BlockMargin - Interest Rate Derivatives Settlement - Mainnet

[Proposal setup] Proposal title

Please provide your proposal title

BlockMargin - Interest Rate Derivatives Settlement - Mainnet

[Proposal Summary] Budget Information

Enter the amount of funding you are requesting in ADA

99975

[Proposal Summary] Time

Please specify how many months you expect your project to last

12

[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?

Launch of BlockMargin - an app for the Banking and Financial Services sector. Bringing the settlement of Interest Rate Derivatives onto the blockchain. BlockMargin is currently running on the testnet

[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?

No

License and Additional Information

Not open source

[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).

The Interest Rate Derivatives market is the largest financial market globally and is dominated by major financial institutions. These products are highly complex and have not yet been implemented on any blockchain. We have demonstrated that Cardano smart contracts written in the Aiken language can successfully replicate these derivative contracts, and we have tested them on a testnet. This makes our product unique - not only on Cardano but across all blockchain platforms. This proposal takes BlockMargin to the Cardano Mainnet

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

The testnet prototype is running on the Preview testnet here: https://blockmargin.app/trade In this proposal we will port the prototype onto the Mainnet and release for community and public to trade Interest Rate Derivatives, subject to clearing regulatory requirements. Financial products that were once inaccessible to the general public will be available to trade on the Cardano blockchain

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

Each Interest Rate Derivative trade lasts 1 - 1000 days, with margin posted or withdrawn daily. Frequent transactions optimize capital use. For example, 10 trades/day maturing in 90 days results in 300 live trades/month, generating 600 daily transactions across both parties. Trades are high-value (> $500k) and in stablecoins, boosting stablecoin adoption on Cardano for assets like USDM, USDA, and DJED

[Your Project and Solution] Solution

Please describe your proposed solution and how it addresses the problem

We aim to onboard traditional financial institutions - banks, funds, and retail entities that use financial products - onto the Cardano Mainnet.

Our approach has been successfully tested on the Cardano Preview Testnet, and we have demonstrated it to several financial institutions. These demonstrations have formed the basis for discussions with leading TradFi interest rate brokers, who provided highly positive feedback. We plan to incorporate this feedback into the application proposed here.

The institutions recognize the disruptive potential of this solution for the industry and are collaborating with us to shape their offerings around it. They also acknowledge that blockchain technology is on the verge of significantly impacting the positions of incumbent market leaders.

In this proposal, we aim to transition the testnet prototype to the Cardano Mainnet and enable its use for real-money trades. This will only be done in full compliance with legal requirements, and if supported by written opinions from qualified lawyers specializing in this area.

A key insight from market makers is the need for “cross-margining” across instruments. This functionality is especially critical for large market makers managing hundreds or even thousands of live positions simultaneously. Currently, a market maker who sells a forward rate agreement (FRA) to one client and buys a similar FRA from another must post margin for both trades, even if they largely offset. Cross-margining would allow a significant portion of posted margin from one trade to be reused for the other, greatly improving capital efficiency. We plan to integrate cross-margin functionality into BlockMargin.

We have also successfully tested chained transactions on Cardano, enabling the creation of complex interest rate products from simpler components. For example, interest rate swaps (IRS) can now be constructed from FRAs, as illustrated in the “Products Overview” screenshot below.

Our experience shows that end users generally prefer complete products, while market makers favor splitting products into smaller components for hedging purposes. With our approach, we can offer IRSs to end users while simultaneously breaking them into FRAs for market makers—a true win-win solution.

For Mainnet operations, Charlie3 will serve as our Oracle data provider. We have held multiple working sessions to define market data formats and integrate external data providers. We are also engaging with two leading interest rate brokers and a UK startup, and are progressing on agreements to supply market data via an oracle solution.

Testnet Prototype

The testnet prototype is currently running on the Cardano Preview testnet at: https://blockmargin.app/trade

Portfolio Overview below

Products Overview below

Post & Withdraw margin screen below

Market Data Curve below

Trade Points on the Curve below

Stablecoin Minting on the Testnet below

Background

Our mission is to Democratize the Interest Rate Derivative Market by making these products affordable for Small Corporates and Retail Customers through:

• Low-Cost Daily Margining
• Secure & PrivateTrading
• Automated Smart Contracts

We have been in talks with a couple of banks and brokers and showcased the functionality of the prototype that we currently have running on the testnet. The idea was well received and we managed to record a lot of valuable user feedback on how to adapt the platform to their usage. This is what we aim to do in this proposal and promote the prototype to the Cardano Mainnet.

