Tackling Slipagge on Cardano: MAYZ Trustless OTC Smart Contract

[GENERAL] Name and surname of main applicant

Agustín Franchella

[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

Diego Macchi

[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)

By developing a trustless and decentralized OTC market in Cardano Haskell Smart Contracts. This will enable medium and large investors to trade without slippage. 

[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

Cardano decentralized and trustless OTC. The code will be available on GitHub. All our smart contracts to develop indexes in Cardano are Open Source.

https://github.com/MAYZGitHub/

MAYZ Protocol builds open-source projects to foster transparency, collaboration, and community involvement in the development of its decentralized finance solutions.

By adopting an open-source approach, MAYZ Protocol encourages innovation, improves security, and promotes widespread adoption of its permissionless platform for creating and managing investment funds on the Cardano blockchain. 

This approach aligns with the decentralized and community-driven nature of blockchain technology, ensuring that MAYZ Protocol remains accessible and adaptable to the evolving needs of the Cardano ecosystem.

[SOLUTION] Please describe your proposed solution

What is MAYZ?

We are a development team from Latam, building on Cardano for the last three years. We run [MAYZ] Stake Pool. MAYZ Protocol is a decentralized protocol that allows the creation and management of decentralized and trustless investment funds. Index Funds smart contract has been open sourced, and TxPipe reviewed the code. The protocol is live on Testnet and we expect to be audited and go to Mainnet this year.

Indexes on Cardano explained by Charles Hoskinson

https://www.youtube.com/watch?v=Iu3eiX7lJyA&t=814s

As part of the development team, we want to research of this new functionality in Cardano that will be Open Source. A trustless Over-the-Counter (OTC) smart contract designed to incentivize medium and large transactions on Cardano.

Problem 

Although Cardano's deterministic nature allows users to set slippage tolerance levels, the lack of liquidity for high-volume trades can still pose challenges and discourage users from transacting in large volumes.

The absence of sufficient liquidity for large transactions on Cardano's DEXs can result in higher slippage tolerance requirements, discouraging users from executing sizeable trades. Our solution aims to address this issue by creating a new avenue for executing large transactions without directly relying on DEX liquidity but on an Smart Contract that acts as an OTC market.

Ethereum and Solana Hybrid DeFi experiments 

Both in Solana and Ethereum there are Hyrid DeFi experiment. ERC-404 Token Standard “is an experimental, mixed ERC-20 / ERC-721 implementation with native liquidity and fractionalization. While these two standards are not designed to be mixed, this implementation strives to do so in as robust a manner as possible while minimizing tradeoffs.” According to Pandora Labs https://github.com/Pandora-Labs-Org/erc404

This idea was created in Solana with BozoHybrid experiment

https://youtu.be/kInBgqe0iEs?si=_-2C46FjFXBpAuhY&t=247

Here you can find how it works

https://medium.com/bozohybrid-official/hybrid-defi-how-solana-can-flip-ethereum-b28f017a2dd1

In the case of Ethereum the ERC404 faced the limitations of high transaction fees that obtuse the flexibility in NFT to Fungible Token transactions and the other way around, product of high costs.

In the case of Solana, the constant network outages put a limit to the explosion of memecoins and the volume of transactions that occurred last February.

We believe that in Cardano there is an ecosystem in which hybrid DeFi can really grow, and at the same time providing solutions to the lack of liquidity.

Approach for Cardano

By locking fungible assets into NFTs, we create a unique, tradable representation of the original asset that can be listed on secondary marketplaces. This alternative approach to trading large volumes bypasses the need for deep liquidity on DEXs and offers users a more accessible way to transact without facing significant slippage. Our solution benefits Cardano users seeking to execute large transactions without directly relying on DEX liquidity. It also fosters engagement among NFT enthusiasts and encourages participation in the broader Cardano ecosystem.

OTC on Cardano - how would it work

A haskell smart contract on the Cardano blockchain that will allow for a certain amount of fungible tokens to be locked in the smart contract, the smart contract will release an NFT corresponding to the tokens locked.

The smart contract will securely store the tokens and maintain a datum that records the details of the minted NFT and its associated tokens. This setup enables not only the issuance of an NFT in exchange for tokens but also permits the reverse transaction, allowing users to trade back the NFT to retrieve the locked tokens.

This NFT can be sold on marketplaces such as jpg.store where the seller can set a price in ADA. 

It benefits the seller, because it can sell at a set market price without decreasing the price in ADA with the transaction.

It benefits the buyer, because it can buy large amounts of ADA from a token without increasing the price, therefore without overpaying.

It benefits the project and those who keep holding the token, because the price does not drop dramatically on Dex pool. And it reduces the need to provide large incentives to liquidity providers (which in the long run will generate more token issuance and selling pressure).

More about the problem we want to solve

In these screenshots we show what happens from the point of view of a buyer and a seller when wanting to buy or sell the equivalent of 100,000 USD one of the most liquid projects in Cardano as SNEK and another consolidated project such as NMKR but with a not so high liquidity.

For projects that are just starting out it is practically impossible to get liquidity, and it is generally achieved at the cost of paying a lot of interest to liquidity providers, generating long-term problems for the price of the token.

This does not look good for whales or large investors from other ecosystems who want to come and invest in Cardano.

If someone would buy 100,000 usd of SNEK it will have a 3.53% of price impact.

