Collateral UTxO Provider API

[GENERAL] Name and surname of main applicant

Quinn Parkinson

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

Entity (Not Incorporated)

[GENERAL] Requested funds in ada

100000

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

6

[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)

This API offers a collateral UTxO for Cardano smart contracts, enhancing privacy and ease of use by allowing users to execute transactions without requiring the wallets to provide their collateral.

[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.”

The API will rely on third-party data providers for transaction simulation.

[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

The project will be built in the open and is open-sourced with GNU GENERAL PUBLIC LICENSE Version 3.

[METADATA] Horizons

UTXO

[SOLUTION] Please describe your proposed solution

This solution introduces an API that lets users leverage shared collateral when building smart contract transactions, eliminating the need to provide a collateral UTxO. Users submit a transaction, and the API returns a valid witness. The API works on any network without requiring a full Cardano node. This approach enhances privacy and simplifies participation in smart contracts, particularly for users concerned about exposing their funds or personal information.

The proposed solution involves users submitting a transaction body (in CBOR format) through an HTTP POST request to a /collateral endpoint. The API then returns a transaction witness for transactions including the collateral UTxO and collateral owner, thereby avoiding users needing to provide their collateral.

This API is designed to be versatile. It works on both the Cardano mainnet and testnets without requiring the host to run a full Cardano node. Instead, it relies on third-party data providers for transaction simulations. Providers hosting this service can configure which networks they want to support and whether the API is available over Clearnet and/or Tor, giving them full control over the service.

The solution provides a more accessible and private method for users to participate in Cardano smart contracts without compromising their funds or privacy. It benefits new users or those concerned about revealing implicit ownership information via collateral tracing or multi-chain wallets seeking to increase interoperability. Using shared collateral allows for greater anonymity while ensuring smart contracts execute successfully, providing a secure environment for users.

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

This project will enhance accessibility and privacy within the Cardano ecosystem by offering a shared collateral service for smart contract transactions. It lowers the barrier for new users who need collateral UTxOs, enabling more seamless participation in decentralized applications. The solution also improves privacy and security for more experienced users by allowing users to avoid exposing their collateral.

Moreover, the API encourages broader adoption of Cardano smart contracts by removing technical complexities and fostering trust in a shared collateral model. The API will help grow the network by making it easier for users to engage with contracts securely, potentially driving more projects and users to the platform.

The solution also benefits collateral providers by simplifying the setup process. It requires a third-party data provider and minimal configuration, offering services and contributing to Cardano's decentralized infrastructure. This project aims to support a more inclusive and privacy-conscious Cardano community, improving user experience and fostering growth across the ecosystem.

[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?

We have extensive experience working with Cardano, smart contracts, and backend infrastructure, including building and testing secure applications using the Cardano CLI and API integrations. Our previous work includes smart contract development, transaction management, and cryptographic solutions, all of which are relevant to this project. Additionally, we run a Cardano stake pool, giving me a deep understanding of the network.

We will use transparent development practices to ensure high trust and accountability, including regular updates, open-source code, and issue tracking via GitHub. Every change will be well-documented and tested using established frameworks to ensure reliability.

To validate feasibility, we will begin by setting up a proof-of-concept on a Cardano testnet, confirming the functionality of shared collateral UTxOs and the API's ability to manage transactions securely. The POC will involve testing transaction execution, witness generation, and API performance in real-world scenarios. We will allow early adopters to test the solution and provide insights, which will help iterate and improve the system to ensure it effectively meets the community's needs.

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

Proof of Concept on Testnet: Set up the API on a Cardano testnet, test collateral UTxO management, transaction witnessing, and validate API interactions. This ensures basic functionality.

Acceptance Criteria:

• A fully functional prototype on the Cardano testnet.
• Basic tests validate the functionality.
• GitHub repository with open-source code under the GPL3 License.
• Initial documentation and tutorial for users and developers.

Budget Allocation: 20% of the total budget.

Mainnet Deployment: Configure and deploy the API to the Cardano mainnet, ensuring seamless integration with Blockfrost API and verifying security for live transactions.

Acceptance Criteria:

• A fully functional prototype on the Cardano mainnet.
• Clearnet and Tor access.

Budget Allocation: 20% of the total budget.

User Feedback and Optimization: Gather feedback from early users, identify performance and security improvements, and optimize the API for speed and scalability.

Acceptance Criteria:

• Community testing and feedback round completed.
• Improvements and bug fixes based on community input.
• Updated documentation with test results and feedback analysis.

Budget Allocation: 20% of the total budget.

Documentation and Guides: Provide clear documentation and guides for users and collateral providers to ensure ease of setup, usage, and maintenance.

Acceptance Criteria:

• Folder containing all required documentation.
• Helper/example scripts in various languages
• Update existing documentation.

Budget Allocation: 20% of the total budget.

Community Adoption and Support: Achieve a stable API widely adopted by the community, focusing on providing ongoing support and ensuring the service's long-term reliability.

Acceptance Criteria:

• Final project report detailing outcomes, impact, and challenges.
• Video demonstration of the API on the mainnet.
• Community release of the final version and promotion across relevant channels.

Budget Allocation: 20% of the total budget.

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

Quinn Parkinson - API Developer

Positions to fill:

Backend Security Advisor

Safety Auditor

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

Milestone 1: Proof of Concept on Testnet: (Month 1-2)

• Set up the API on a Cardano testnet: 10,000 ADA
• Test collateral UTxO management and transaction witnessing: 5,000 ADA
• Validate API interactions: 5,000 ADA
• Budget Allocation: 20,000 ADA (20% of total budget)

Milestone 2: Mainnet Deployment:

• Configure and deploy the API to the Cardano mainnet: 10,000 ADA
• Integration with Blockfrost API: 5,000 ADA
• Verifying security for live transactions: 5,000 ADA
• Budget Allocation: 20,000 ADA (20% of total budget)

Milestone 3: User Feedback and Optimization:

• Gather feedback from early users: 5,000 ADA
• Identify performance and security improvements: 5,000 ADA
• Optimize the API for speed and scalability: 10,000 ADA
• Budget Allocation: 20,000 ADA (20% of total budget)

Milestone 4: Documentation and Guides:

• Provide clear documentation and guides: 10,000 ADA
• Helper/example scripts in various languages: 10,000 ADA
• Budget Allocation: 20,000 ADA (20% of total budget)

Final Milestone: Community Adoption and Support:

• Final project report detailing outcomes, impact, and challenges: 10,000 ADA
• Video demonstration of the API on the mainnet: 5,000 ADA
• Community release of the final version and promotion across relevant channels: 5,000 ADA
• Budget Allocation: 20,000 ADA (20% of total budget)

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

Allowing privacy-focused and cross-chain smart wallets to be functional will be a major win for the Cardano ecosystem. The cost of this project is insignificant compared to the success it could bring Cardano. A solution to the collateral problem is a requirement for the future of Cardano.