NuNet: Hydra-Powered Micropayments for DePIN

[Proposal setup] Proposal title

Please provide your proposal title

NuNet: Hydra-Powered Micropayments for DePIN

[Proposal Summary] Budget Information

Enter the amount of funding you are requesting in ADA

1000000

[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?

Blockchain industry and Cardano decentralises payment infrastructure on software and logical levels, but is still exposed to single points of failure due to reliance on centralized compute providers.

[Proposal Summary] Supporting Documentation

Supporting links

• https://nunet.io/
,
• https://gitlab.com/nunet/device-management-service
,
• https://docs.nunet.io/docs/developer-documentation/readme/device-management-service/main/actor
,
• https://medium.com/nunet/the-need-for-a-decentralized-orchestration-layer-8cfb79af9457
,
• https://medium.com/nunet/the-nuactor-system-11ed57203384

[Proposal Summary] Project Dependencies

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

Yes

Describe any dependencies or write 'No dependencies'

The project builds upon a sophisticated decentralized compute orchestration infrastructure stack of NuNet and Cardano blockchain ecosystem, specifically leveraging Hydra Head technology for creating scalable, off-chain payment channels. The dependency hierarchy creates a robust foundation for a state-of-the-art multi-party payment settlement system that is both deployed on and enables trust-minimized micropayments for decentralized physical infrastructure networks (DePINs). Internal dependencies (existing NuNet technologies that will be augmented during the project) Core Infrastructure Layer The primary dependency is NuNet's device-management-service (DMS) protocol, which provides the foundational decentralized orchestration layer for compute resources distributed across globally available compute devices. DMS enables distributed task execution across a network of participating devices, handling resource discovery, allocation, and coordination in a trustless environment. For the Hydra payment implementation, this layer will be extended to support deployment of Hydra Heads via NuNet on decentralized hardware provided by community, multi-party payment provider roles and real-time settlement tracking. Secure Programming Framework The NuActor system is an integral part of device-management-service which delivers a specialised programming model designed for secure development of decentralised systems. NuActor framework provides isolation guarantees, message-passing semantics, and fault-tolerance mechanisms essential for distributed application reliability. The system abstracts the complexities of distributed state management while maintaining security properties across network boundaries. NuNet Contracts NuNet Contracts are a state of the art implementation Electronic Rights Transfer Protocol (ERTP) with object capability security models, creating secure decentralized economic contracts for compute resource sharing that can operate securely in off-chain and on-chain execution environments while maintaining capability-based authentication via NuActor system. For this project, NuActor serves as the core communication and orchestration layer, enabling requestors and compute providers to interact via secure, asynchronous messages. The system coordinates job submissions, status updates, and resource allocations. NuNet Contract logic and functionality is integrated into NuActor workflows for defining and cryptographically enforcing agreements between participants, ensuring that job execution, reporting, and funding conditions are trust-minimized and automatically verifiable. NuActor and NuNet Contracts will provide the protocol for signaling job start, progress, and completion events, allowing payment providers to trigger and verify transactions via off-chain Hydra Heads ledgers. NuNet Payment Provider’s infrastructure NuNet's Payment Provider role represents an important internal dependency that will be substantially enhanced in this project. NuNet payment providers are blockchain-agnostic payment gateway interfaces that handle transaction processing for the NuNet Contracts system, leveraging payment modes with escrow and direct payment types, designed for future integration as part of the payment layer architecture. During this project NuNet Payment provider infrastructure will be enhanced by an interface to Hydra Heads deployed via NuNet on decentralized hardware, thus enabling secure interfaces to off-chain transactional layer and eventually multi-party access to Cardano blockchain. Additionally, the payment provider infrastructure will be considerably extended to: Initializing and managing Hydra Heads for off-chain settlement Participating in multi-party state channels with other payment providers Coordinate fund locks and releases based on compute job status via NuNet Contract managed events; Implement automated