Recent interest rate hikes highlighted the risk of relying on cheap financing for too long and what can happen when interest rates increase rapidly. Sharp increases in interest rates can cause an unplanned increase in mortgage payments and much higher refinancing rates on every type of credit.

Consumers' current lack of access to the interest rates markets also limits their options for protecting against further rate increases, leaving them in a difficult position - exposed and without options.

We plan to bring interest rates markets onto the blockchain, so consumers and small corporates can access the same instruments as the large banks and large corporations.

The first step in the journey is to bring the markets onto the blockchain by offering existing banks a system that lets them manage the daily payments on these products (the settlement). The second step is to bring liquidity from the main financial players.

The target state is to lower costs by up to 100x for consumers and banks.

We aim to revolutionize the trading and settlement of Interest Rate Derivatives by leveraging the capabilities of the Cardano Blockchain. Our initiative is designed to democratize access to this multi-trillion dollar daily market, traditionally dominated by large financial institutions, corporations, and asset managers. By introducing a streamlined solution named BlockMargin, we intend to empower thousands of small companies and individuals to participate in the Interest Rate Derivatives market efficiently.

Challenges Faced by Small Entities:

Interest Rate Derivatives serve as crucial risk management tools for corporations and asset managers, enabling them to hedge interest rate risks associated with loans, bond issuance, and other liabilities. However, small corporates and private individuals often find themselves excluded from this market due to the intricate back-office processes involved, particularly the daily margining requirements. Without the resources to handle daily margining, these entities face inflated fees imposed by financial institutions, leading to elevated credit and operational risks.

The BlockMargin Solution:

BlockMargin, our innovative product, addresses these challenges by seamlessly integrating daily margining onto the blockchain. This transformation simplifies what was once a complex back-office operation into a user-friendly experience, reducing the barriers to entry for small businesses and individuals. Through a user-friendly dashboard, BlockMargin provides 24/7 visibility into positions, market values, and margin requirements. Users can effortlessly manage their positions, manually or automatically post and redeem margin from their crypto wallet.

Key Features of BlockMargin:

• Automated Monitoring: BlockMargin constantly monitors daily market prices, contract conditions, margin requirements, and settlement processes, mitigating risks and simplifying the trading experience.
• Empowering Small Entities: By bringing the power of daily margining to the fingertips of small businesses and individuals, BlockMargin facilitates a win-win situation, eliminating the need for excessive fees and minimizing credit and operational risks.

Significance of Margin Posting:

Understanding why margin matters is pivotal to appreciating the BlockMargin solution. Interest rate derivatives involve dynamic contract values that can turn positive or negative at any point. Margin posting becomes essential to prevent defaults and provide compensation if one party decides to exit the contract prematurely. Additionally, margin posting aids in avoiding litigation, as both parties can walk away, leaving margin with the counterparty to cover any adverse market moves.

Midnight Platform

We are currently in touch with financial institutions and leading interest rate brokers. One of the high priority points on their wishlist is to ensure the privacy of transactions, as they do not want to expose their dealings with clients completely to the public.

Our product will be the prime candidate for Midnight. Therefore, after delivering this project on Cardano Mainnet, we will look to port it to the Midnight chain when it launches.

[Your Project and Solution] Impact

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

The proposal will bring the possibility of trading interest rate derivatives on the Cardano Mainnet (a completely new product on Cardano and other blockchains) and can potentially bring the financial services industry onto Cardano.

This proposal targets the traditional finance sector and aims to bring some of their operations onto the blockchain and create a Decentralized Finance alternative (DeFi)

It will increase the Total Value locked, total number and active daily users. And it will bring the largest market in the world onto a blockchain.

The Interest Rate Derivative market is the largest market in the world by a big margin, with $250+ Billion daily volume between Small Corporates, Retail and Financial institutions. The overall market that includes large corporations is even bigger at over $5 trillion of volume per day.

Bringing the settlement of these derivatives onto a blockchain has the potential to open up adoption of the large financial sector on a blockchain and, over time, drive a tide of adoption to that blockchain.

Settling these trades on the blockchain reduces their operational cost drastically, making it possible for financial institutions to offer these products to smaller clients they overlooked in the past. This can lead to market growth as new participants enter the market.

