Xerberus Nodes: A Decentralized Risk Rating Agency on Cardano for the World

[GENERAL] Name and surname of main applicant

Simon Peters

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

Entity (Incorporated)

[GENERAL] Co proposers and Additional applicants

In addition to the main applicant (Simon Peters), the proposal has two co-proposers: Noah Detwiler and Matthias Guilbert, being submitted by the three Co-Founders of Xerberus.

[GENERAL] Requested funds in ada

750000

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

12

[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 to decentralize and scale up the computation of the Xerberus Risk Ratings through a Network of Nodes, removing Xerberus Servers as centralized power and potential censor.

[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

[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

Xerberus Nodes, like most Nodes of decentralized networks, are fully open-sourced. Users who run nodes can inevitably look into the source code, as this is the only way Node Providers can independently ensure that our nodes are censorship-free. Our Nodes will be licensed under the MIT Licence, a permissive open-source license. This means that the software is available for use, modification, and distribution under the terms that allow for open-source and proprietary use.

[SOLUTION] Please describe your proposed solution.

What is Xerberus?: 

Xerberus is a Risk Rating Protocol that empowers investors by providing metrics to facilitate a quick and objective assessment of any crypto asset. Our platform, Xerberus V1, is fully functional and will be entirely published by 23.12.2023. Until then, access will remain exclusive to our Xercher Community. We encourage anyone who would like to be granted access to the platform to reach out to us on our socials (Discord, X, etc.).

Our platform allows users to assess the risk associated with any crypto asset and explore the metrics underlying our Risk Ratings. What sets Xerberus apart from any other risk assessment system is its radical approach that relies exclusively on on-chain data. We believe that bad actors can easily fake credentials and use social media to deceive investors, but one thing they cannot do is hide their transaction records.

More concretely, the fundamental idea at the core of Xerberus is that transactions encode relevant information that can be used to guide the actions of rational investors. Because markets are efficient and priced in all available knowledge, we believe that Xerberus empowers its users by decoding this hidden information and making it readable.

Problem: The Risk Ratings offered by Xerberus Ltd. have proven effective in guiding investors, but their computation is centralized at Xerberus servers. This contradicts the decentralized ethos of blockchain technology and creates a vulnerability with a single point of failure by placing the entire system's reliability on Xerberus alone. This setup could lead to potential biases, technical failure, or security issues within the company.

Solution:

1. Decentralising Computation with Xerberus Nodes: To address the centralization concern, Xerberus aims to distribute the computation of its Risk Ratings, increasing its resilience and scaling up its computing power. The node network will form an effective Cardano Partnerchain built on "substrate" and run its own consensus, following a principle that we call "Proof of Useful Work," with risk rating constituting proof of computation. 
2. Community Engagement and Governance: Governance is implicit through Xerberus Node Operator's ability to accept or deny updates to their node (which constitutes an effective vote right) and explicit through a governance body formed by Xerberus Community Members. 
3. Transparent and Verifiable Computation: The computation subjacent to our risk ratings becomes transparent and verifiable with decentralized and open-sourced nodes. This is a critical step in building the lasting credibility of the Xerberus system, which relies on methodological excellence and verifiability. 
4. Downtime Reduction: By employing multiple nodes to form an efficient partner chain that undertakes Proof of Useful Work, we can significantly reduce the risk of computational downtime. This ensures the ultimate risk scoring system's continuous operation and reliability so that third-party users are not impacted.

Impact on Xerberus: The proof of concept is up and running, and given we achieved our publication date of 23.12.2023, we are almost six months ahead of schedule for our last catalyst proposal. However, Xerberus is far from having realized its full potential. Expanding Xerberus to a decentralized network running on Cardano as a partnerchain would take Xerberus to a whole new level: A genuinely decentralized system would put Xerberus into the hands of the community and create a new layer of Cardano itself that can be used by other Dapps that want to build on the Xerberus Risk Engine. From Lending Protocols that wish to manage their Credit Risk to Option Protocols that look to improve their internal pricing engine, they need a risk engine that can be built on Xerberus. 