settlement logic triggered by NuNet Contract state changes and telemetry events in the system; NuNet Observability Infrastructure NuNet's observability system is a comprehensive monitoring framework that consolidates information about job scheduling, completion, and peer-to-peer contract agreements through structured logging with specialized label-based routing (allocation, deployment, contract, node labels), distributed tracing via Elastic APM (currently), and a LibP2P event bus that captures all system events, providing centralized visibility into the entire distributed compute workflow from contract negotiation to job execution and settlement. NuNet observability and telemetry infrastructure will assist in verification of entries on the ledger and provide additional metadata which could be replicated on the blockchain if desired to be publicly verifiable by: Feeding real-time job execution data into Hydra Head state updates Providing cryptographic proofs of compute job start, progress and completion for dispute resolution Enable automated verification of compute resource usage Trigger settlement events based on predefined Contract state changes External dependencies These represent upstream technologies and potential collaboration partners that are essential for project success. Cardano Hydra Head Protocol Hydra Head (https://hydra.family) is the primary external dependency, providing the Layer 2 scaling solution for Cardano. Hydra enables: Fast, low-cost off-chain transactions with on-chain security guarantees Multi-party state channels supporting complex settlement logic Isomorphic state representation allowing seamless on-chain/off-chain transitions Sub-second finality for micropayments The integration will leverage Hydra's ability to create isolated payment channels between multiple payment providers, enabling them to maintain a shared ledger of compute job settlements without on-chain transaction overhead. Close technical integration between NuNet and Hydra heads will provide micro-transactions speed and bandwidth necessary for the machine and algorithm economy of the future. Co-Developers and sub-contractors Sundae Labs will be engaged for co-development as well as potentially integrating liquidity pools from Sundae DEX into the solution. This will depend on their availability and know-how they can provide in developing this particular project including, but not limited to: Automated NTX-to-stablecoin conversion for long-running compute jobs Liquidity pools ensuring predictable exchange rates Smart contract interfaces for programmatic token swaps Price oracle services for accurate settlement calculations Cardano Stake Pool Operators (SPOs) While not a direct technical dependency, Cardano SPOs represent a critical ecosystem dependency and adoption pathway by: By being natural candidates to operate NuNet payment provider nodes on their existing infrastructure, including facilitating new payments teams by running Huydra Heads; Already running Cardano nodes with understanding of blockchain operations Potential beneficiaries of decentralized compute for their own infrastructure needs Early adopters providing real-world testing and feedback The project includes about 10 SPOs in the pilot program who are already running relay and block-producing nodes on NuNet's decentralized hardware both in testing and production modes. These SPOs will be invited to participate as payment providers, creating a bootstrapping effect for the network. Integration Architecture These dependencies create a layered architecture where: Network Layer: Cardano blockchain provides the base settlement layer with Hydra Heads enabling scalable off-chain channels Orchestration Layer: NuNet's device management and NuActor and NuNet Contract systems coordinate compute jobs and payment events Settlement Layer: NuNet Payment providers collaboratively manage Hydra Heads for real-time micropayments Liquidity Layer: SundaeSwap enables stable-value settlements for long-running jobs Monitoring Layer: NuNet observability and telemetry famework providers ensure accurate job tracking and automated settlement triggers The architecture positions the project to deliver a production-ready payment infrastructure that can scale to millions of micropayments while maintaining the security guarantees of the Cardano blockchain. By leveraging existing NuNet infrastructure with Cardano's advanced Layer 2 capabilities, the project has a huge potential to create a unique value proposition for decentralized compute markets. This comprehensive dependency structure ensures that all technical components are identified, partnerships are established early (Milestone 1), and the project can proceed with clear understanding of integration points and potential challenges. The modular design allows for incremental development and testing, reducing technical risk while maximizing the potential for ecosystem-wide adoption.

