DeFi Evolution: Pioneering High-Frequency Trading on Cardano

[GENERAL] Name and surname of main applicant

SIDAN Lab

[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)

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)

Research and ideation on a general HFT Framework for the Cardano Blockchain to enable initial foundational groundwork for later development.

[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.”

Technique for transaction chaining. Adopting this technique could solve one of the HFT’s pain points - confidence on order execution at match. Also it closes the attack vector on orders frontrunning.

[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

All the research outcomes will be fully open sourced once the R&D is finalised.

[METADATA] SDG rating

SDG 8: Decent Work and Economic Growth: By fostering a more efficient and liquid market, the project will contribute to economic growth and provide opportunities for employment within the blockchain and financial technology sectors.

SDG 9: Industry, Innovation, and Infrastructure: Developing an advanced trading platform aligns with the goal of promoting innovation and building resilient infrastructure, particularly within decentralized finance and blockchain technology.

SDG 10: Reduced Inequalities: Enhanced liquidity and reduced barriers to entry in financial markets could potentially contribute to reducing inequalities by providing broader access to trading opportunities.

SDG 17: Partnerships for the Goals: Collaboration and partnerships formed through this R&D project, possibly involving various stakeholders within the blockchain and financial sectors, align with the goal of fostering global partnerships to achieve sustainable development.

[SOLUTION] Please describe your proposed solution.

Objective - What We Aim to Achieve: 

• Integrate High-Frequency Trading (HFT) into Cardano’s decentralized finance (DeFi) ecosystem. The goal is to significantly increase the trading volume on Cardano’s decentralized exchanges (DEX).

Why - Rationale for HFT in Cardano:

• Market Gap: There's a largely untapped HFT market within Cardano.
• Growth Potential: Currently, 90% of the crypto trading volume resides in CEX. With HFT, we can narrow the gap between CEX and DEX and bring exponential growth in DeFi trading volume.
• Ecosystem Benefit: HFT can boost liquidity, tighten bid-ask spreads, and lift the overall market valuation of Cardano, leading to overall ecosystem growth.
• Institutional and Professional Traders’ Adoption: HFT on Cardano attracts institutions and professional traders with its high market adaptability, programmable alpha return, scarcity of competition.

How - Our Proposed Solution:

• Optimising for Security and Speed: Research a mechanism enhanced transaction speed and reliability, tailored for the high demands of High-Frequency Trading.
• Lower Order Management Costs: Research an off-chain order layer to remove order management costs.
• Fair Order Fulfilment: Research a mechanism that ensures fairness in order fulfilment while leveraging the power of off-chain computation.
• Programmatic Access: Research the possibility of APIs & SDKs for users to enable high frequency trading and attract professional and institutional traders.
• Fully Non-Custodial: Utility research of Cardano smart contract to protect users’ funds

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

1) Boosting Cardano’s Appeal to Institutional and Professional Traders:

• What's Happening: We're aiming to bring High-frequency Trading (HFT) to Cardano.
• Big Picture: Targeting a slice of the massive $30 trillion global crypto trading pie (even more when the bull market arrives).
• Core Benefit: Attract heavy hitters - think institutional and professional traders. This means more trading on Cardano, more growth, more buzz.

2) Liquidity Surge, Ecosystem Thrive:

• What's Happening: HFT players trade big, trade fast.
• Big Picture: They're the market's oil - making buying and selling smoother for everyone.
• Core Benefit: Reduced bid-ask spreads, healthier market, more money flowing. It’s like opening the floodgates for Cardano's DEXes, boosting their trade volume. 

3) Cardano: The New Standard of Decentralised Professional Trading:

• What's Happening: Breaking barriers through the decentralised highly performant trading platform.
• Big Picture: Cardano eUTxO technology + highly performant trading platform = Decentralised, Secure, Efficient trading.
• Core Benefit: Making Cardano the top choice for decentralised professional trading, ideally elevating Cardano’s status in the larger blockchain world.