1. Enhanced Trust and Reliability: Decentralization would significantly increase the trust and reliability of the Xerberus risk ratings.
2. Reduced Risk of Manipulation: Distributing computation across various nodes would significantly reduce the risk of manipulation or the introduction of biases by a single entity. As noted, we had risk rating agencies before, and they worked well until they chose to play against the people they were serving, leading to the great financial crisis of 2008.
3. Alignment with Blockchain Principles: True to the principles of blockchain technology, this solution honors decentralization, 

Uniqueness of the Solution

1. Leveraging Cardano's Partnerchain: Building a Cardano Partnerchain that encompasses all crypto assets is a pioneering move, pushing the boundaries of blockchain capabilities. The Partnerchain setup using the substrate framework is highly customizable and allows validators from other Layer Ones to run a Xerberus Node on top of their infrastructure. Effectively, that will enable the "Xerberus Chain" to consume data from places like Ethereum, Polkadot, etc., and serve clients there while effectively settling the created value back to the Cardano ecosystem. 
2. Community-driven Updates and Innovations:  The governance model allows for a democratic and community-driven approach to updating and improving the risk assessment model, ensuring that it evolves with the ecosystem and stays relevant.
3. Decentralized Risk Assessment Model: Unlike traditional centralized Risk Rating models, Xerberus Nodes offer a blockchain-native solution in tune with the decentralized nature of blockchain technology.

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

The Benefits to Cardano 

1. Increased safety for the entire Ecosystem: An additional layer of protection to Cardano that helps with the early detection of bad actors and damaging behavior is essential for enhancing trust and confidence among investors. This is especially true in Cardano's DeFi sector, which continues to grow and evolve. Right now, most of DeFi lacks any form of risk management as it is simply not rewarded. However, creating a risk assessment instrument will contribute to and make it easy to understand for end users. We change what is acceptable by creating transparency. The resulting improving financial robustness of the DeFi ecosystem will be a significant stepping stone to Cardano's establishment as a powerhouse in the DeFi ecosystem. 
2. Establishing an Equal Playing Field: By providing objective, censorship-resistant risk assessments for all crypto assets, including Layer One blockchains, Xerberus levels the playing field for Cardano to receive a fair evaluation alongside other ecosystems. It also promotes equality by empowering all users with tools that reduce the gap between the more and the less tech-savvy.  
3. Driving Revenue and Exposure from External Sources: By providing risk ratings for other Layer Ones, the Xerberus Network attracts revenue from across various ecosystems that flows back into the Cardano economy. Within Cardano, Xerberus Labs LTD generates cash flow by redirecting the revenue generated in the Xerberus Platform to the nodes, as it captivates other Dapps and professional traders using Xerberus' quantitative outputs.
4. Enhancing Cardano's Recognition: The ethics of Xerberus and its data-driven, objective, and unbiased assessments will reflect positively on the Cardano Network and boost its recognition.

[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?

1. The platform demonstrates our ability to build and Xerberus’ ability to produce outstanding risk ratings and powerful instruments that help the community assess the risk associated with many crypto asset

2.   Funds: Our company is registered in the United Kingdom under the Company Number 14966821. Find out more by following this link: https://xerberus.io/company. By law, we are required to publish our balance sheets and statutes only on the government website, but we will make them available to the Cardano community in the form of a report audited by an external and certified accountant. Everyone will be able to see how Catalyst funds were used.

3.   Xerberus Community Track Record: We have been active in networking, attending several Cardano events, and representing Cardano at various conferences throughout the year, including Web3 Berlin and Crypto Cruise Cologne, where we delivered keynote speeches. We are proud to have earned the trust of key members of the broader Cardano community. For instance, we serve as official advisors to the Orcfax Oracle Project. Furthermore, over the past year, we have been actively involved in the community, providing valuable information that has helped to shed light on several controversial events, such as the report on the failed 

Ardana Project: https://xerberus.io/blog/the-life-and-death-of-ardana.

FACT Launch Report: https://xerberus.io/blog/the-fact-launch-on-wingriders-lanchpad.

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

Project Planning and Kick-off (Months 1-2)

1. Tam Assembly:  We have a shortlist of long-term collaborators waiting to be onboarded into our company. At the end of the milestone, the reinforced/expanded team will be ready to commit to a full-time schedule. We will provide CVs and employment contracts as proof of this milestone.
2. Requirement Analysis: Conduct a thorough analysis of the technical and functional requirements of Xerberus Nodes and evaluate the compatibility of our "proof of useful work" with the existing framework. We will provide this requirement analysis as proof of our milestone. 
3. Substrate Framework Familiarisation: Ensure the team understands Substrate's capabilities and limitations. We will seek a connection to other groups building using the Substrate Framework and actively join their developer community. 
4. Project Roadmap Development: Create a detailed roadmap identifying specific goals, timelines, and resource allocation. The roadmap will be delivered as part of our milestone proof.

