Minswap Cardano DeFi Onboarding: Incentive Program

[GENERAL] Name and surname of main applicant

Paolo Pezzarossa - Minswap Volunteer

[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

Long Nguyen - long@minswap.org - Tech Lead Minswap Labs

Temijun - temujin@wanchain.org - CEO Wanchain.org

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

3

[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 aim to create a framework for an Incentive program designed to onboard more users to Cardano DeFi. This is a PoC for doing this on Cardano, focusing on Minswap first.

[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

Once the project is ready: incentive strategies, chain indexers and bot prevention methods will be open sourced.

[SOLUTION] Please describe your proposed solution

Cardano is considerably behind other blockchains in terms of standard industry metrics such as Daily Active Addresses or DEX Volume. It is difficult to determine why that is, but some reasons suggest that ICO Participants don't use the chain or Protocol offerings and Yield opportunities aren't good enough. You can read a full Background report here.

Cardano has always made design choices prioritizing first principles, organic growth and decentralization versus quick growth and catering to the industry’s hottest metrics. In addition, some factors leading to this problem, such as Japanese tax/crypto laws (which is why most ADA ICO participants are hesitant to interact with DeFi), cannot be addressed by the community. However, it is clear Cardano can and should do better to increase the usage of the blockchain. Ultimately, Cardano's security model depends on transaction fees in the long term. Especially with Voltaire coming up and the community having access to the 1.5bn ADA Treasury, projects and community members need to step up, ideate and grow adoption. 

This is why we are proposing the Catalyst Funded “Cardano DeFi Onboarding by Minswap”. The aim is to create a framework for a program that is designed to onboard more users to Cardano DeFi. We are starting with a focus on Minswap first, but if successful, the program could in the future be applied to the whole Cardano DeFi ecosystem, with bigger and more attractive incentives. 

Such a program should be designed in a way that targets both: 

1. Current Cardano users and ADA holders who are not using DeFi. 
2. Wider crypto users familiar with other chains but who have not interacted with Cardano DeFi. 

For such a program to be successful, it should be accompanied by a strong Education and a Marketing campaign. However, this proposal focuses exclusively on the program's Incentive campaign. 

Our solution involves a comprehensive Incentive program with key objectives and strategies that aim to foster volume and awareness in Cardano DeFi, both in the short and the long run. The program modalities are:

1. Trading Volume Incentives

Our Point System will reward users based on the total volume of trades made within a specified period. Traders can be incentivized to trade different Cardano Tokens available on Minswap, thereby increasing DEX Volumes on Cardano. 

2. Liquidity Provision Incentives

Our Point System will encourage users to provide liquidity to Minswap's pools, thereby increasing TVL on Cardano. Users can be rewarded based on the amount of liquidity they provide and the duration of their participation, promoting market stability and depth.

3. Bridging Incentives

During the Avalanche Rush program in 2021, the Avalanche Bridge saw a spike in volume, reaching over US$370mm on August 27th alone, all coming from Ethereum. The bridge maintained high volumes, with a peak of over US$600mm on September 23rd. 

Our Point System will reward users who bridge to Cardano from different ecosystems using a bridge such as Wanchain. In this way, we can both increase the daily active addresses on Cardano and attract a wider range of crypto users familiar with other chains but who have not interacted with Cardano DeFi.

This will be done in collaboration with Wanchain. The Wanchain bridge has proved to be one of the top decentralized blockchain interoperability solutions. Responsible for bringing USDC, USDT and DAI to Cardano in the form of bridged assets, Wanchain has deep expertise in Cardano and they have agreed to support the Proposal in 3 ways: 

1. Marketing of the Incentive campaign and rewards for bridging from other blockchains to Cardano using Wanchain.
2. The potential addition of Incentives from Wanchain org themselves to this program.
3. Support compiling data of users bridging in according to a ruleset to be provided by the Minswap DAO project members.

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

• Creating a Proof of Concept for a Cardano DeFi onboarding program: we are starting small with a program that focuses on Education, Incentives and Marketing for onboarding DeFi users on Minswap. If successful, the Cardano community would have proof of what such a campaign can achieve with a view to implementing a wider program with bigger incentives and for the whole blockchain.

• Boosting DeFi metrics where Cardano is lagging: By creating an incentive program, we intend to draw a wider audience to Cardano's DeFi ecosystem. This would in turn boost key metrics such as Daily Active Addresses, DEX Volumes, or TVL. These are metrics that the average consumer of blockchain data sees in data providing platforms such as Messari or Token Terminal, and play an important role in attracting users to an ecosystem.

• Open Source Contribution: As our project will be fully open source, it will contribute to the pool of resources available to Cardano developers, fostering innovation and collaboration within the community. Should our program achieve its goals, it could become a model for other protocols too.

[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?

These Incentive programs, especially Points based ones, have been already implemented successfully in other blockchains, as you can read in the aforementioned report. A recent article by DeFi Research firm Delphi Digital, sheds light on how Solana’s DeFi ecosystem recently experienced a renaissance (in terms of increased usage and liquidity) mainly driven by protocols implementing these incentive programs following Point Systems. More about Point Systems and their positive effect onboarding users into the Solana ecosystem can be found here. An important point to make is that these incentive systems were mainly in protocol tokens, which is why as part of the Minswap DAO we plan on creating a Proposal to supplement the ADA incentives with MIN Tokens from the DAO Treasury. 

Our team is composed of Minswap DAO members, among which there are programmers, blockchain experts, marketing experts, and well known Educators within Cardano. All of them bring a wealth of knowledge and experience to this project. The Proposal also has the backing of the Minswap Labs team, which is composed of several highly experienced Plutus engineers who have been working on developing Plutus-based Smart Contracts for over 3 years. As such, Minswap Labs has established itself as a highly experienced and capable company specialized in the development of DeFi tools in the Cardano Ecosystem.