[Proposal Summary] Project Open Source

Will your project's outputs be fully open source?

Yes

License and Additional Information

NuNet licensing policy, adopted in April 2023, follows the principle of "Open Source code for community and business use" and publicly available at https://docs.nunet.io/docs/nunet-licensing-policy. It defines a licensing application for all NuNet's projects, publicly hosted at https://gitlab.com/nunet. All components developed as a result of this project will be categorised as core or non-core protocol components and licensed with Apache 2.0 open source software license from the start.

[Theme Selection] Theme

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

Developer Tools

[Campaign Category] Category Questions

Describe your established collaborations.

NuNet has an ongoing collaboration with single pool SPOs (10) that are in the pilot program, running relay and block producing nodes on decentralized hardware via the NuNet protocol. These SPOs will be included in this Catalyst proposal for testing Hydra head payments in addition. SPOs are disclosed in the IMPACT section.

NuNet has an agreement with Sundae Labs to subcontract development support, due to Cardano and Haskell specific deep expertise as well as Hydra experience. Additionaly, there is a potential need for integration of liquidity solutions on Sundae Swap DEX for the Hydra Head

Describe funding commitments.

Nunet is currently funding the development of payment providers solutions through its own internal budgets. Cardano Catalyst project enables NuNet to develop payment provider solutions on Cardano, and to use Hydra Head for it instead of other competing L1 chains with low cost and fast finality. It will ensure that the key settlement layer leverages Cardano / Hydra Heads as the most decentralized option.

Describe your key performance metrics.

NuNet will provide the metrics on the usage of developed Hydra solution, with the following KPIs:

• Number of transactions
• Total value of transaction in ADA
• Number of entities deploying and using the developed solution

[Your Project and Solution] Solution

Please describe your proposed solution and how it addresses the problem

Overview

We propose developing a DApp for payment providers that leverages NuNet’s NuActor protocol, the Cardano blockchain, Hydra, Hydra SDK, and SundaeSwap to enable fast, secure, and fully decentralized realtime off-chain settlement for compute jobs. The proposed solution would result in fully decentralized payment infrastructure that leverages Hydra Head technology deployed on NuNet's distributed compute network to enable fast, secure, and trust-minimized off-chain settlement for compute jobs in the DePIN ecosystem. By that we effectively address the fundamental paradox where supposedly decentralized compute and payment networks rely on centralized hardware and payment providers, creating bottlenecks and single points of failure.

Technical Architecture

The proposed solution establishes a multi-party payment provider network where independent operators manage Hydra Heads deployed on decentralized hardware via NuNet's orchestration layer. Unlike traditional approaches where Hydra nodes run on centralized cloud infrastructure, our solution deploys Hydra Head instances directly on NuNet's distributed compute network, ensuring the payment layer itself is truly decentralized.

In this system, compute requestors and providers communicate via NuNet’s NuActor protocol, coordinating job execution across the NuNet network. Payment flows are managed by independently operated payment providers, who handle deposits from requestors and distribute funds to compute providers upon job completion. Currently payment providers would work off chain and would only be able to manage payments between participants that are using their service. Using Hydra Head for settlement between multiple payment providers could occur off-chain via a Hydra Head which would facilitate a multi-party ledger and can add an additional incentivization layer via external DeFi partners (e.g. drip dropz) for payment providers. This ensures transparent, verifiable, and efficient realtime settlements across the network. Key components of the architecture:

• Decentralized Hydra Head Deployment: Hydra Head nodes run as containerized services on NuNet's decentralized hardware network, orchestrated through the device-management-service (DMS) protocol. This eliminates dependence on centralized cloud providers for payment infrastructure.
• NuActor-Based Coordination: The NuActor system provides secure, asynchronous message-passing between compute requestors, providers, and payment processors. Each actor maintains isolated state while coordinating complex multi-party interactions through capability-based authorization (UCAN).
• NuNet Contracts Integration: Generic contract logic embedded in NuNet Contracts defines compute job agreements, payment conditions, and settlement triggers. These contracts execute both on-chain (for final settlement) and off-chain (within Hydra Heads for micropayments).

This multi-party ledger promotes decentralization: each payment provider operates independently, yet collectively contributes to a shared settlement network. By enabling many providers to participate, the platform creates a fully decentralized settlement layer that mirrors the decentralized nature of NuNet’s compute network, differentiating this solution from centralized off-chain payment systems.

Payment Flow Architecture

The solution will unlock the possibilities and flexibility of Nunet Contract system to define arbitrary interactions between interacting parties in the network with the security, speed and finality of the payment layer of Cardano blockchain and Hydra Heads. Depending on the terms of peer to peer agreements described in NuNet Contracts, both Compute requestors and providers can lock collateral or funds with one or more payment providers, enabling flexible multi-party execution. NuNet Observability nodes continuously monitor job execution, verifying that participants report accurate progress and completion in the off-chain ledger. This creates a trust-minimized environment where computation and payments happen and are decoupled from on-chain latency and fees, while still benefiting from Cardano’s security and transparency. The possibilities of the payment flow architecture include:

Job Initiation and Funding:

• Trusted party payments: parties can agree to implicitly trust each other and provide advance payments, advances or payments-upon-job completion, since NuNet Contracts allow for maximal flexibility of contract terms, matching the flexibility of physical commercial contracts;
• Requestor Deposits: For leveraging blockchain-supported trustless payment infrastructure, compute requestors lock funds (NTX tokens) with one or more payment providers by depositing into a multi-signature wallet controlled by the Hydra Head participants.
• Provider Registration: Compute providers register with payment providers, establishing their payment addresses and performance bonds if required. Depending on the trust anchoring, reputation and trustless payment possibilities, Payment providers may need a level of explicit trust or operate in entirely trustless environments.
• Hydra Head Initialization: Payment providers collaboratively or individually can open a Hydra Head, creating a shared off-chain ledger for tracking compute job payments. The head includes:
  • Initial state with locked funds from requestors
  • Provider payment addresses
  • Settlement rules encoded in the head's logic
  • Telemetry verification requirements

Off-Chain Settlement Mechanism

Real-Time Micropayments: As compute jobs execute, the system processes payments through the Hydra Head:

• Nunet Contract state changes: NuNet Contracts will define and contain the logic of peer-to-peer agreements between nodes or organizations in the network; NuNet Contrats will also define the events when transactions or payments between parties will have to be triggered and will feed them to Payment Providers which will in turn initiate transactions on Hydra Heads;
• Telemetry-Driven Updates: NuNet's observability infrastructure feeds real-time job metrics (CPU usage, memory consumption, job progress) into the Hydra Head state machine via NuActor messages.
• Incremental Settlement: Payment providers collaboratively update the Hydra Head ledger based on verified telemetry data:
  • Hourly jobs: Micropayments every few minutes
  • Daily jobs: Hourly settlement increments
  • Long-running jobs: Daily settlement with stablecoin conversion

Stablecoin Integration Layer

Short-duration jobs (hourly or daily) may be executed via Cardano native NTX token, allowing rapid, low-overhead settlement. For long-running jobs, NTX funds will be temporarily converted to stablecoins via SundaeSwap for the duration of the Hydra Head, ensuring predictable settlement values. At the conclusion of the transaction / head whichever comes first, stablecoins will swapped back to NTX and distributed to participants. This will be done via flexible stability mechanism, which can be chosen by network participants themselves:

• Automated Conversion: Upon job initiation, NTX funds are programmatically swapped to chosen stablecoins via SundaeSwap DEX integration within the Hydra Head logic.
• Settlement in Stable Value: Throughout job execution, payments accumulate in stablecoins within the Hydra Head, protecting both requestors and providers from volatility.
• Final Conversion: Upon job completion or Head closure, stablecoins are converted back to NTX at current rates, with the option for providers to receive stablecoins directly.

Finally payment providers will then settle transactions on-chain with compute providers. Effectively consolidating all of the micropyments made in the head and paying out to the wallets registered with the payment provider.

Integration with Existing NuNet Infrastructure

The proposed Hydra Head-based payment layer seamlessly integrates and extends NuNet's existing components:

• DMS Integration: Payment provider nodes are deployed and managed through the same orchestration system as compute resources.
• NuActor Messaging: Payment events flow through the same secure messaging infrastructure as compute coordination.
• Observability Pipeline: Existing telemetry systems feed directly into payment verification logic.
• Identity Layer: SSI/DID integration (from the companion proposal in Fund14) enables verified identities for payment providers and high-value compute jobs.

The system's true innovation lies in its decentralized payment provider architecture, which, first of all, will enable payment providers to establish their presence in the network and leverage access to decentralized infrastructure and compute orhcestration layer provided by NuNet. Second, it will enable transacting parties to have broad choice of payment providers for accessing secure transaction layer of Cardano blockchain, leveraging Hydra Heads for fast off-chain micro-transactions. By providing this solution, NuNet aims at further decentralising Cardano ecosystem on both hardware as well as multi-party ecosystem evolution levels.

[Your Project and Solution] Impact

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

By combining NuActor coordination, Hydra Head settlement, multi-party decentralization, and SundaeSwap, this platform establishes a fully decentralized compute and payment ecosystem. It provides predictable payments, verifiable execution, low transaction costs, and scalability, while enabling an additional incentivization layer for payment providers, encouraging liquidity, participation and broad adoption across the Cardano ecosystem.

Impact on the cloud computing ecosystem

Traditional cloud computing is projected to be a more than 1Trillion market by 2030, if decentralized computing captures just 1-2% of that market it would mean approx 10 - 20billion. Having a robust scalable settlements layer is critical in enabling this next wave of adoption to be truly decentralised. This solution would contribute in positioning Cardano as a key enabler of this scalable decentralised alternative.

