Indigo V3 – CNT-Backed Collateral for Indigo CDPs

[Proposal setup] Proposal title

Please provide your proposal title

Indigo V3 – CNT-Backed Collateral for Indigo CDPs

[Proposal Summary] Budget Information

Enter the amount of funding you are requesting in ADA

550000

[Proposal Summary] Time

Please specify how many months you expect your project to last

6

[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?

Indigo only supports ADA as collateral, limiting liquidity and CNT use. Multi-collateral support will unlock Bitcoin/stablecoin DeFi and boost Cardano integration, including with the SWF.

[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

N/A

[Theme Selection] Theme

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

DeFi

[Campaign Category] Category Questions

Describe your established collaborations.

The Indigo V3 – CNT-Backed CDPs upgrade is a joint initiative between 3rd Eye Labs, the Indigo Foundation, and TxPipe, combining deep protocol expertise, governance oversight, and independent security assurance.

Describe funding commitments.

This proposal is seeking full funding through Project Catalyst to cover development, testing, and audit of Indigo V3.

Contributors:

• 3rd Eye Labs – Will contribute internal development resources, project management, and infrastructure support beyond the scope funded by Catalyst, ensuring timely delivery and quality.
• Indigo Foundation – Will provide product management, governance coordination, and community engagement at no additional cost to Catalyst.
• TxPipe – Will provide a full security audit as a paid vendor under this proposal, with the audit scope and report made public.

Describe your key performance metrics.

KPIs include: TVL in CNT-backed CDPs (ADA/USD), unique CNT types whitelisted, % CNT vs total collateral, total CNT collateral value, unique wallets opening CNT-backed CDPs, transaction volume, protocol revenue from CNT-backed CDPs, and liquidity impact on Cardano DEXs. Metrics will be tracked on-chain and reported quarterly to the Indigo DAO for transparency and governance review.

[Your Project and Solution] Solution

Please describe your proposed solution and how it addresses the problem

We propose Indigo V3 – CNT-Backed Collateralized Debt Positions (CDPs), an upgrade to the Indigo Protocol that expands CDP functionality from ADA-only collateral to include Cardano Native Tokens (CNTs) such as Bitcoin bridged via the Cardinal protocol, stablecoins (USDM, USDA), and other high-quality assets on Cardano.

How It Works:

• Single-Collateral CDPs: Users can open a CDP with ADA or any approved CNT as collateral. For example, BTC holders can open a BTC-backed CDP to mint iUSD, or the Cardano Sovereign Wealth Fund (SWF) can use USDM to generate yield.
• Governance-Approved Collateral: The Indigo DAO will manage collateral whitelisting and parameters (discount rate, interest rate oracle) via on-chain proposals.
• Multi-Asset Stability Pools: Liquidations from CNT-backed CDPs will distribute rewards proportionally in the underlying collateral asset to Stability Pool providers.

Addressing the Problem:

• Unlocking Bitcoin DeFi on Cardano – By allowing BTC-backed loans via the Cardinal trust-minimized bridge, Indigo directly supports Charles Hoskinson’s stated goal of positioning Cardano as a leading smart contract layer for Bitcoin DeFi, tapping into a $2 trillion liquidity pool.
• Powering the Cardano Sovereign Wealth Fund – The SWF can deploy its holdings in Indigo to generate sustainable yield, increasing the stablecoin-to-TVL ratio and supporting ecosystem liquidity.
• Expanding DeFi Composability – With multiple collateral types, iAssets become more useful across the Cardano DeFi ecosystem, driving transaction volume, liquidity depth, and user adoption.
• Mainnet-Ready Implementation – Indigo is already deployed, audited, and DAO-governed. This proposal is a targeted, production-level enhancement — not a prototype — ensuring immediate ecosystem impact upon release.

Outcomes Expected:

• Increased TVL and liquidity diversity in Cardano DeFi.
• Broader user base as BTC and stablecoin holders gain utility.
• Stronger cross-protocol collaboration (Cardinal, stablecoin issuers, SWF governance).
• A compelling Bitcoin DeFi narrative to attract external liquidity and media attention.

[Your Project and Solution] Impact

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

The Indigo V3 – CNT-Backed CDPs upgrade will have a direct and measurable impact on the Cardano ecosystem by expanding DeFi collateral diversity, increasing TVL, and enabling new high-value use cases.

1. Expanding Cardano’s DeFi Market Share

• By adding Bitcoin (via Cardinal protocol) and stablecoins (USDM, USDA, iUSD) as collateral, Indigo will tap into billions in off-chain liquidity, positioning Cardano as a competitive player in the global Bitcoin DeFi market.
• Expected measurable outcomes include increased iAsset minting, broader collateral distribution, and higher stablecoin-to-TVL ratios.

