Defy - Secure Multi-Party Transactions via MPC Virtual Signers and Programmable Smart Wallets

[GENERAL] Name and surname of main applicant

Sebastien Picard

[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)

5

[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)

A virtual signer using Plutus smart contracts to enable secure multi-party computation on financial data, facilitating transaction due diligence without revealing data.

[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?

No

[GENERAL] Please provide here more information on the open source status of your project outputs

We will release parts that can be open-sourced with Mesh. However, as we plan to establish commercial use cases, we will not be able to open-source the full entirety of the proposal's outcomes.

[SOLUTION] Please describe your proposed solution

Cardano virtual signers leveraging Multi-Party Computation (MPC) and Plutus smart contracts enable the creation of temporary multi-user smart wallets to securely lock transactions until all involved parties collaboratively perform their Know Your Transaction (KYT) duties, either automatically or manually reviewed.

The virtual signer, which enforces predefined policies and approval workflows for transactions, securely accesses sensitive data such as credit scores, transaction records, and customer data for analytics and fraud detection across multiple institutions. This enables the analysis of complex transactions without revealing individual inputs.

The smart contract then executes the intended transaction(s) using the reconstructed private key, transferring the assets or funds to the designated recipient(s). After the transaction, the temporary multi-user smart wallet is dissolved, and the key shares are destroyed, ensuring the wallet cannot be reused or compromised.

By combining MPC's secure multi-party computation capabilities with Plutus smart contracts, this solution enables complex transactions involving multiple parties while eliminating the single point of failure and satisfying KYT requirements in a decentralized and trust-minimized manner.

This is an example of a usecase that can be built using this technology. This, however, lays a foundation for smart wallets, which can allow for trustless asset management, governance, and interoperability.

Such decentralized, transparent, and privacy-preserving solutions can enable tailored financial services to underserved populations, fostering greater financial inclusion.

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

We aim to solve real-world problems and help bank the unbanked. This has been a focus point for the Cardano community in the past several years. With advancements in ZK and MPC tech, it's possible to build a suite of products to help achieve the original dream of changing the world. Here are some of the ways this product will generate a positive impact:

Decentralized Financial Services

The Cardano sidechain can host decentralized applications (DApps) built with Plutus smart contracts to provide financial services like lending, insurance, and payments to underserved populations based on secure data analysis. Each DApp could be associated with a virtual signer, eliminating centralized control and enabling direct peer-to-peer transactions while meeting compliance requirements.

Secure Data Sharing and Analysis

MPC enables secure multi-party computation on sensitive financial data like credit scores, transaction records, and income levels across institutions without revealing individual inputs. This pooled data can be analyzed using Plutus smart contracts to assess creditworthiness and financial needs while preserving privacy.

Trustless Asset Management

MPC can be used to create multi-signature wallets managed by Plutus smart contracts. These wallets enable trustless joint custody of assets without a single point of failure and automatic disbursement to multiple parties. This allows communities to pool resources securely for collective investment or lending purposes.

Transparent Governance

The Cardano MPC side blockchain's governance features can enable decentralized governance of financial inclusion initiatives through transparent voting mechanisms implemented via Plutus smart contracts. This ensures community participation and oversight.

Accessibility and Interoperability

With MPC, the sidechai can leverage the Ethereum Virtual Machine (EVM) compatibility to enable interoperability with existing Ethereum DApps and developer tools, thus lowering the barrier to entry.

[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?

• The Defy initiative has made significant strides in development and in forming partnerships with veterans like zkFold.
• The prototype for encryption key management has been completed, marking a crucial step in ensuring secure data management.
• Simultaneously, discussions with several regulatory bodies to enter their regulatory sandbox signify Defy's commitment to compliance and regulatory alignment.
• Collaborations with GCC countries demonstrate Defy's dedication to fostering a supportive ecosystem.
• Discussions with several international organizations to explore opportunities in countries excluded from the global financial system are ongoing, highlighting Defy's inclusion goals.
• Defy team has solidified its financial support with an MoU signed with a VC fund, showcasing confidence in Defy’s vision.

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

Proposal onboarding and project management tools setup. Have a detailed breakdown of tasks for all the activities covered.

MPC and cryptographic functions

Developing the virtual signers components

Multi-party signatures transactions with multi-user smart wallets and virtual signers

A video demo, whitepaper and report of the product.

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

The Defy team consists of Sebastien, product owner and CEO, Julia, Chief Regulatory Officer and Eelee, Chief of Staff, responsible for institutional partnerships. Defy’s team members have 45+ experience in building and running Fintech and DLT projects. Defy’s team members have also a strong experience in nurturing partnership with regulators and international organizations involved in promoting financial inclusion. 

Sebastien Picard

CEO 

www.linkedin.com/in/zebpic

PhD, MBA and MSc in Business Management, Sebastien founded, co-founded and advised startups in France, China, The Bahamas, and Cayman Island in various sectors : Crypto, Education, Fashion, Digital news and Cognitive and behavioral R&D. He also worked as a strategic builder for corporates' venturing arm in banking and vaccines industries. Sebastien has published papers on ethics and compliance in top academic journals.

Eelee Lua

CoS

https://www.linkedin.com/in/eeleelua/

With a BBA in business, Eelee is a risk management and FinTech expert, SID Accredited Board Director. She has an extensive start up experience working alongside founders to develop, communicate and execute strategic plans to achieve business objectives. An advocate for diversity and inclusion, involved in SFA Women in FinTech, WIA Chapter Lead, Eelee excels in nurturing institutional partnerships.

Julia Chin

CRO 

https://www.linkedin.com/in/pekyee-julia-chin/

With over 25 years of experience in compliance and financial crime prevention, including roles at HSBC and Standard Chartered, Julia is an expert in correspondent in Banking, Securities Services, Fintech. She oversees regulatory and compliance affairs within Defy, ensuring full compliance with laws, regulatory requirements, policies, and procedures.

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

Milestone 1

Budget: 20000 Ada

• Infrastructure setup and cryptographic research

Milestone 2

Budget: 20000 Ada

• Research and development for MPC and cryptographic functions

Milestone 3

Budget: 20000 Ada

• Research and development for virtual signers

Milestone 4

Budget: 20000 Ada

• Research and development for multi-party signatures transactions with smart wallets

Milestone 5

Budget: 20000 Ada

• A video demo
• A whitepaper and report

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

Implementing this project using Cardano's capabilities offers significant value for money for the Cardano ecosystem for several reasons:

Enhancing Institutional Appeal of Cardano: Utilizing Multi-Party Computation (MPC) and Plutus smart contracts for secure data sharing and transaction handling makes Cardano more attractive to institutions requiring high security, such as banks and financial services. It allows them to conduct complex transactions securely without exposing sensitive data.

Innovation and Technological Advancement: The project advances Cardano's technological capabilities, particularly in decentralized financial services and secure asset management, potentially attracting more developers and projects to the ecosystem.

Financial Inclusion: The system facilitates financial services for underserved populations, expanding Cardano’s user base and market reach.

Interoperability and Accessibility: Compatibility with the Ethereum Virtual Machine (EVM) lowers barriers for developers familiar with Ethereum’s tools and DApps, enhancing the usability and versatility of the Cardano ecosystem.

Onboarding Users: Enabling payments and other financial services will bring new users to crypto and Cardano.

Overall, the costs are justified by the benefits to the Cardano ecosystem, likely enhancing Cardano’s value as a blockchain platform and ensuring long-term growth and sustainability.