Impact on Cardano Adoption

NuNet’s decentralized payment DApp solves a core bottleneck in decentralized compute: centralized payment processors. By integrating NuActor coordination, Hydra Head off-chain settlement, and liquidity through SundaeSwap, this proposal creates a fully decentralized, multi-party settlement system for compute workloads. Users and developers can pay for compute in NTX for short tasks, or in stablecoins for long-running jobs, ensuring predictable costs and reducing volatility risks. This unlocks trust-minimized, transparent, and scalable payments directly on Cardano, demonstrating how the blockchain can power critical infrastructure beyond financial transactions.

Technical Impact

The proposal introduces a novel payment settlement layer combining Hydra-enabled microtransactions, multi-party fund management, and DEX liquidity. This approach extends Cardano’s technical utility by enabling:

• Microtransactions for granular, pay-per-use compute.
• Hybrid settlement options (NTX and stablecoins) for flexible use cases.
• Distributed payment providers operating as liquidity managers and settlement agents. This design transforms settlement from a single-point bottleneck into a collaborative, resilient payment fabric anchored in Cardano’s blockchain.

Ecosystem Collaboration

NuNet is actively working with Cardano SPOs to deploy relay and block-producing nodes on decentralized hardware powered by NuNet. By extending Hydra payment channels to SPOs, the project enables a more granular cost structure through microtransactions, lowering operational costs and diversifying income streams. This strengthens Cardano’s backbone while fostering deeper collaboration between core infrastructure providers and the broader decentralized compute economy.

NuNet is currently running a pilot project where selected SPOs are deploying their relay and block producing nodes on decentralized hardware provided by NuNet. NuNet is for this purpose providing subsidized compute resources from reliable small datacenters. NuNet is also in motion to expand the compute offering with a multitude of traditional and novel web3 compute providers.

The SPOs that have expressed written interest to join the pilot so far are:

HAMDA, BBHMM, TIPFS, ECP, PREEB, FLUID, PET♥, ADRIA, DOTAR, BETTR, TDSP, EMPL, PLKOZ, AFICA, 8BALL, PREEB, KTOP, SHA, ENVY, OTG, CARDS, SUDTI, ZAMBIA, SHAMROCK

The SPOs that have been onboarded, are already deployed and in the process of (or done) signing pilot contracts:

HAMDA, BBHMM, ENVY, KTOP, PORTO, CARDs, AFICA, FLUID

NuNet will work with these SPOs offering the opportunity to onboard into this Catalyst proposal and pilot the NuNet payment provider role and in turn the operation of hydra heads..

SPO Incentives & Community Growth

SPOs have an option to gain a new revenue model by participating as decentralized payment providers, managing liquidity, and securing settlement channels. This model aligns incentives for SPOs to contribute compute capacity, while also strengthening the reliability of Cardano infrastructure. Payment providers are incentivized with additional yields, creating a self-reinforcing loop of liquidity, adoption, and decentralization. The project thereby broadens economic participation across the Cardano ecosystem, engaging SPOs, developers, liquidity providers, and compute users in building a global Web3 compute marketplace.

[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?

Illustration of Capacity:

Our organization comes with a history of successfully bringing intricate technology projects to fruition. The pillars of our success lie in our deep-rooted technical understanding, stringent project management practices, and an unwavering focus on transparency and responsibility.

Our team is populated with seasoned software engineers with excellent skills to leverage containerization (Docker), Blockchain and peer-to-peer networking (Go libp2p). NuNet past work includes the implementation of projects in some sense similar to the one proposed here, showcasing our readiness to tackle the unique challenges this project poses.

NuNet is committed to Open Source Software development from the inception. Therefore, all our development and progress is available for public scrutiny at all times as well as open collaboration with the community. We actively invite and work with the community in regards to contribution, usage, work and testing of the platform codebase.

Link: https://gitlab.com/nunet

NuNet licencing policy:

https://docs.nunet.io/nunet-licensing-policy/

Openness and Responsibility:

We have established a robust framework to ensure openness and responsibility in the execution of the project and the management of finances:

1. Elaborate Budgeting: We present an exhaustive budget layout at the start of the project that details the fund allocation across various tasks. This leaves no room for ambiguity regarding the utilization of funds.
2. Periodic Reporting: Regular updates regarding the project and financial statements will be shared, offering complete transparency into the progression of the project and the use of funds.
3. External Auditing: We are open to audits conducted by independent third parties at regular intervals. This ensures responsibility and openness in our financial management.
4. Escrow Mechanisms: To further reassure proper use of funds, we can utilize an escrow service. This arrangement ensures that the project funds are held by a third party and released according to pre-set milestones. This provides an extra layer of assurance for the funds.
5. Payment Based on Milestones: Our payment structure is built around specific, agreed-upon milestones. This ensures that funds are released as we achieve these milestones. The completion of each milestone can be verified, ensuring you pay only for verifiable progress.