1. Supporting the Cardano Sovereign Wealth Fund (SWF)

• The SWF can deploy its stablecoin reserves into Indigo CDPs to earn yield, turning otherwise idle treasury assets into a sustainable revenue stream.
• This creates a direct link between Indigo, Cardano governance, and long-term ecosystem financial stability.

1. Driving User Adoption and Composability

• CNT-backed CDPs open the door for more users and institutions to participate in Indigo, including BTC holders, fiat-backed stablecoin holders, and DeFi protocols looking to leverage diversified collateral.
• Multiple collateral types make iAssets more composable, enabling new integrations with lending markets, DEXs, and yield aggregators.

1. Measurable KPIs Post-Launch:

• Collateral Diversity: Number of CNTs used in active CDPs.
• TVL Growth: Increase in Indigo TVL from non-ADA collateral.
• User Adoption: Growth in unique CDP owners and Stability Pool participants.
• Liquidity Metrics: Volume of BTC and stablecoins locked in Indigo post-upgrade.
• Integration Count: Number of DeFi protocols integrating with CNT-backed iAssets.

By delivering production-level, audited smart contract upgrades on a proven mainnet protocol, this project will create immediate and lasting benefits for the Cardano community — increasing liquidity, enhancing utility, and reinforcing Cardano’s positioning as a hub for high-value, real-world blockchain finance.

[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?

Indigo Protocol is one of the most battle-tested DeFi platforms on Cardano, with over a year of continuous mainnet operation, thousands of active users, and a flawless record of secure, audited smart contract deployments. Since launch, Indigo has consistently ranked among the top protocols on Cardano in Total Value Locked (TVL) and user adoption, demonstrating our ability to deliver complex upgrades while maintaining community trust.

3rd Eye Labs, as Indigo’s core development partner, has an established history of delivering major protocol releases—including Indigo V1, V2 and V2.1—on time and with full transparency.

[Milestones] Project Milestones

Milestone Title

Development of CNT-Backed CDPs (Core Smart Contracts)

Milestone Outputs

• Updated iAsset, CDP, Governance, Treasury, Staking, and Stability Pool smart contracts to support Cardano Native Token (CNT)-backed collateral.
• On-chain logic for collateral whitelisting, risk parameters (discount rates, oracles), and multi-asset interest and fee handling.
• Positive and negative test cases for ADA and non-ADA CDPs.

Acceptance Criteria

• All smart contracts compile successfully in Aiken.
• Full testsuite passes for both ADA and CNT-based CDPs.
• Collateral ratio, interest, liquidation, and redemption calculations function correctly for multiple collateral types.

Evidence of Completion

• A video showing the successful completion of the tests outlined in the Technical Specifications document.
• Demo transactions on testnet showing creation, adjustment, liquidation, and closure of CNT-backed CDPs.

Delivery Month

2

Cost

200000

Progress

50 %

Milestone Title

Independent Security Audit

Milestone Outputs

• Full audit of updated Indigo smart contracts by TxPipe (or equivalent).
• Audit report detailing vulnerabilities, severity, and recommended fixes.
• Post-audit changes implemented and verified. Reviewed by developers.

Acceptance Criteria

• All high and medium severity findings resolved prior to mainnet deployment.
• Audit report published for community review.
• Video of Lead Developer reviewing Audit Report and associated findings/fixes.

Evidence of Completion

• Publicly available audit report.
• Another dump of the tests outlined in the Technical Specifications document as well as the vulnerability tests resolved.
• Video review of Audit process.

Delivery Month

4

Cost

160000

Progress

70 %

Milestone Title

Protocol Upgrade & Migration

Milestone Outputs

• On-chain upgrade logic for moving existing ADA CDPs, Stability Pools, and other Indigo UTXOs to new multi-collateral-compatible versions.
• Creation of initial CollateralAssetRef NFTs and governance-controlled supported_collaterals list.
• Migration scripts to ensure full continuity for existing users.

Acceptance Criteria

• All existing Indigo UTxOs remain valid post-upgrade.
• Governance proposals successfully add new collateral types in test environment.
• No loss of funds or incorrect parameter changes during migration.

Evidence of Completion

• Testnet upgrade execution report including video reviewing report.
• Dump of the tests used for the Protocol Upgrade smart contracts

Delivery Month

5

Cost

100000

Milestone Title

Off-chain Integration

Milestone Outputs

• Updated Indigo Off-chain SDK to support CNT-backed CDPs.
• Wallet integration logic for multi-asset deposits, withdrawals, and interest payments.
• Backend service updates to handle per-collateral governance parameters and oracle feeds.

Acceptance Criteria

• Off-chain SDK supports all operations for ADA and CNT-backed CDPs.
• Wallet connections function seamlessly for multi-asset flows.
• Backend passes all unti and integration tests for mainnet-readiness.

Evidence of Completion

Demonstration of CNT-backed CDP lifecycle via SDK and wallet in a testnet environment, along with public code commits to the Indigo Off-chain SDK repository showing all completed off-chain features.

