Anti-Front-Running ZKPerps on Cardano w/MidnightZK

[Proposal setup] Proposal title

Please provide your proposal title

Anti-Front-Running ZKPerps on Cardano w/MidnightZK

[Proposal Summary] Budget Information

Enter the amount of funding you are requesting in ADA

74000

[Proposal Summary] Time

Please specify how many months you expect your project to last

4

[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 suffers from front-running and MEV bots exploiting public mempool data. This lack of privacy exposes trader strategies, allows sniping, and results in unfair, costly trades.

[Proposal Summary] Supporting Documentation

Supporting links

• https://app.nucast.io/
,
• https://www.nucastlabs.xyz/
,
• https://x.com/NucastIO

[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.

DeFi

[Campaign Category] Category Questions

Describe what makes your idea innovative compared to what has been previously funded (whether by you or others).

MidnightZK Perps introduces private order flow and settlement to Cardano perpetuals via zero-knowledge proofs, preventing MEV and front-running. This is the first privacy-focused perps solution on Cardano, combining confidentiality with trustless execution something not yet funded or built in the ecosystem.

Describe what your prototype or MVP will demonstrate, and where it can be accessed.

A live, prototype of a perpetuals trading platform integrated with MidnightZK. It will allow users to place and settle trades privately, shielding order details while ensuring verifiable execution. The MVP will be deployed on Cardano’s testnet and accessible to the community for public testing.

Describe realistic measures of success, ideally with on-chain metrics.

Unique wallets trading on MVP from the time of launch.

Number of private transactions executed without front-running.

Zero instances of MEV detected in testnet monitoring.

Community feedback from at least 10 users on UX and performance.

[Your Project and Solution] Solution

Please describe your proposed solution and how it addresses the problem

In current DeFi systems, especially on transparent blockchains, transactions sit publicly in the mempool before confirmation. This allows bots and validators to observe and front-run trades placing their own orders ahead to extract profit, Disadvantaging honest traders. This is particularly damaging in perps, where timing and positioning are crucial.

Our Solution Using Midnight:

1. Zero-Knowledge Order Commitment on Midnight:

Orders are constructed and validated using zero-knowledge proofs (ZKPs) and submitted to the Midnight network. Midnight’s native privacy-preserving smart contracts ensure these commitments are anchored securely without exposing order details. This prevents front-running, as the content of trades remains completely private until execution.

2. Private Matching & Settlement Engine:

Trade matching and settlement occur off-chain or on Midnight using privacy-preserving circuits. ZKPs verify fair trade execution, adherence to protocol rules (price, size, collateral), and final settlement without leaking any sensitive data. This ensures trustless, auditable, yet confidential trading.

3. Hybrid Architecture (Cardano + Midnight):

While the core privacy logic and state reside on Midnight, key settlement checkpoints, liquidity bridges, and staking logic are anchored to Cardano L1. This hybrid model leverages Cardano’s robust eUTXO ledger for integrity and Midnight’s ZK capabilities for privacy.

Benefits of Using Midnight:

Native privacy integration: Midnight is purpose-built for confidential smart contracts, removing the need for bolt-on privacy layers.

Strong compliance primitives: Midnight supports programmable data protection, enabling use cases that balance privacy with regulatory flexibility.

Interoperability with Cardano: Midnight’s architecture allows seamless composability with Cardano.

Scalable privacy: Midnight is optimized for scalable zero-knowledge applications, keeping fees low while maintaining strong guarantees.

By building this protocol with Midnight, we unlock a new class of fair, private, and front-running-resistant DeFi primitives tailored for professional traders. This is the foundation for a new, privacy-first financial infrastructure on Cardano.

[Your Project and Solution] Impact

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

Our project will deliver significant and far-reaching benefits to the Cardano ecosystem by introducing anti-front-running, privacy-preserving perpetuals and prediction markets built on Midnight. This will not only expand the capabilities of decentralized finance (DeFi) on Cardano but also position the ecosystem as a leader in privacy-first, fair trading infrastructure. Below are the key areas of impact:

Eliminating Front-Running from Cardano DeFi

By leveraging zero-knowledge proofs and private smart contracts on Midnight, we remove one of the most harmful and persistent problems in DeFi: front-running.

