P2P-DeFi Protocols: Cardano-Loans

[GENERAL] Name and surname of main applicant

Zhekson

[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

fallen-icarus (Twitter, Github)

zhekson (Twitter, Github)

Note: we are a small, two-person team that prefers to maintain public pseudonymity. Our pseudonyms are consistent across all platforms, and we are more than happy to verify our identities with the Catalyst administrators on a need-to-know basis.

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

2

[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)

We propose a family of radically permissionless and composable p2p-DeFi protocols that forgo reliance on permissioned off-chain software, in favor of p2p-driven liquidity and price discovery.

[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.”

Aiken - The core of this project is a collection of on-chain validator & minting policies written in Aiken. Although all four protocols are currently working MVPs, we will not consider them ready for mainnet deployment until Aiken reaches a stable level of development. Nonetheless, the current state of Aiken is plenty enough for us to continue development.

[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 aspects of the project (on-chain & off-chain code, documentation, e.t.c.) is open source, under the Apache 2.0 license.

[SOLUTION] Please describe your proposed solution.

Cardano-Loans is a p2p-lending/borrowing protocol that gives users full control over loan terms, and the ability to negotiate them on-chain. In addition to all the features Cardano-Loans inherits from the P2P-DeFi Protocol family, here are some unique standouts:

• Trade-able Bonds - debt instruments in the form of an NFT, used to direct borrower's repayments and/or claim their collateral. Trade-able just like any other NFT.
• On-Chain Credit History - Borrower's entire credit history is queryable on-chain, which informs lenders' risk assessments and lending criteria.
• On-Chain Negotiations - Borrowers and lenders interact with each other via "UTxO handshakes", where lenders can offer loans to prospective buyers, with all routing taken care of by Beacon Token querying. The terms (rate, compounding frequency, length, e.t.c.) are all negotiable parameters.
• Fixed or Compounding Interest - interest rates can be fixed (one time) or compounding (enforced via a "rollover" action).

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

In addition to the positive impact of the whole P2P-DeFi Protocol family, Cardano-Loans is particularly impactful. A healthy credit-debt market is a vital (and often the largest) component of a thriving economy. A healthy market is one in which prices reflect underlying reality as quickly and fluidly (with as little friction) as possible. This is especially true for credit-debt markets, where money itself is the asset, priced via interest rates. Unfortunately, many lending/borrowing protocols employ pool-based lending, where rates and liquidations are handled formulaically and/or at a global level. Cardano-Loans enables the formation of a fully peer-to-peer credit/debt market.

This project establishes a "level playing field", where users have maximum control over all aspects of their loan terms.

[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?

Capability

Cardano-Loans, along with the rest of the P2P-DeFi Protocols, has already been implemented as a working prototype. Development has been continuous over the past several months, and has adhered to the roadmap set out in the (unfunded) Fund10 proposal. Although originally implemented in PlutusTx, Cardano-Loans has since been refactored to Aiken, and has undergone many improvements under the hood. See here for the full changelog. We trust the Github repos and the revision history attest our ability to deliver.

Feasibility

As a working prototype with many improvements/refinements under its belt, Cardano-Loans has demonstrated technical feasibility. Further optimizations and associated benchmarking will continuously assess feasibility.

Documentation & Support

Architectural decision-making and protocols' logic will be thoroughly documented to foster collaboration with a wider community of developers. Written and video tutorials will be created to help establish a user base. The feasibility of our approach will be validated by feedback from users and developers.

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

Refinements & Optimizations (~4 weeks)

• Rearchitect the protocol to improve the expressiveness of beacon querying
• Implement features/optimizations, which are outlined here
• Provide benchmarks for transactions involving the protocol

New Features and Optimizations (~3 weeks)

• Update documentation to reflect changes
• Create written and video tutorials to demonstrate use

Comprehensive Benchmarking (~1 week)

• Benchmark performance of Cardano-Loans standalone, and when composed with other P2P-DeFi Protocols
• Benchmarks generated for: opening & closing asks, offers, accepting loans, repayments, rollovers, reclamations, and the extent to which each action is composable with other actions in the P2P-DeFi family.
• Results will be similar to the benchmarks done for Cardano-Swaps, here.

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

We are a two-man team based in the US:

fallen-icarus: Protocol Architect and Lead Developer

After over two years' experience with PlutusTx and Aiken, fallen-icarus has developed a deep understanding of Cardano's eUTxO model. As a pioneer of the Beacon Token design pattern, he has a proven ability to think outside the box and develop novel asset-oriented programming techniques.

zhekson: Technical Writer and Community Advisor

A longtime member of the community, zhekson has demonstrated his commitment and technical expertise in Cardano. He is passionate about distilling high-impact technical concepts for the masses, and doing so in an easily digestible manner. He actively engages with the community on Twitter, is a top contributor to the Cardano Stack Exchange, and operates a productive stake pool.

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

Total Budget: $17,600 / 44,000 ADA (@ $0.40 per ADA) / 8 weeks

• Full-time Protocol Architect & Developer: $45/hr x 320 hours = $14,400
• Part-Time Technical Writer & Admin - $20/hr x 160 hours = $3,200

Note: Although this proposal is submitted in the concept phase, it is related to and overlaps with the overarching P2P-DeFi Proposal in the solutions phase. This is done for two reasons:

1. To give the community flexibility in deciding/voting on which parts of the project deserve more immediate attention. This proposal (Cardano-Loans) being one of these avenues.
2. There is a lot more work to be done beyond the scope of these proposals. If all of them receive funding, extra money will be set aside for future expenses, in the following manner:
3. Third Party Audit (~$10,000) - After optimizing and refining the protocol, Cardano-Loans will need an independent smart contract audit for enhanced security guarantees.
4. Continuing R&D (~7,600 ADA) - To make these protocols viable for end-users, a lot more work is required on the UI/UX front. This will likely involve hiring developers to create web or desktop apps, the former of which will incur some operational costs. Since this project has no token, and is 100% free and open source, our only source of funding is grants such as Catalyst, even upon "successful development". To ensure steadfast progress, extra funds will be transparently set aside as a buffer against Catalyst's unpredictability.

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

Despite previously not receiving funding, we've largely adhered to the roadmap set forth in our Fund10 proposal. Since then, we've gotten up to about the first milestone (Cardano-Swaps refinement). The plan is to continue moving forward along this direction.

We see a path towards a truly resilient and sustainable DeFi ecosystem that stands in stark contrast against existing DeFi solutions on Cardano. Moreover, this project heavily leans into previously unexplored eUTxO design principles (i.e. Beacon Tokens, Stake Key Overloading, e.t.c.) that may help advance the state of the field. The team has a reasonable expectation that their R&D efforts will be of interest to the eUTxO developer community at large, particularly with respect to composability. This proposal offers an excellent value for money to the Cardano 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