[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?

We are approaching the final milestone of delivering BlockMargin on the Testnet. This proposal seeks to continue development and transition BlockMargin to the Mainnet.

The project’s technical foundations were first shared with the Cardano community in 2021 (Cardano Forum post: https://forum.cardano.org/t/oracle-for-energy-prices/53588/3 ).

The core team brings decades of combined expertise in trading and settling interest rate derivative contracts. Dmitry and Sergio previously worked together at a major financial institution in the Netherlands.

Dmitry spent over a decade in Risk Management and Trading, managing multi-million-dollar positions for both the bank and its clients.

Sergio is a seasoned banking professional with hands-on experience in regulation and corporate banking interactions.

Together, they also have deep industry connections essential for engaging large financial institutions in pilot projects.

We are also pleased to add Paulo Rosarion, who brings extensive experience in the UK financial services sector, further strengthening our team.

During development of BlockMargin on the Cardano Testnet, we encountered challenges with the Marlowe tech stack. To overcome these, we pivoted to building in Aiken. This transition was successful, demonstrating our adaptability and problem-solving ability. As a result, we have gained significant expertise in Aiken, which will be our chosen technology going forward.

[Milestones] Project Milestones

Milestone Title

Oracle Integration

Milestone Outputs

Connect BlockMargin to a Cardano oracle provider. The oracle data for Interest Rate Derivatives is different to other assets on chain in that the Oracle needs to provide data for a whole curve with different maturity points - whereas classic Oracles typically needed to provide only 1 price.

We have implemented a new design of the Oracle during the buildout of BlockMargin on the testnet using our proprietary data and data model. Since then we have been in touch with Charlie3 Oracle provider, who have agreed to adapt their Oracle solution to Interest Rate Derivatives.

We will therefore work with them to port our data model into their infrastructure and redirect our smart contracts and Web2 dashboard queries to their solution.

Acceptance Criteria

An Oracle running on Charlie3 testnet that publishes an interest rate curve on the Cardano testnet. The data in the Oracle will be provided using the same delivery method as is currently operating on the testnet.

BlockMargin pulls the data from this oracle into the Web2 dashboard and is used in the BlockMargin smart contracts

Evidence of Completion

A video walkthrough of pulling data from an external oracle provider on a Cardano testnet. The data of the curve in the Oracle will be shown

Delivery Month

3

Cost

24993

Progress

20 %

Milestone Title

Cross Margin

Milestone Outputs

Cross Margin implemented into BlockMargin. This feature will be an option for market makers. When initiating the feature the market make will be subject to higher margin requirements on the first few trades, and this margin will reduce as offsetting trades are booked

Acceptance Criteria

Ability to turn on Cross margin on a portfolio and the algorithm will take into account the riskiness of different trades and compute a combined margin requirement for all the trades. A batch of trades in opposite directions should show a lower margin requirement and the sum of individual margin requirements without cross margin.

Evidence of Completion

• A batch of 10 trades from different Cardano wallets on the testnet
• The 10 trades are taken by the same market maker
• The total margin requirement by the market make is a fraction of the total margin requirement from the individual trades

A video walkthrough the test trades and the resulting margin requirement for the market maker and the individual trades

Delivery Month

6

Cost

24993

Progress

50 %

Milestone Title

Improve UX / UI

Milestone Outputs

Improve the UI and UX of the dashboard in line with the feedback received during our demos. A more intuitive feel and quicker response time from the dashboard

Automate the following tasks:

• Posting and withdrawing margin with 1 click, similar to what we have for taking and creating multiple position
• Updates subscription service for email and telegram to inform traders and market makers when their margin thresholds are breached and additional margin should be posted

Acceptance Criteria

Improved design of the dashboard and automated tasks as described in the Output section. The posting and withdrawal of margin should be executable with a press of a button - to the extent possible the layering of transactions will be used. A backend service deployed that will monitor margin requirements for subscribed wallets and notify them via email and/or telegram when they are close to breaching margin thresholds.

Evidence of Completion

A video walkthrough the dashboard and the automated tasks for posting and withdrawing margin. A batch of 10 test trades (buys and sells) where margin is posted in one go.