Technical Design and Substrate Customisation (Months 3-4)

1. Architecture Design: Design the architectural blueprint of the Xerberus Node, outlining its core components and how they interact within the Substrate framework. This architecture is provided as proof of milestone.
2. Custom Blockchain Creation: Begin customizing Substrate modules to fit the specific needs of the Xerberus Node.
3. Data Model Development: Develop the data model to handle risk assessment computations and on-chain data interactions.

Core Development and Initial Testing (Months 5-6)

1. Core Blockchain Development: Develop the core blockchain functionalities of the Xerberus Node.
2. Smart Contract Implementation: Write and deploy the initial smart contracts for risk assessment processes.
3. Initial Testing: Conduct preliminary tests to ensure basic functionalities work as intended. We will provide the preliminary testing report as proof of the milestone.
4. Node Provider Feedback: Present the progress to potential node providers (SPOs) and gather feedback for refinements. We will provide the collected feedback as proof of the milestone

Risk Assessment Algorithm Integration (Months 7-8)

1. Algorithm Development: Develop the risk assessment algorithms based on the requirements.
2. Integration with Blockchain: Integrate the risk assessment algorithms with the blockchain.
3. Enhanced Testing: Perform rigorous testing to ensure the algorithms work accurately and efficiently within the blockchain environment. We will provide the enhanced testing report as proof of the milestone.
4. Initial Documentation: Start creating documentation for the system, including technical guides and user manuals. We will provide the initial documentation as proof of the milestone.

UI/UX Development and Beta Release (Months 9-10)

1. User Interface Creation: Develop the user interface for interacting with the Xerberus Node.
2. User Experience Optimization: Ensure the UI is intuitive and aligns with the best practices for user experience.
3. Beta Version Launch: Deploy a beta version of the Xerberus Node for limited public testing. We will provide the enhanced beta version as proof of the milestone.
4. Beta Testing and Feedback Collection: Gather feedback from beta testers to identify bugs and areas for improvement.

Final Testing, Documentation, and Official Launch (Months 11-12)

1. Final System Testing: Conduct comprehensive system testing, including stress tests and security audits.
2. Finalize Documentation: Complete all documentation, ensuring it is clear and comprehensive. We will provide the enhanced final documentation as proof of the milestone.
3. Launch Preparation: Prepare for the official launch, including marketing and community outreach efforts. We will provide a link to the full node as proof of the milestone.
4. Official Launch: The Xerberus Node will be officially launched, marking the completion of the 12-month development sprint.

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

Answer:

The core team behind Xerberus consists of three highly accomplished and competent Co-Founders and an invaluable key member.

Simon Peters is the Director of Xerberus LTD. From 2019 to 2022, he served as the CEO of DECUS Network, a corporate venture based in Berlin. Under Simon's leadership, DECUS secured one million USD in venture funding, and the custody infrastructure developed under his supervision is currently used by institutional players within the EU. Throughout this period, Simon collaborated with several Tier 1 banks within the EU. He conducted activities at the intersection of emerging regulations, institutional adoption of blockchain technology, and the creation of technology capable of fulfilling the specific needs of these sectors. Within less than three years, DECUS Network and its clients were fully integrated into the BlockSize Capital Group. The technology developed under Simon's leadership is now employed by firms like Micobo GmbH, serving prestigious clients such as HSBC, Deutsche Bank, and Allianz. This experience makes Simon an excellent fit to work on Xerberus for the Cardano community: https://www.linkedin.com/in/snj-peters/

Noah Detwiler is the Chief Scientist of Xerberus LTD, responsible for developing the data models supporting Xerberus' Risk Assessment of Cardano native assets. As a physicist, he graduated with distinction and was recognized as an outstanding student on the Dean's List from Ariel University. Noah's background as an applied econophysicist equips him with a profound understanding of using mathematical models and statistical analysis to complex economic systems. His proficiency in intricate data modeling, coupled with his expertise in physics and econometrics, empowers him to devise innovative solutions for complex challenges, such as managing blockchain data's noisy and sparse nature. Throughout his journey, he has honed his skills as a proficient SQL and Python programmer: https://www.linkedin.com/in/noachdetwiler/

