ZK-P2P Lending with Midnight ZKPs; Private Loans Cardano Lib

[Proposal setup] Proposal title

Please provide your proposal title

ZK-P2P Lending with Midnight ZKPs; Private Loans Cardano Lib

[Proposal Summary] Budget Information

Enter the amount of funding you are requesting in ADA

80000

[Proposal Summary] Time

Please specify how many months you expect your project to last

5

[Proposal Summary] Translation Information

Please indicate if your proposal has been auto-translated

No

Original Language

en

[Proposal Summary] Problem Statement

What is the problem you want to solve?

Cardano lacks private and negotiable peer-to-peer loans. Borrowers must overshare data; lenders lack reliable risk signals without centralized intermediaries.

[Proposal Summary] Project Dependencies

Does your project have any dependencies on other organizations, technical or otherwise?

No

Describe any dependencies or write 'No dependencies'

No dependencies

[Proposal Summary] Project Open Source

Will your project's outputs be fully open source?

Yes

License and Additional Information

MIT License

[Theme Selection] Theme

Please choose the most relevant theme and tag related to the outcomes of your proposal

Lending

[Campaign Category] Category Questions

Mention your open source license and describe your open source license rationale.

We will use the MIT License, an OSI-approved license.

MIT is simple, permissive, and widely adopted in the Cardano ecosystem.

Allows anyone to freely use, copy, modify, and distribute with minimal restrictions.

Encourages maximum adoption and contributions while keeping outputs fully open.

Chosen to ensure transparency, collaboration, and easy integration with other open source projects.

How do you make sure your source code is accessible to the public from project start, and people are informed?

A public GitHub repository will be live from project start with the MIT license clearly included.

Initial commit will contain setup instructions, contribution guide, and documentation.

Code updates will be frequent, with clear commit history and tagged releases.

How will you provide high quality documentation?

Documentation will be written in Markdown and hosted in the GitHub repo.

Includes setup guides, API references, code samples, and tutorials.

Clear visuals (architecture diagrams, flowcharts) will simplify complex concepts.

[Your Project and Solution] Solution

Please describe your proposed solution and how it addresses the problem

Problem:

Cardano lending is largely over-collateralized. There’s no native way to use private off-chain facts (e.g., income band, DTI, repayment reputation) to unlock or improve credit without disclosing the raw data to a counterparty. This limits capital efficiency and excludes creditworthy users with limited on-chain collateral.

Proposed Approach:

A non-custodial P2P lending layer that uses Midnight for zero-knowledge eligibility proofs and Cardano for negotiation, settlement, and repayments. Midnight verifies predicates and mints short-lived eligibility tokens; Cardano enforces terms via eUTxO and Plutus.

How It Works:

• Borrower generates a client-side ZK proof (e.g., “DTI < 30%”, “repayment score ≥ X”). Midnight verifies and issues a time-boxed eligibility token.
• Lender and borrower negotiate on Cardano (offer/counter/accept).
• On fill, mint a loan-note NFT that routes repayments and, if needed, can claim collateral.
• Settlement scripts enforce offer/fill/repay/rollover; optional oracle hooks bound LTV/rate ranges.
• Only minimal attestations leave Midnight. Settlement remains transparent on Cardano.

Key Features:

• Privacy: Prove eligibility, not identity; short-lived attestations reduce leakage/replay.
• Risk-aware credit: Verifiable private predicates enable partial/under-collateralized lending.
• Liquidity: Transferable loan-note NFTs enable secondary trading and portfolio management.
• **Non-custodial: **Funds stay in user wallets; deterministic on-chain enforcement.
• API & dApp: API and a lightweight web dApp.
• **Security: **Tests, fuzzing, published benchmarks, and independent review before mainnet.
• Composability: Eligibility tokens, note-NFTs, and handshake UTxOs plug into Cardano DeFi.

Engagement & Impact Proof:

Pilot integrations with wallets/DEXs/dApps; public incentivized testnet. KPIs: ≥100 testnet loans, negotiation→fill rate, repayment punctuality, secondary transfers of note-NFTs. Benchmarks: prover median <10s on laptop for core predicates; published on-chain cost tables. Bug bounty, docs, and tutorials to drive adoption.

Uniqueness & Importance to Cardano:

Delivers verifiable yet private credit while keeping settlement auditable on Cardano. Demonstrates practical Midnight+Cardano composition and ships reusable ZK + eUTxO primitives (eligibility tokens, note-NFTs, handshake patterns), expanding Cardano’s credit markets and developer toolkit.