These measures reflect our commitment to openness, responsibility, and proper management of funds. We believe that these factors, along with our technical capabilities, make us an ideal choice to successfully execute this project.

We understand that not all steps we have implemented are valid for the Catalyst proposal but it demonstrates the internal working procedures we have in place.

Catalyst Experience

NuNet also has received the funding for proposals in Fund7 and Fund8. Both proposals have been delivered. Overall, the funds were spent as intended on the development which can be monitored on Gitlab with daily commits since the award.

https://gitlab.com/groups/nunet/-/milestones/19#tab-issues

https://gitlab.com/groups/nunet/-/milestones/20#tab-issues

Financial Stability

As a 20+ strong team, we have independent funding to develop the core platform with a cash runway for at least 1-1.5 years. Cardano Catalyst proposals are used to extend the functionality and add features to the platform in order to enrich the possible use cases.

Risks & Mitigations

Delivering a decentralized payment DApp that integrates NuNet, Hydra Heads, and SundaeSwap is a complex initiative with several potential risks. NuNet has identified these risks and defined mitigation strategies to ensure project success and long-term sustainability:

Technical Complexity & Integration Risk

Risk: Integrating Hydra Heads, NuActor, and SundaeSwap into a seamless settlement DApp involves multiple moving parts and could face delays in implementation or compatibility challenges.

Mitigation: NuNet will follow an incremental milestone-based approach (POC → telemetry → stablecoin conversion → scalability) with early testnet deployments. Partnerships with Hydra and SundaeSwap developers will ensure best practices and rapid troubleshooting.

Market Adoption & Network Effects

Risk: Without sufficient adoption by SPOs, liquidity providers, and compute users, the system may not reach critical mass, limiting its utility.

Mitigation: NuNet already has 10+ SPOs onboarded in pilot deployments, and this number will expand. SPO incentives (ie. via new revenue streams through payment provider roles) and a targeted marketing campaign will drive adoption. Early pilots will demonstrate tangible value to accelerate network effects.

Stablecoin & Token Volatility

Risk: Volatility of NTX or ADA may discourage long-running compute jobs due to unpredictable settlement costs.

Mitigation: The system integrates stablecoin conversion via SundaeSwap, enabling predictable payments while retaining NTX for short-term tasks. This dual-mode settlement approach reduces volatility risk and increases enterprise appeal.

Security & Smart Contract Vulnerabilities

Risk: Bugs or vulnerabilities in smart contracts, Hydra channels, or DApp logic could expose funds to risk.

Mitigation: A dedicated independent security audit is built into the budget (Milestone 5), ensuring critical and high-risk vulnerabilities are addressed before production launch. Ongoing internal code reviews and bounty programs will add further protection.

Regulatory & Compliance Uncertainty

Risk: As decentralized payments intersect with stablecoins and compute markets, evolving regulations could affect adoption.

Mitigation: NuNet will design the system to be modular and flexible, ensuring that payment settlement logic can adapt to different regulatory environments. Partnerships with SPOs and industry collaborators will ensure compliance pathways are considered early.

Execution & Delivery Risk

Risk: Large, multi-party projects can face coordination challenges, resulting in scope creep or delays.

Mitigation: The project begins with formal agreements/MOUs (Milestone 1) clearly defining responsibilities. Regular milestone reviews, public reporting, and transparent community updates will ensure accountability.

By identifying these risks early and embedding mitigation strategies into the project structure, NuNet ensures that Catalyst funding is used responsibly, with clear safeguards for delivery, adoption, and long-term ecosystem value.

[Milestones] Project Milestones

Milestone Title

Coordination & Planning

Milestone Outputs

• Developing feature scope of the project
• architectural design blueprint and detailing implementation roadmap
• clarifying roles between NuNet, payment providers, DripDropz, SundaeSwap and other identified parties

Acceptance Criteria

• Signed commercial agreements and Memorandums of Understanding with partners and collaborators
• Clearly defined responsibilities and deliverables of each project party related to detailed project blueprint

Evidence of Completion

Written documentation such as: Minutes of meetings, signed MOUs, project plan with timelines and responsibilities.