Matthias Guilbert is the primary front-end developer at Xerberus. Matthias served in the military for five years before applying the learnings from the French Navy Special Forces to the civilian business world, leading various challenging projects, occasionally in conflict zones. He became a software developer focusing on real-world solutions enabled by tech products. Matthias' greatest strength is the MERN stack. He is an avid technology enthusiast and continues to learn new programming languages: https://www.linkedin.com/in/matthias-guilbert/

Mihir Solankar is a full-time core team member and Xerberus' first employee. He is a skilled back-end developer who has been coding since his early teenage years. He worked in various positions and is a critical asset in developing our platform. (https://github.com/Mi88ir?tab=overview&from=2023-07-01&to=2023-07-11)

While this capable core team is central to the company, Xerberus extends beyond it. We enjoy the privilege of having an outstanding advisory board that includes people with solid institutional backgrounds and occupying influential positions. These individuals possess in-depth knowledge of financial market operations and believe in Xerberus and its capability to achieve its goals. Our first advisor has decades of experience in institutional trading. This individual has built quantitative trading strategies and managed hedge funds in London, New York, and Silicon Valley. This person currently holds a managerial position at the largest data broker in the market. Our second advisor is, among other roles, a former Executive Director of Goldman Sachs New York and currently manages his own proprietary quant crypto trading firm. We are not permitted to publish the full names of our advisors, but we can provide proof of engagement to trusted representatives of the Cardano community under signed NDAs.

Lastly, we are fortunate to have support from a dedicated group of community members and highly skilled freelancers who excel in building large databases and developing machine-learning models. As we continue to grow, we plan on using the funds raised to expand the team and hire two long-time supporters currently employed and waiting for an opportunity to join Xerberus Labs Ltd. full-time. The new team members will be responsible for building the Xerberus Nodes.

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

Please find the budget detailed in the spreadsheet provided below: https://docs.google.com/spreadsheets/d/e/2PACX-1vSzotWbRBcsoxp0dYNKU370NGyL0-SjOXYZtgdAEb2YchbVUjyWlm10grAdlCA5EomTjjYK701EU180/pubhtml?gid=0&single=true.

Funds will be used primarily to offset the costs associated with the expansion of expenses of the two talented professionals joining our team to help us build the Xerberus node and deliver our vision: a Blockchain Architect and a Senior Developer. The cost of hiring them both is $224,000 per year, which is an excellent value for money considering the high demand and skill level of these roles. This amount is based on a gross salary of $8,000 per month, which is ca. $5,000 after taxes, and provides good living standards in London. Xerberus will also commit funds to these human resources, complementing their salary with token and equity options as an incentive and a reward for their work.

This proposal totals approximately $225.000, assuming a stable ADA (Cardano) price of $0.30. This price will cover the described project. We acknowledge that the current ADA price is higher and hope it remains stable. Still, we must include a safety margin that covers the impact of market hardships on our employees and their families. In case the ADA price falls to something around $0.25. and the proposal totals approximately $187,500. We will still be able to fill the gap with other funds. If ADA prices strongly increase or decrease, we will scale the project up or down accordingly. However, if we stay within the ranges given above, the project will be executed as described. 

Below is a screenshot of the budget:

• The starting balance shown in the spreadsheet originates from our angel investors.
• The revenue streams noted in the spreadsheet are not related to the nodes but come from advisory services provided by Xerberus Labs Ltd.

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

Xerberus’ development relies on various funding streams, including private investment funds, different revenue streams from services we provide to other projects, and Catalyst funding (Fund10).

We offer a critical services to the community while creating a platform that draws investor attention to the Cardano Ecosystem and generating external revenue, Xerberus channels revenue back into the Cardano financial system via an out network of nodes. Additionally, we will be yet another case study community members can point to display the always-evolving strengths of the Cardano Network and set an example for the exploding partner chain ecosystem of Cardano. Our nodes will be open sources and can be a blueprint for future partner chains.

The different layers of value we create ensure an exceptionally high investment return per ADA spent, significantly benefiting the community.

[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