Delivery Month

6

Cost

45000

Progress

80 %

Milestone Title

Mainnet Deployment & Governance Execution

Milestone Outputs

• Deployment of updated Indigo V3 contracts to Cardano mainnet.
• Frontend UI updated for collateral type selection, multi-asset balances, and liquidation tracking.
• Governance proposal executed to onboard initial CNT collateral.
• Public documentation and announcements released.

Acceptance Criteria

• Mainnet deployment verified via on-chain transactions.
• Governance vote executed and results publicly verifiable. Including on-chain execution.
• All documentation on Indigo App and in GitBook is updated and accessible.

Evidence of Completion

Live mainnet UI demonstration showing CNT-backed CDP creation and management, governance proposal link with vote results, and public release notes/documentation confirming full multi-collateral support.

Delivery Month

6

Cost

45000

Progress

100 %

Milestone Title

Project Close-Out Report & Video

Milestone Outputs

A polished 2–3 page written Close‑out Report summarizing KPIs (both challenge-level and project-level), key achievements, learnings, next steps, plus project metadata (e.g., project name, ID, manager, start/end dates, and resource links). Also, a public (YouTube or Vimeo) 2–5 minute Close‑out Video, in 720p or 1080p, demonstrating the project’s achievements, deliverables, technical solutions, and how funding was employed.

Acceptance Criteria

PoA accepted by Milestone Reviewers & Catalyst Team. Report covers project KPIs, outcomes, learnings, and future roadmap. Video includes demonstration of the live V3 product, technical approach recap, achievements, and next steps.

Evidence of Completion

The Project Close-Out Report is submitted through the Catalyst Milestone Module and marked as final, with confirmation of acceptance from Milestone Reviewers and the Catalyst Team. A public YouTube or Vimeo link to the close-out video is provided, demonstrating the deployed Indigo V3 CNT-Backed CDPs functionality, summarizing achievements, KPIs, and next steps, ensuring full transparency for the Cardano community.

Delivery Month

7

Cost

1000

Progress

100 %

[Final Pitch] Budget & Costs

Please provide a cost breakdown of the proposed work and resources

The total funding request is 550,000 ADA.

This budget covers smart contract development, protocol upgrades, security auditing, off-chain integration, and mainnet deployment.

• Smart Contract Development (200,000 ADA – 36%): Covers the design and implementation of updated iAsset, CDP, Governance, Treasury, Staking, and Stability Pool contracts to support CNT-backed collateral. This includes creation of CollateralAssetRef logic, handling multi-asset stability pools, and delivering full test coverage.
• Independent Security Audit (160,000 ADA – 29%): Funds a comprehensive audit of all updated smart contracts by TxPipe (or equivalent). The audit will include vulnerability assessment, severity classification, and post-audit verification of implemented fixes.
• Protocol Upgrade & Migration (100,000 ADA – 18%): Supports the development of upgrade scripts and on-chain logic to migrate all ADA CDPs, Stability Pools, and other Indigo UTXOs to the new multi-collateral-compatible versions. Includes governance-controlled collateral list setup and full migration validation on testnet.
• Off-chain Integration & Mainnet Deployment (90,000 ADA – 16%): Covers updates to Indigo’s frontend UI and wallet integration for multi-asset operations, mainnet deployment of Indigo V3, governance proposal execution for initial collateral onboarding, and public documentation release.

Notes on Cost Efficiency:

• Development will be executed by 3rd Eye Labs, the proven core team behind Indigo V1, V2, and V2.1, ensuring continuity and eliminating onboarding delays.
• Audit by TxPipe provides independent security assurance, leveraging their Cardano-specific expertise.
• Off-chain work and protocol upgrades ensure not only the feature release but also a smooth migration for all existing users — preserving Indigo’s current TVL while expanding to new market

[Final Pitch] Value for Money

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

This 550,000 ADA investment funds a production-ready, audited upgrade to Indigo — one of Cardano’s most used DeFi protocols — with immediate ecosystem impact.

• Collateral Diversity & Liquidity Growth: Enables ADA, BTC (via Cardinal), and stablecoins (USDM, USDA) as CDP collateral, attracting new liquidity and boosting Cardano’s TVL.
• Strategic Alignment: Supports Cardano’s Bitcoin DeFi vision and allows the Sovereign Wealth Fund to deploy treasury assets into yield-generating positions.
• Low Execution Risk: Delivered by 3rd Eye Labs, the team behind Indigo V1–V2.1, with security assurance from independent auditor TxPipe.
• High ROI: For a one-time cost, Cardano gains a more diverse, composable, and resilient DeFi ecosystem — positioned to capture external capital and drive measurable adoption.

[Required Acknowledgements] Consent & Confirmation

Terms and Conditions:

Yes