Delivery Month

1

Cost

20000

Progress

10 %

Milestone Title

Modifications to NuNet payment provider, Initial DAPP and Hydra POC

Milestone Outputs

• Implementation of the process supporting deployment of simple shared ledger with Hydra Head on NuNet payment provider infrastructure;
• Modification of payment provider interfaces to interact with the DApp.
• Required code updates, testing and release

Acceptance Criteria

Full end to end process verified manually and via user acceptance tests, demonstrating that:

• Payment providers can create a Hydra Head;
• Contract parties can deposit NTX;
• NuNet Contract and Hydra Head interaction correctly record a simple transaction, and settle funds successfully;
• The process is documented and published;

Evidence of Completion

Working POC deployed in a testnet environment; screenshots or demo of off-chain transactions between payment providers

Delivery Month

4

Cost

150000

Progress

30 %

Milestone Title

Telemetry Integration, Stablecoin Conversion Layer and Multi-party Incentivization

Milestone Outputs

• Integrate telemetry reporting into the Hydra Head ledger.
• Develop automated stablecoin conversion via SundaeSwap for long-running jobs.
• Implement multi-party incentives for payment providers using Hydra SDK.

Acceptance Criteria

• NuNet Contract state changes correctly trigger ledger updates;
• Telemetry events are correctly fed to Hydra Heads for verification
• Stablecoin swap executes correctly
• Automatic distribution of incentives to providers and other ecosystem entities is correctly executed following terms of contracts.

Evidence of Completion

​​Test reports showing telemetry-driven settlements, stablecoin swaps completed, and incentive distributions executed.

Delivery Month

6

Cost

300000

Progress

50 %

Milestone Title

Testing and scalability

Milestone Outputs

• Comprehensive full-stack end-to-end testing of Hydra Heads with multiple payment providers and compute jobs
• Thorough evaluation of performance, scaling limits under varying conditions, system loads and configurations

Acceptance Criteria

• The system can handle at least 10 concurrent payment providers and 1000 concurrent jobs
• The latency and throughput metrics meet performance targets for a scalable usage
• All identified bugs fixed and compiled test reports

Evidence of Completion

• Compiled list and description of all load tests performed
• Detailed documentation of scalability metrics and limits
• Detailed description of all bugs identified and fixed along with regression tests

Delivery Month

8

Cost

200000

Progress

70 %

Milestone Title

Security Audit and remediation

Milestone Outputs

Conduct an independent security audit of:

• Hydra Head DApp, payment provider modifications, and smart contract logic;
• Nunet Contract infrastructure and its relations to Hydra Head;
• Secure Software Development Lifecycle design and process;

Implement required fixes and security updates;

Acceptance Criteria

• All critical and high-risk vulnerabilities identified during the security audit have been fully remediated
• A comprehensive audit report has been reviewed and approved by an independent security auditor.

Evidence of Completion

A formal signed security audit report detailing discovered vulnerabilities and issues along with documented remediation steps.

Delivery Month

10

Cost

250000

Progress

90 %

Milestone Title

DApp Pilot & Launch / marketing campaign

Milestone Outputs

• Deploy complete system to pilot participants
• Monitor system operations and provide required refinements based on feedback
• Resolve critical bugs
• Launch marketing campaigns targeting payment providers and compute participants

Acceptance Criteria

• Pilot completed with multiple jobs processed from multiple onboarded payment providers
• Stress and system load tests successfully completed;
• DApp operational and stable
• Marketing materials released.

Evidence of Completion

• A detailed compilation of pilot results with usage metrics
• All marketing assets used in the campaign
• Press releases and articles describing the launch

Delivery Month

12

Cost

80000

Progress

100 %

[Final Pitch] Budget & Costs

Please provide a cost breakdown of the proposed work and resources

Cost Justification; ROI

The following budget breakdown provides an overview of the anticipated costs essential to delivering NuNet’s fully decentralized payment DApp and Hydra-enabled settlement layer. This allocation supports every critical stage, from coordination and system design to Hydra integration, stablecoin conversion, scalability testing, and security auditing, ensuring that NuNet has the resources necessary to build a robust and production-ready system for the Cardano ecosystem.

Outlined in ADA the budget is categorized to cover project management, IT development, system integration, compliance/security, and ecosystem engagement. This structured approach ensures operational efficiency, seamless technical execution, and a strategic reserve for unforeseen requirements — setting a strong foundation for project success.