[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?

First and foremost, we have an awesome and interdisciplinary team of strongly committed and experienced member, providing all required skill sets and expertise to successfully implement the proposed solution

• Trust and accountability
• Track record on Cardano ecosystem participation
• Team members have a track record of contributing in Cardano open source such as Mesh feature improvement, research Cardano techniques with sharing on Gimbalabs.
• Leverage the team's blockchain and financial tech expertise
• Team members are professionals across a spectrum of industries, including banking and finance, cyber security and software engineering, with chartered status with different professional bodies.
• Approach validation
• Market validation conduction with HFTs
• Our team gets direct connection with multiple hedge funds with AUM up to billions dollars, where we conduct product interviews and get validations which the approach could solve their major pain points trading on decentralized networks.
• Technical approach feasibility research
• Preliminary research on Cardano smart contract and transaction logic is performed and validated that the transaction logic is feasible on the blockchain layer. Remaining areas such as the off chain computation layer are considered as less critical technical problems.
• Collaboration with Cardano infrastructure providers
• The team would collaborate with infrastructure providers such as Maestro to validate the proposed solution has no technical blockers on infrastructure point of view

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

Market Analysis and Requirements Gathering (2 weeks)

• Proposal Onboarding and Project Management setup
• Conduct a comprehensive analysis of current HFT use cases and identify integration points for Cardano
• Gather requirements from potential users and stakeholders (e.g. hedge funds, asset management firms, centralized crypto exchange)
• Milestone Report via recorded Team Meeting
• Total Milestone Budget: ADA 20,000

Conceptual Architecture Design (4 weeks)

• Design the initial architectural framework for the off-chain computation layer.
• Establish the foundational design for order creation, matching and processing including
• Order information design
• Order types design
• Order matching engine rule design
• Order acknowledgement mechanism design
• Milestone Report via recorded Team Meeting
• Total Milestone Budget: ADA 20,000

Feasibility Study and Whitepaper (4 weeks)

• Conduct a feasibility study for the proposed HFT gateway.
• Publish a whitepaper detailing the concept, architecture, and potential impact.
• Milestone Report via recorded Team Meeting
• Total Milestone Budget: ADA 20,000

Community Engagement and Feedback (2 weeks)

• Engage with the subject expertise (e.g. hedge fund, crypto trading firms, centralised crypto exchange, Gimbalabs, Mesh, etc.) and the Cardano community to present the prototype.
• Gather feedback for refinement and future development.
• Milestone Report via recorded Team Meeting
• Total Milestone Budget: ADA 20,000

R&D consolidation and close out report (4 weeks)

• Consolidate research, prototype findings, and community feedback.
• Outline a detailed plan for full-scale development.
• Deliver a comprehensive report on project findings and future steps.
• Final Report via recorded Team Meeting
• Total Milestone Budget: ADA 20,000

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

A Hong Kong based Interdisciplinary team.

To ensure that we do not only provide deep and profound knowledge and expertise within the Cardno ecosystem, but also include professional expertise from outside the ecosystem, we have assembled a team of mixed skills and Interdisciplinary experts from both sides, the Cardano Ecosystem as well as from the financial industry in Hong Kong (HK).

Tier 1 - Proposal Leads (The group responsible and in charge of implementing the proposal)

Jackal Leung - Software Engineer

• Over 5 years in full-stack development in creating comprehensive software solution that encompass both front-end and back-end components
• Extensive experience in high-frequency system architecture design and infrastructure development.
• Worked and contributing in a leading FinTech unicorn (Welab bank) in HK
• LinkedIn: https://www.linkedin.com/in/jackalleung/ 

Anson Chui - Cybersecurity Engineer

• Cybersecurity engineering work experience at Huobi, Hex Trust, and Deloitte
• Extensive experience in implementing and monitoring security controls to ensure system hardening, resilience, and integrity of mission critical systems
• Certified Information Systems Security Professional (CISSP) & Certified Information Systems Auditor (CISA) & AWS Certified Solutions Architect
• LinkedIn: https://www.linkedin.com/in/anson-chui-219816158/ 