Traders can operate without fear of MEV bots or validator manipulation, leveling the playing field for all participants.

This increases trust, capital efficiency, and user confidence across the Cardano DeFi space.

Unlocking Private Trading Infrastructure

This will be the first ZK-powered perps protocol in the Cardano ecosystem.

Users gain access to confidential order flows, private strategies, and shielded balances features that institutional and advanced traders increasingly demand.

It opens the door to new users (especially from TradFi) who previously avoided DeFi due to privacy concerns.

Supercharging Midnight Adoption

By building natively on Midnight, our protocol serves as a flagship use case demonstrating how powerful and flexible Midnight is for ZK applications.

Our use case attracts developers and users into Midnight who are interested in private DeFi, strengthening the Midnight ecosystem.

Expanding the Cardano Use Case Horizon

With fair perpetual contracts, Cardano users will be able to hedge, speculate, and create decentralized information markets in a privacy-first way.

This expands Cardano’s DeFi portfolio beyond lending and swaps into more complex, data-driven financial primitives.

Enabling Composable Privacy for Other dApps

Our core privacy infrastructure (order commitment schemes, private matching logic, ZK proof systems) can be reused and extended by other Cardano projects.

This fosters an ecosystem of privacy-first DeFi applications, boosting innovation and composability within Cardano and Midnight.

Attracting Builders and Capital

Privacy-preserving infrastructure and ZK-native DeFi are fast-growing sectors.

By offering something not available on Ethereum, Solana, or other ecosystems in the same way, Cardano gains a competitive edge in attracting:

High-frequency and institutional traders

DeFi-native builders looking for a front-running-free platform

Privacy advocates and Web3 users concerned about data exploitation

This increases TVL, ecosystem growth, and developer activity.

Driving Fairness, Accessibility, and Global Inclusion

Traders in less-developed financial markets can participate in global derivatives without fear of being exploited by bots or insiders.

A censorship-resistant, privacy-preserving system protects users under restrictive regimes or those who require financial anonymity for personal safety.

This aligns with Cardano's mission of financial inclusion and decentralized empowerment.

Research Contributions & Open-Source ZK Tools

As part of our development process, we will contribute open-source ZK tooling and design patterns tailored for Midnight.

We plan to publish research articles, technical blog posts, and educational content to grow the understanding of ZK-powered DeFi in the Cardano community.

This raises the technical maturity of the Cardano ecosystem and invites academic and developer collaboration.

[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?

Development Team

Our development team is highly skilled, with extensive experience in blockchain development, specifically on the Cardano platform. We have successfully contributed to several Cardano-based projects and are proficient in Cardano dApp development, ensuring our protocol is built on a solid and scalable technical foundation.

Track Record on Cardano

We have previously delivered innovative solutions including:

Uncollateralized lending protocols

On-chain invoice factoring mechanisms

These projects involved advanced smart contract design, real-world asset integration, and novel credit risk modeling all deployed or tested within the Cardano ecosystem.

Zero-Knowledge Proof Expertise

Our team includes Midnight ZK Pioneers, with deep expertise in implementing Zero-Knowledge Proof (ZKP) techniques, essential to ensuring privacy, fairness, and data protection in our trading protocol.

We are early adopters of Midnight, actively building with its confidential smart contract tooling and data protection primitives.

First Place – Midnight Hackathon at Rare Evo 2024

We are proud to have won First Place in the Midnight Hackathon held at Rare Evo 2024, hosted by Input Output Global (IOG).

Our winning submission showcased a real-world application of Midnight’s confidential smart contracts, validating our architectural approach and demonstrating strong alignment with Midnight’s privacy-first vision.

This achievement underscores both our technical capability and our active leadership within the Midnight and Cardano developer communities.

Budgeting and Financial Reporting

We will maintain transparency in our budgeting, adhering to Catalyst guidelines. Regular financial updates, including progress reports, milestones, and challenges, will be shared with the Cardano community through forums and social media channels. We will actively seek and incorporate community feedback throughout the development process.

[Milestones] Project Milestones

Milestone Title

Initiation and Requirements Planning

Milestone Outputs

Define high-level goals and detailed system requirements for the project, covering functional and technical aspects. Set up project infrastructure including GitHub repository, dev workflows, tools, and collaboration channels.

