundbreaking proof of concept, showcasing practical applications and potential on the Cardano blockchain.
• Protocol Development: Budget allocation includes creating a comprehensive whitepaper, detailing the protocol’s mechanics, benefits, and integration with Cardano, serving as a valuable resource for future developments.
• Ecosystem Growth: The project serves as a catalyst for innovation, attracting interest and potentially inspiring further research and development within the Cardano community.
• Foundation for Future Expansion: Establishes a strong foundation for scalable and sustainable solutions, setting a precedent for subsequent projects on the Cardano platform.

[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