Hinson Wong - Smart Contract Engineer

• Team member of Gimbalabs, driving Hong Kong community
• Key contributor to MeshJS, a Cardano SDK for DApp development
• Lead developer at Cardano Name Service (CNS)
• Extensive network with Hong Kong based hedge funds and individual HFTs
• Ex-Citi, Chartered Financial Analyst (CFA)
• LinkedIn: https://www.linkedin.com/in/hinsonwong/
• Github: https://github.com/sidanwhatever 

Neal Lam - UIUX & Media Designer

• Digital & Virtual Banking UIUX design experience at Livi bank
• Branding design experience
• Animation designer of a Hong Kong Key Opinion Leader (KOL) - mingjai (653K subscriber, Top 5 KOL in Hong Kong)
• LinkedIn: https://www.linkedin.com/in/neallam/ 

Tier 2 - Proposal Support & Advisory (A supportive layer to advise and consult the Proposal Lead)

Kinson Cheung - Cardano Ecosystem & HFT Advisor

• Head of Incubation at Adaverse
• Experience in product marketing
• Extensive network with institutional traders in UK
• LinkedIn: https://www.linkedin.com/in/kinson-cheung-166979103/ 

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

Milestone 1: Market Analysis and Requirements Gathering (2 weeks)

• Proposal Onboarding and Project Management setup
• Budget: ADA 2,500
• Conduct a comprehensive analysis of current HFT use cases and identify integration points for Cardano
• Budget: ADA 12,500
• Gather requirements from potential users and stakeholders (e.g. hedge funds, asset management firms, centralized crypto exchange)
• Budget: ADA 5,000
• Milestone Report via recorded Team Meeting
• Total Milestone Budget: ADA 20,000

Milestone 2: Conceptual Architecture Design (4 weeks)

• Design the initial architectural framework for the off-chain computation layer.
• Budget: ADA 5,000
• Establish the foundational design for order creation, matching and processing including
• Order information design
• Order types design
• Order matching engine rule design
• Order acknowledgement mechanism design
• Budget: ADA 15,000
• Milestone Report via recorded Team Meeting
• Total Milestone Budget: ADA 20,000

Milestone 3: Feasibility Study and Whitepaper (4 weeks)

• Conduct a feasibility study for the proposed HFT gateway.
• Budget: ADA 5,000
• Publish a whitepaper detailing the concept, architecture, and potential impact.
• Budget: ADA 15,000
• Milestone Report via recorded Team Meeting
• Total Milestone Budget: ADA 20,000

Milestone 4: Community Engagement and Feedback (2 weeks)

• Engage with the subject expertise (e.g. hedge fund, crypto trading firms, centralised crypto exchange, Gimbalabs, Mesh, etc.) and the Cardano community to present the prototype.
• Budget: ADA 17,500
• Gather feedback for refinement and future development.
• Budget: ADA 2,500
• Milestone Report via recorded Team Meeting
• Total Milestone Budget: ADA 20,000

Milestone 5: R&D consolidation and close out report (4 weeks)

• Consolidate research, prototype findings, and community feedback.
• Budget: ADA 2,500
• Outline a detailed plan for full-scale development.
• Budget: ADA 2,500
• Deliver a comprehensive report on project findings and future steps.
• Budget: ADA 15,000
• Final Report via recorded Team Meeting
• Total Milestone Budget: ADA 20,000

Total Proposal Budget = ADA 100,000

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

Investing in high-frequency trading (HFT) infrastructure offers substantial value to Cardano by driving higher adoption among institutional and professional traders, amplifying liquidity within Cardano’s Defi ecosystem, reshaping Cardano as the premier destination for cutting-edge trading. These advancements elevate Cardano DeFi's maturity and market competitiveness, propelling it to the forefront of the industry.

[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