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Introduction

An index is a market portfolio (benchmark) tracking the performance of a group of assets selected and weighted in accordance to the benchmark specification. As the result indexes allow investment into the entire crypto market and its sectors, such as DeFi projects, DEXes, NFTs, etc.

The advantages of investing into index, compared to manual portfolio management are

- wider market exposure, helping to avoid 100X market gems, and ensuring more stable returns,

- balance against single asset failures - if one DEX fails to perform then other in the portfolio will absorb its share, hence in that sense the risk is neutral as the index represents the entire sector (in this example DEXes).

Examples of indexes from the world of traditional finance and crypto:

- S&P 500 tracking composed 500 largest companies stocks weighted by market capitalisation representative of the entire US economy;

- FTSE 100 - 100 largest companies listed on the UK exchanges weighted according to their market cap;

- (Ethereum) DeFi Pulse Index: https://www.tokensets.com/portfolio/dpi , tracking the performance 25 largest Ethereum DeFi projects according to the composition formula (each project capped at 25% max allocation), balanced monthly.

Problem

Alonzo HFC event leads to the rapid development of Cardano DApp ecosystem. 

This means that

- among so many projects it'll be very easy to miss a lot of hidden 100X gems;

- focus on seizing all investment opportunities;

- risk management and understanding;

- access to higher barrier to entry projects (NFTs, private sales, etc.);

- for many people it will be hard to achieve market benchmark returns, but index is exactly the definition of the benchmark returns.

Index performs 2 important roles from the investor point of view:

- gives wide exposure to the market;

- is a passive investment, user invest funds into the index, and doesn't have to perform any other actions, index itself is managed to the composition formula;

- it's sectors benchmark - essential on-chain data allowing for the evaluation of all other investment possibilities using Share ratio (comparing excess return to the excess risk measured using volatility).

Solution

We propose implementation of on-chain financial indexes of 3 broad types:

- financial (fungible token) indexes - investing in fungible tokens representing different projects share / internal currencies;

- NFT indexes - index composed of NFTs bought and sold based on the current price, valuation, and market sentiments, starting with art, but with t he growth of NFTs in the future potentially also representing all the deeds stored on the blockchain;

- Cardano delegation index - an aggregated way to delegate ADA via smart contract to a portfolio of pools according to a specified condition, e.g. single stake pool operators, ecosystem developers, mission-driven pools, etc. Each pool considered for the index would need to mean the block production and reward requirements.

The index protocol would consume on-chain price Oracle, reserve, and other data, according to the index specification, and each cycle (T = 6 epochs = 30 days) would rebalance the index according to the new parameters

Founder

Jarek - the founder and lead developer of Maladex experience:

- Master of Informatics from the University of Edinburgh (where Phil Wadler and Aggelos Kiayias research and teach) with specialisation in concurrent and distributed systems, functional programming, and formal methods.

- Quantitative Finance master equivalent degree from CQF (the bespoke industry degree).

- Head of Platforms in an international bank leading 3 teams, architecting and building complex financial systems.

- Citadel Securities (the #1 market market in the world) where I worked on designing and building a novel approach to market making.

- Microsoft Research where I worked on designing and implementation of highly scalable (cluster) machine learning algorithms used in Microsoft Office and Windows analytics (processing exabytes of data).

- Active in the Haskell community from taking part in many conferences and hackathons to using Haskell and other functional languages and paradigms in all kinds of professional work.

- Wrote first program (game) at age 6 and spent the entire youth immersed in computer security forums.

I believe that my experience gives me the unique ability to combine all 3 intersections - advanced mathematical financial modelling, building scalable concurrent protocols which EUTxO requires, and many years of coding experience.

About Us

We operate stake pool (ticker MAL):

- https://pooltool.io/pool/261789e4d39000aa333495d4dbe850708a7fe7a996011a6be98060db/,

- https://pooltool.io/pool/261789e4d39000aa333495d4dbe850708a7fe7a996011a6be98060db/delegators.

We are engaged in the community promoting Cardano, answering questions (of all types, not only related to our project, including how to implement concurrency in EUTxO).

Funding

Total: $60,000

Breakdown:

- 160 engineering hours - evaluation of DeFi protocols build on Cardano for the potential of direct on-chain integration;

- 120 engineering hours - quantitative modelling of Cardano financial indexes and on-chain investment strategies specification (how to verify price Oracles, how to price illiquid asset, how to derive reliable pricing data from multiple sources, what's the optimal MPT - modern portfolio theory, market efficient curve etc.).

- 240 engineering hours for development of index protocol, integration with Cardano asset sources, and testing.

- 120 evaluation and incorporation of on-chain data for the purpose of on-chain index balancing computations.

- 160 engineering hours front-end design

Average price per hour $87 incl. VAT and tax.

Features

We've got a unique and refreshing approach to DeFi.

For full description check our site: https://maladex.com/#features.

But, to outline our approach in the area of passive and active investment:

- capital efficiency - connecting investment capital to projects by passive and active managed of user resources;

- risk control - we build risk control mechanisms into the protocol;

- alpha generation and accessibility - unique and novel ways of generating returns and exposing users to wider range of investment; for instance consider ability to participate in early investment rounds by pulling user funds, by managing risk portfolio by investing into a diversified portfolio, by opening a new investment streams such as NFT collectables, and more.

- powerful tokenomics - we've got one token for all our projects, and check how much we work on at https://maladex.com/#roadmap, and we not only have fair launch, we plan on distributing the token to the wide community to engage everything in the protocol and its decentralisation via the shared ownership.

- one of a kind team - people with experience akin to our are not interested in DeFi because their day to day job pay exceedingly well and they are surrounded by some of the brightest minds in the industry, we however base our decisions on the goals of decentralisation and wide access to means of increasing financial wealth (hence financial revolution), we put our hearts into the project because we want DeFi as the concept to be successful and Cardano as a blockchain, and we build the future in which we want to live ourselves.

Definition of Success

1 month: define the projects incorporation process into the index, study projects protocol for on-chain integration, MPT optimisation, and benchmarks definition;

3 months: vault locking and liquidation protocol, publication of Cardano index development study; integration of Oracle data feeds, testing first index contracts on the testnet.

6 months: launch first index.

12 months:  a wide range of Cardano indexes available to the user.

https://maladex.com/#roadmap.

Expected launch date: Q2/Q3 2022.