If someone would like to buy 100,000 usd of NKMR it would have a 22.64% of price impact

If some one sells 100,000 usd of NMKR price will dump 22.65%

If you sell 100,000 of SNEK price will dump 3.94%

Demonstrating Impact: We will measure our solution's impact by tracking the number of tokenized assets, the volume of trades executed through our smart contract, and user feedback on the ease and accessibility of executing large transactions using our OTC approach.

This innovative approach to addressing the liquidity problem for high-volume trades on Cardano is essential for enhancing the trading experience, promoting user confidence, and driving adoption of the Cardano blockchain platform.

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

Answer:

Our Trustless OTC Smart Contract project aims to contribute to the Cardano community by providing a well-documented and open-source solution that addresses the Slippage challenges faced during transactions. By focusing on the early development stages of the documentation and code, we will set a strong foundation for future implementation and adoption.

Measuring Impact:

Code Repository Engagement: We will monitor activity on the open-source code repository, including stars, forks, and contributions, to gauge interest and involvement from developers and other community members.

Feedback and Collaboration: We will actively seek feedback and collaboration opportunities from the Cardano community to ensure our solution aligns with their needs and fosters ecosystem growth.

Sharing Outputs and Opportunities:

Open-Source Code and Documentation: Our code and documentation will be publicly available, allowing the Cardano community to access, review, and contribute to the project's development.

Community Engagement: We will share project updates, findings, and results through social media, forums, and dedicated channels to keep the community informed and involved.

Educational Resources: We will create educational content to help users understand our Trustless OTC Smart Contract's concept, benefits, and potential applications.

By providing a solid foundation of resources and documentation for our innovative solution, our project will contribute to the overall advancement of the Cardano ecosystem and encourage further development and adoption of trustless OTC smart contracts.

[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?

Team of experienced Haskell developers and members with a university degree in economics.

Experienced in blockchain and with deep knowledge of the Cardano infrastructure and ecosystem. Our combination of expertise in blockchain technology, smart contract development, and project management makes us well-suited to bring this innovative solution to life.

Our team's diverse expertise, combined with a commitment to transparency, collaboration, and thorough validation processes, ensures that we can deliver with a high level of trust and accountability.

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

• Project Planning, Research, and Technical Documentation 

Estimated Duration: 4 weeks 

Conduct market research to identify liquidity challenges in the Cardano ecosystem.

Develop a comprehensive project plan, including resource allocation and timelines.

Collaborate with technical experts and writers to create a detailed documentation outlining the Trustless OTC Smart Contract concept, architecture, and potential applications.

Acceptance Criteria: Project plan, research report, documentation, and stakeholder sign-off.

Evidence:

• GitHub repository with initial project structure and documentation

• Smart Contract Prototype Architecture 

Estimated Duration: 2 weeks

Acceptance Criteria: Completed smart contracts architecture published on GitHub.

Evidence:

• GitHub repository with smart contracts architecture
• Detailed architecture diagram illustrating components and their interactions

• Smart Contract Prototype Development 

Estimated Duration: 4 weeks

Develop a Cardano-based Haskell smart contract prototype.

Acceptance Criteria: Completed smart contracts first version.

Evidence:

• GitHub repository with smart contracts

Open-Source Release and Community Engagement 

(Estimated Duration: 6 weeks)

Publish the smart contract first version code to an open-source repository on https://github.com/MAYZGitHub 

Deploy smart contracts in Mainnet

Create a video resources and documentation to support community understanding and adoption.

Acceptance Criteria: Open-source code release, documentation, and community engagement video.

Evidence:

• GitHub repository with smart contracts
• Video and documentation

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

Project Managment: Agustín Franchella

(Cardano Ambassador)

Responsible for leading the project and overseeing the development of the Cardano-based Haskell smart contract prototype.

In charge of implementing tokenization functionality for converting fungible assets into NFTs.

Analyst & Researcher: Diego Torres 

(Funded Proposer in F11, Cardano Ambassador, Organizer of Patagonia CIP1694 Workshop)

Conducts market research to identify liquidity challenges in the Cardano ecosystem and validates the feasibility of our solution.

Provides insights into Cardano's evolving landscape and adapts our approach accordingly.

Content Strategist: Diego Macchi

Leads the development of the project's documentation and educational resources, ensuring clear communication of our solution's concept, architecture, and potential applications.

Collaborates with technical experts to maintain accuracy and clarity.

Smart Contracts Architect Manuel Padilla

(Funded Proposer in F10 and F11)

A versatile and highly experienced Smart Contracts Architect, specializing in Plutus smart contract development on the Cardano blockchain.

Technical Writer Federico Ledesma Calatayud.

(Cardano Ambassador)

Federico has a deep understanding of blockchain technology, including Cardano and Plutus, which will enable him to create comprehensive and easy-to-understand documentation for the Trustless OTC Smart Contract project.

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

Project Planning, Research, and Documentation 

• Project Management $10,000

Coordination, planning, and task tracking

• Research $5,000

Data collection, analysis, and reporting

• Technical Documentation $10,000

Technical writing, content strategy, and expert collaboration

Smart Contract Development Open-Source and Documentation release

• Smart Contract Development $20,000

Plutus development.

Open-Source Code Release

Code repository setup and documentation.

Educational Resources and Documentation

Estimates (USD and ADA at $0.45)

Total ADA 100,000

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

By considering Catalyst standards, ensuring efficient resource allocation, maintaining transparency, and providing expertise, we believe that the Open Source Trustless OTC Smart Contract project delivers value for money and will greatly benefit the Cardano ecosystem.