[Your Project and Solution] Impact

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

This project introduces private, negotiable credit to Cardano. Borrowers prove eligibility, not identity via ZK predicates on Midnight; lenders get verifiable risk signals without seeing raw data. That unlocks partially/under-collateralized loans, improves capital efficiency, and increases on-chain activity (originations, repayments, secondary trades of loan-note NFTs).

For builders, we provide composable primitives (eligibility tokens, loan-note NFTs, handshake UTxOs), audited examples, and APIs that shorten integration time and encourage experimentation across wallets, DEXs, and dApps.

Users gain better pricing and privacy. Short-lived attestations minimize data exposure while Cardano settlement stays transparent and non-custodial.

Value to the Cardano Community:

• Expand lending beyond over-collateralized pools with risk-aware, privacy-preserving credit.
• Increase on-chain activity: loan originations/repayments, secondary trading of note-NFTs, and integrations.
• Provide reusable ZK + eUTxO patterns (circuits, verifiers, Aiken scripts, SDK) for other protocols.
• Demonstrate practical Midnight + Cardano composition, strengthening Cardano’s DeFi toolkit.

How We Will Measure Impact:

Quantitative:

• ≥ 10 loans completed on public testnet; origination volume (ADA), unique borrowers/lenders.
• Negotiation → fill rate, average collateral ratio vs baseline, share of partial/under-collateralized loans.
• Repayment punctuality and default rate.
• Benchmarks: on-chain cost tables for offer/fill/repay/rollover.

How We Will Share Outputs:

• All code, circuits, and SDKs released under MIT License in public GitHub repos from week one.
• Comprehensive docs site: architecture, specs, APIs, tutorials, and example integrations.
• Weekly changelogs and progress updates on the Cardano forum and X.

[Your Project and Solution] Capabilities & 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?

Dextr Labs – https://dextrlabs.com/ – is a team of 25 experienced developers and blockchain engineers with deep expertise in delivering secure, scalable Web3 infrastructure. Over the past two years, we have launched multiple production-grade products with a 100% delivery rate, building long-term client relationships through consistent, high-quality results.

Our portfolio includes Zodor (https://www.zodor.io/) a Real-World Asset (RWA) tokenization platform, and BePay (https://bepay.money/) a stablecoin-powered payments system. These products demonstrate our capability to integrate complex smart contracts, stablecoin liquidity management, and cross-chain interoperability key competencies for delivering ZK-P2P.

We bring proven experience in developing Subnets, appchains, and privacy-preserving integrations on Cardano, EVM-compatible chains, and other blockchain platforms. Our delivery approach ensures trust and accountability through:

Public GitHub repos with milestone tracking and open-source licensing.

Transparent communications via Cardano forums, social channels, and developer updates.

Independent testing & audits, plus testnet to validate functionality before mainnet launch.

[Milestones] Project Milestones

Milestone Title

Project Initiation & Requirements

Milestone Outputs

Landscape & Feasibility Review:

Current Cardano lending patterns, Midnight capabilities, regulatory considerations.

Technical assessment of ZK predicate options (DTI band, repayment score), proof systems, script budget estimates, and wallet/oracle needs.

Requirements Documentation:

Functional & non-functional specs for circuits, Midnight verifier, eligibility-token semantics (mint/expire/revoke), settlement scripts, loan-note NFTs, SDK/dApp, and monitoring.

Initial risk register with mitigations (replay/expiration, oracle drift, UX failure, prover latency, default flows).

Acceptance Criteria

A comprehensive launch/requirements document is produced, defining:

Project scope, boundaries, and measurable success metrics.

Feasibility validated for proofs and scripts (size/latency/budget).

Risks fully identified with first-pass mitigations.

Evidence of Completion

Launch/Requirements doc published in a public repo.

Public repository shows full transparency for Scope and requirements

Delivery Month

1

Cost

20000

Progress

20 %

Milestone Title

Architecture & Predicate Design

Milestone Outputs

Feasibility Assessment Report with:

End-to-end flow designs (request → proof → eligibility token → offer/counter/accept → repay/rollover → reclaim).

Contract interfaces, token schemas, SDK function surface, wallet integration points, oracle hooks.

Risk evaluation & mitigations for reorgs, chain halts, privacy leaks, and concurrency.