Acceptance Criteria

Requirements are prepared & refined by the team, documented in a public-facing format. GitHub repository is initialized with initial structure, documentation, and is publicly accessible to the community.

Evidence of Completion

Public link to the requirements document (PDF) shared for review. Live GitHub repository link available with initial project setup, including readme, workflow details, and infrastructure configuration.

Delivery Month

1

Cost

20000

Progress

30 %

Milestone Title

Architecture & Initial Development

Milestone Outputs

Document the overall system architecture, including core modules, interactions, and data flows. Begin prototyping of essential zero-knowledge components, ensuring integration with Cardano frameworks and dev tooling.

Acceptance Criteria

Architecture diagram and documentation provided. Early Zero knowledge logic compiles and runs successfully in a local dev environment, demonstrating correctness of flow and alignment with defined architecture.

Evidence of Completion

Architecture document published in the GitHub repository for transparency. Initial ZK code modules pushed to the repo, with commit history showing development progress and verification of working prototype logic.

Delivery Month

2

Cost

21000

Progress

80 %

Milestone Title

MVP and Final Delivery

Milestone Outputs

Deploy functional MVP on Cardano testnet, demonstrating private order flow and settlement. Deliver a live demo, collect structured feedback from users, and compile findings into a comprehensive final report.

Acceptance Criteria

MVP operates end-to-end on testnet with all core features enabled. Demo successfully presented, and user feedback collected, reviewed, and incorporated into documentation for validation and project closure.

Evidence of Completion

Public link to the deployed testnet MVP available for verification. Demo video published and accessible. Final report shared in GitHub repository, including results, learnings, and closure summary for transparency.

Delivery Month

4

Cost

33000

Progress

100 %

[Final Pitch] Budget & Costs

Please provide a cost breakdown of the proposed work and resources

Milestone 1: Initiation and Requirements Planning

Total: 20,000 ADA

Project Manager: 5,000 ADA

Senior Cardano Developer: 10,000 ADA

Research & Infrastructure Setup: 5,000 ADA

Milestone 2: Architecture & initial Developemnt

Total: 21,000 ADA

Project Manager: 5,000 ADA

Senior Cardano Developer x2: 11,000 ADA

Zero-Knowledge Engineer: 5,000 ADA

Milestone 3: MVP & Final Delivery

Total: 33,000 ADA

Project Manager: 8,000 ADA

Senior Cardano Developer x2: 20,000 ADA

UI/UX and Community Reporting: 5,000 ADA

Total Project Cost: 74,000 ADA

[Final Pitch] Value for Money

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

1. Unlocks New Capabilities for Cardano

Introduces front-running-resistant perps and prediction markets, a first for Cardano and rare across all blockchains.

Demonstrates a practical and scalable use case for Midnight, helping drive adoption of Cardano’s privacy layer.

2. Strategic Use of Midnight

Leverages Midnight’s confidential smart contracts and zero-knowledge proof systems to offer privacy-preserving trading.

Acts as a flagship ZK DeFi use case, supporting Midnight's growth with real-world, open-source tooling.

3. Ecosystem Reusability

ZK circuits, smart contract templates, and relayer logic will be open-sourced so that other Cardano projects can build on them.

Tools and learnings can be extended to build private auctions, voting, credit scoring, and more.

Anti-front-running value for Cardano DeFi

Front-running is one of the most damaging inefficiencies in DeFi, where bots exploit transaction ordering to siphon value at the expense of real traders. By introducing anti-front-running perps on Cardano, we not only protect users from hidden costs but also set a higher standard of fairness and transparency in trading. This positions Cardano as a safer, more attractive environment for retail and institutional DeFi participants, encouraging greater liquidity inflows and strengthening Cardano’s competitiveness against other ecosystems.

Our team has:

Won 1st place at the Midnight Hackathon (Rare Evo 2024).

Built previous projects including uncollateralized lending and invoice factoring on Cardano.

This minimizes execution risk and ensures high ROI on development funding.

The project is designed to achieve real outcomes on testnet with a cost-effective investment for a novel, privacy-first financial primitive.

[Required Acknowledgements] Consent & Confirmation

Terms and Conditions:

Yes