The Minswap DEX is currently the Cardano dApp with most Daily Active Users and transactions. Data available at: https://dappsoncardano.com/

It is also currently the Cardano DeFi dApp with highest Total Value Locked and handling the majority of Trading Volume on Cardano DEXs. Data available here: https://defillama.com/chain/Cardano?currency=USD

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

Milestone 1 - Research and Planning - this involves studying previous work done on other blockchains and developing a detailed Incentive Program. This Program will expound the rules to qualify for incentives, the timeline to qualify for incentives (for Trading, Providing Liquidity and Bridging) and the measures taken to prevent manipulation of the program.

Milestone outputs

A documentation detailing the Point System on Minswap design, including how to qualify for rewards, what types of actions are required, and bot/manipulation prevention mechanisms. 

Acceptance criteria

The Point System documentation successfully goes over the points mentioned above.

Evidence of milestone completion

Published links of the document

Milestone 2 - Development of the Incentive Program - according to the rules designed in Milestone 1, there will be the development of the trading volumes incentives system, liquidity provision incentives system and bridging incentives system.

Milestone outputs

Development of a Points System that tracks how many swaps a user does, total volume of user swaps, how much liquidity the user added to the protocol, and other relevant data is developed. 

Acceptance criteria

Points System accurately tracks data on the active ongoing usage of Minswap v2 

Evidence of milestone completion

Published links to the Point System dashboard

Milestone 3 - Project Launch - launch the incentive program to the wider crypto community. Continue to monitor its performance and make adjustments as necessary to ensure its ongoing success.

Milestone outputs

All participants will be able to track their ranking in the Point System dashboard. Rankings will determine how available incentives are distributed to different participants according to their success in the Points System. Rewards will be distributed at the end. 

Acceptance criteria

Participants can track their ranking and receive rewards according to the rules designed in Milestone 1. 

Evidence of milestone completion

Link to a TX ID showing proof rewards have been disbursed.

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

Documentation, outreach, and coordination led by Minswap DAO

Paolo Pezzarossa (“RedPa”) - Project Lead - Paolo is a Full Stack developer at Kiwui, familiar with eutxo and chain indexers.

Peter Bui (“Astroboysoup”) - Project Member - Pete is one of the most renowned educators in Cardano. His YouTube channel has 20k subscribers and he posts almost daily updates about anything happening in the Cardano ecosystem. He has also worked extensively on a library of educational material such as the following. 

Smurfy - Project Member - Smurfy is an expert marketer in Cardano/crypto. Previously a Social Media Manager & Marketing Lead at Dropspot (Cardano NFT Platform). His content library can be viewed here.

Sean Davies - (“seanworkingdead”) - Project Member - Sean is the founder of the working courses platform, a cross-chain support learning platform leveraging Cardano under the hood with a wide array of courses ranging from how to Create a cardano node from zero in less than 90 minutes to DeFi basics and crypto knowledge courses. Previous experience as a developer at the prominent Cardano NFT project Ape Society.

Other Minswap DAO members are involved with track record and experience on Cardano who have contributed in the past to the Minswap DAO such as CWSchub or Chicken.

Technical Support from Minswap Labs 

Adrian (“PurritoGeneral”) - Product lead, previous experience at Optim Labs. 

Long Nguyen (“longng”) - Tech lead, previous experience at AWS Cloud, Anduin Transactions (specialists in smart deal tech solutions for the alternative investment market) and Jenkins (extensible automation engine)

Website: https://minswap.org/

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

Technical writer: $45 USD per hour / 95.74 ADA per hour - conducts research and prepares the documentation

Lead Engineer: $130 per hour/ 280.58 per hour - Lead engineer lays the groundwork for the app's architecture and technical foundation.

Project management: $60 USD per hour / 85.11 ADA per hour - coordinates with the other 2 members and compiles requirements for the engineering work

Current ADA price 0.47 ADA per $1 USD

Milestone 1 - Research and Planning

Technical writer: 120 hours / 11,488.8 ADA

Milestone 2 - Development of the Incentive Program 

Lead Engineer: 100 hours / 28,058 ADA

Project management: 50 hours / 4,255.5 ADA

Milestone 3 - Project Launch

Technical writer: 20 hours / 1,914.8 ADA

Project management: 50 hours / 4,255.5 ADA

Lead Engineer: 60 hours / 16,834.8 ADA

Incentive Rewards going directly back to all participants in the Point System: 33,192.6 ADA

Total cost = 100k ADA

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

In the long term, the cost of funding an Incentive Program as part of a Cardano DeFi Onboarding by Minswap campaign would be a strategic investment in a Proof of Concept for a type of Growth program that could have a significant impact on Cardano. By allocating resources to this initiative, the Cardano ecosystem will have a competent team designing, studying and implementing an incentive program that has proven to work on other blockchains to grow user adoption. We will be able to assess the results and discuss as a community if it's worth exploring these types of programs further and on a bigger scale.

In the short term, the Proposal aims at bringing value for money to Cardano by attracting regular crypto users from other chains as well as Cardano users who do not often interact with DeFi. This should improve metrics where Cardano is lagging, such as DEX Volumes or Active Addresses and enhance the liquidity and overall health of the Cardano ecosystem, making it more attractive to new users and investors.

The wider Cardano DeFi Onboarding by Minswap campaign aims to foster a sense of community among users drawn to Cardano by encouraging participation in DeFi Education and Learn to earn activities, the Incentives for activity in Cardano DeFi platforms such as Minswap, and a Marketing campaign to highlight the advantages of Cardano and the ongoing activities in the ecosystem.