System Architecture Blueprint:

Diagrams of circuit modules, Midnight verifier, settlement scripts, loan-note NFT policy, negotiation “handshake” UTxOs, and eventing/telemetry.

Component responsibilities, interfaces, and state machines.

Acceptance Criteria

Architecture validated against Milestone 1 requirements.

Development ready design and tech architecture for the ZK p2p loans library.

Documented fallback strategies and dependency management; scalability and transport-security addressed.

Evidence of Completion

Architecture Blueprint and Feasibility Report published in the public repo.

All diagrams and technical descriptions included.

Delivery Month

2

Cost

20000

Progress

40 %

Milestone Title

Prototype (ZK + Settlement) & Alpha Testnet

Milestone Outputs

Prototype Core Components:

ZK circuits for DTI-band and repayment-score predicates; Midnight verifier contract that checks proofs and mints eligibility tokens; client-side prover + CLI.

Cardano Aiken scripts for offer/counter/fill/repay/rollover/reclaim; loan-note NFT mint/burn policy and secondary-transfer flow; optional oracle hook.

API alpha nd minimal lending dApp.

Unit/integration tests for main flows and error handling; CI set up.

Acceptance Criteria

End-to-end testnet demo (offer → fill → repay) gated by eligibility token.

Eligibility tokens expire/revoke correctly; proofs verify on Midnight testnet.

Test coverage ≥ 85% for circuits/verifier; settlement scripts pass integration tests.

Evidence of Completion

Demo recording and testnet transaction hashes.

Public repos with release, benchmarks report documentation.

Delivery Month

4

Cost

20000

Progress

80 %

Milestone Title

Public Testnet, Docs, Benchmarks & Project Closeout

Milestone Outputs

Public testnet campaign; full docs site (architecture, on-chain specs, API refs, tutorials).

Benchmark suite and published tables (offer/accept, repay, rollover, reclaim; script costs & latencies).

Release packaging: API, dApp beta, changelog, and integration playbooks.

Acceptance Criteria

10 loans completed on the public testnet.

Prover and on-chain costs remain within documented budgets with benchmarks published.

Versioned documentation, stable API, and complete integration guides provided.

Evidence of Completion

Links to docs, benchmark tables and API documentations in repo.

Library available to download and use for developers and dapps.

Delivery Month

5

Cost

20000

Progress

100 %

[Final Pitch] Budget & Costs

Please provide a cost breakdown of the proposed work and resources

Milestone 1 – 20,000 ADA

Midnight ZK Dev: 14000 ADA

Senior Cardano Developer: 6000 ADA

Milestone 2 – 20,000 ADA

Midnight ZK Dev: 14000 ADA

Senior Cardano Developer: 6000 ADA

Milestone 3 – 20,000 ADA

Midnight ZK Dev: 14000 ADA

Senior Cardano Developer: 6000 ADA

Final Milestone – 20,000 ADA

Midnight ZK Dev: 14000 ADA

Senior Cardano Developer: 6000 ADA

Grand Total: 80,000 ADA

[Final Pitch] Value for Money

How does the cost of the project represent value for the Cardano ecosystem?

This project represents a cost-efficient investment for the Cardano ecosystem by delivering a reusable, non-custodial, privacy-preserving credit primitive that will benefit many projects and partners beyond the initial deployment. The funding directly supports research, architecture design, development, security reviews, documentation, and onboarding resources, creating infrastructure that will continue to generate value for years without repeated large investments.

We have structured the budget to cover only essential development and delivery activities, optimized through in-house expertise, open-source components, and lean processes. By replacing centralized underwriting and PII handling with zero-knowledge eligibility proofs and on-chain enforcement, we eliminate these inefficiencies and maximize return on funds spent.

The resulting solution expands Cardano’s reach by enabling fast, secure, and trustless private credit with on-chain negotiation and transferable loan-note NFTs. This drives new loan originations and secondary trading, increases protocol TVL and fee throughput, tightens spreads for lenders, and improves the user experience for borrowing, lending, and structured products.

Because the architecture is modular and reusable, additional integrations and onboarding campaigns can be launched at minimal incremental cost. Wallets, DEXs, vaults, and fintech partners can adopt the SDK and settlement scripts without licensing fees, compounding the return on the initial investment and supporting long-term ecosystem growth. Public testnet usage targets, published performance benchmarks, and open security artifacts ensure measurable impact and accountability.

[Required Acknowledgements] Consent & Confirmation

Terms and Conditions:

Yes