Delivery Month

9

Cost

24993

Progress

80 %

Milestone Title

Mainnet Launch

Milestone Outputs

Receive expert advice on the regulatory clearance to launch settling of interest rate derivatives on the blockchain. Engage with a law firm for this advice and receive a written responsive with their opinion

Launch BlockMargin onto the Cardano Mainnet and execute a live trade using a Stablecoin. This is is subject to regulatory clearance to perform the trade with an eligible counterparty

If the expert advice is favourable then adjust the app’s environment variables and to point to the Cardano Mainnet infrastructure and launch on Cardano’s Mainnet

Acceptance Criteria

Expert legal advice received, a redacted copy will be shared in the milestone review showing the essence of the legal opinion. If advice is favourable then the BlockMargin is launched on the Cardano Mainnet and a test trade is executed.

Evidence of Completion

Redacted copy of the legal opinion on regulatory clearance to launch the platform on the Cardano Mainnet. Video walkthrough of a trade on the Cardano Mainnet.

If the legal opinion is not favourable then we will endeavour to pursue further actions to identify additional required steps to obtain regulatory clearance for a launch at a later date. In that case a test trade will be performed on the testnet with the all the new functionalities delivered in this proposal

Delivery Month

12

Cost

24996

Progress

100 %

[Final Pitch] Budget & Costs

Please provide a cost breakdown of the proposed work and resources

The budget is estimated based on 40 hours per week and 4 weeks per month.

Milestone 1: Oracle Integration

• One Senior Developer 40h per week for 4 weeks @ $60/h
• One Junior Developer 40h per week for 2 weeks @ $30/h
• One Data Expert 20h per week for 4 weeks @ $60/h

Total 16,800 USD

Milestone 2: Cross Margin

• One Senior Developer 40h per week for 8 weeks @ $60/h

Total 19,200 USD

Milestone 3: Improve UX / UI

• One Senior Developer 40h per week for 4 weeks @ $60/h
• One Senior Designer 40h per week for 6 weeks @ $40/h

Legal fees for expert opinion 10,000 to execute an Interest Rate Derivative trade on the Cardano Mainnet. Additionally Business Dev and Marketing of the new functionalities with financial services and brokers 5,000

Total 34,200 USD

Milestone 4: Mainnet Launch

• One Senior Developer 40h per week for 4 weeks @ $60/h

Total 9,600 USD

Total for project 79,980 USD

A conservative ADAUSD exchange rate of 0.8 is assumed for the budgeting. At this level we are happy to hold ADA if the price drops significantly below that

Total for project in ada 99,975

[Final Pitch] Value for Money

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

BlockMargin represents a strong use of Catalyst funds because it delivers a unique financial use case not yet available on Cardano or any other blockchain: on-chain settlement of Interest Rate Derivatives, the largest financial market in the world with more than $5 trillion in daily transaction volume. By enabling this functionality on Cardano, we create a clear path for institutional adoption, significantly expanding Cardano’s footprint in decentralized finance (DeFi).

The value created for the Cardano ecosystem includes:

• Each derivative trade requires daily margining, producing frequent on-chain activity. Even a small initial adoption of ~300 active trades could generate 600+ transactions per day (Transaction Growth)
• These products are typically denominated in stablecoins, driving demand and usage for USDM, USDA, DJED, and similar Cardano-native assets (Stablecoin adoption)
• Interest rate products are inherently high notional (often >$500k USD), meaning TVL and liquidity in Cardano DeFi will grow faster than with retail-only products. (TVL expansion)
• Delivering a regulated, legally reviewed product strengthens Cardano’s reputation as a serious blockchain for enterprise finance (Institutional credibility)
• High-value transactions support future Cardano fee markets, boosting staking rewards and benefiting all ADA holders (More fees from transactions)

The budget reflects typical industry contract rates:

• $60/hour for senior developers. In line with global blockchain developer contract rates, often ranging from $50–$100/h
• $60/hour for data experts. In line with specialist quantitative finance/data engineering roles, in Western markets.
• $30/hour for juniors. In line with typical $35–$50/h junior blockchain dev rates.

Typical range estimated from glassdoor.com

Legal costs of $10,000 for regulatory clearance are unavoidable given the nature of financial products. Comparable fintech legal reviews typically cost $15,000–$25,000, so this budget is conservative.

Business development/marketing at $5,000 ensures industry outreach and adoption, which is essential for a financial-sector product.

[Required Acknowledgements] Consent & Confirmation

Terms and Conditions:

Yes