Milestone 1 - Coordination & Planning

20,000 ADA

Project management, partnerships

Milestone 2 - NuNet Payment Provider, Initial DApp & Hydra POC

150,000 ADA

Core IT development & integration

Milestone 3 - Telemetry Integration, Stablecoin Conversion, Incentivization

300,000 ADA

Advanced IT development, ecosystem integration

Milestone 4 - Testing & Scalability

200,000 ADA

QA, performance engineering

Milestone 5 - Security Audit & Remediation

250,000 ADA

Compliance & security

Milestone 6 - DApp Pilot, Launch & Marketing

80,000 ADA

Ecosystem engagement, adoption, outreach

Total Budget Requested: 1,000,000 ADA

Adjustment to Catalyst Funding Limit

Given Catalyst’s maximum funding cap of 1,000,000 ADA for Fund14, NuNet will co-finance the project by covering the calculated expected extra costs of 262,500 ADA from its own resources and/or through partner contributions if deemed necessary. This ensures that the Catalyst grant stays within program limits while planning full project delivery.

Return on Investment for Cardano Ecosystem

For SPOs: Reduce reliance on big cloud providers which have proven to be hostile to crypto on several occasions. This in turn increases the robustness and resilience of the Cardano blockchain making it resistant to outside pressures by running on decentralized hardware sourced worldwide.

For Developers & dApps: Delivers a scalable, low-cost settlement layer for compute, unlocking enterprise-grade Cardano use cases. NuNet will offer the results as Open Source on its Gitlab pages.

For Cardano blockchain: Demonstrates Hydra’s real-world scalability, showcases NTX and stablecoin utility, and strengthens the resilience of the SPO network by running on decentralized hardware.

For the Ecosystem: Creates an enterprise-grade settlement infrastructure that can be extended to other Cardano-native services, fostering adoption across industries. Being Open Source it can be used by any developer in Cardano ecosystem looking for a payment solution.

This initiative not only aligns with NuNet’s business objectives but also strengthens Cardano’s position as the leading blockchain for decentralized infrastructure. By transforming payments from a centralized bottleneck into a distributed, collaborative settlement fabric, this project sets a precedent for future Cardano-based enterprise solutions and accelerates wider industry adoption of decentralized systems.

[Final Pitch] Value for Money

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

This project presents a significant opportunity for value creation within the Cardano ecosystem and beyond. There is a clear market gap for decentralized, trust-minimized payment settlement in the DePIN (Decentralized Physical Infrastructure Networks) space, particularly for compute-intensive use cases. Current decentralized compute solutions rely on centralized payment or management layers, which undermine the principle of decentralization and restrict scalability. By pioneering a multi-party, Hydra-enabled settlement layer on Cardano, NuNet is not only solving this limitation but also laying the foundation for adoption across industries where secure, automated, and verifiable microtransactions are essential.

The potential market impact extends far beyond blockchain-native use cases. The ability to support decentralized payments for compute jobs unlocks value for traditional industries such as robotics, smart manufacturing, IoT, digital twins, and edge AI systems. These industries increasingly rely on distributed compute and real-time coordination but currently depend on siloed, centralized platforms with rigid cost structures. A Cardano-powered decentralized settlement fabric allows these industries to leverage trust-minimized compute resources while benefiting from predictable, automated payment flows. This contributes to establishing Cardano not just as a blockchain for finance, but as the transactional backbone of the machine economy.

The broader DePIN sector is projected to become a multi-billion-dollar global market over the next decade, driven by demand for decentralized cloud compute, storage, connectivity, and energy services. Within this space, decentralized compute alone is forecasted to capture a substantial share as enterprises adopt Web3-native and hybrid solutions. By anchoring this system on Cardano, NuNet creates the conditions for Cardano-native assets (ADA, NTX, stablecoins) to circulate within global-scale industrial workflows, multiplying adoption opportunities across both Web3 and traditional sectors.

Therefore, the cost of this project—capped at 1M ADA with NuNet co-financing additional costs—represents exceptional value for money. It delivers not only a robust and scalable decentralized settlement DApp but also facilitates a strategic adoption pathway for Cardano into trillion-dollar markets such as smart manufacturing and IoT. By catalyzing this bridge between blockchain and real-world industries, the project has the potential to contribute positioning Cardano as the leading blockchain for DePIN and the machine economy, amplifying returns on the community’s investment many times over.

[Required Acknowledgements] Consent & Confirmation

Terms and Conditions:

Yes