DeFi+Catalyst🔥 Retroactive Finance

Project Catalyst is an ideas market. Knowledge is "socially constructed", and the formation of the ideas spread across many communication channels, challenges and proposals. To fully participate is exhausting even at the current size.

The entire Catalyst process is a microcosm of direct deliberative democracy. We vote every three months, revealing our collective choice over which proposals best use community funds. However, democratic systems are limited by the community's access to information, knowledge, and expertise. We can attempt to consider each proposal on merit, but blockchains and applications are not commonly understood. They are very technical, and their application crosses many domains of knowledge and expertise. We're also acting globally, but the information is local and often very specific to a given context. Any voter spends so little time engaging with proposals that making good decisions using direct democracy is slow and costly. As Catalyst scales to several thousand proposals, it will be even harder to track and engage with proposals. As funded cohorts grow, the cost of monitoring and auditing the progress of funded proposals will balloon as well.

Market mechanisms are an alternative to social choice (voting and direct deliberation). Designed well, price in an abstract sense reveals collective preference and distributes information, builds knowledge in a crowd, and rewards expertise. Blockchains, tokens (fungible and non-fungible), and smart-contract based market mechanisms provide low-cost means of coordinating crowds in a way that was not possible before such that we can: input crowd, output meaning.

A Risk-Adjusted Bonding Curve(RABC)[1] is a market mechanism that implements a type of Impact Bond[2]. A performance-oriented investment instrument suitable for retroactive project funding; Retroactively funding projects with highly uncertain outcomes only when they succeed. We have proposed their use as a Catalyst Rapid Funding Mechanism [3].

Designed as an impact finance instrument by Shruti Appiah[4], a well-engineered and secure RABC implementation was recently funded[5]. The mechanism applies to any innovative project scenarios; The unique properties of RABC means we can quickly fund public goods. A limiting factor in adopting RABC as a rapid funding mechanism for Catalyst and other impact investment scenarios is the user experience.

Team Experience

The team has experience in product management and design, impact investing, fund management, financial markets software engineering, accounting, and tech start-ups. We are also organising a legal-tech community and the Catalyst Eastern Townhall.

Max O'Brien: Product Designer with experience in UI Design, UX Design, User Research methods, Game Design and Product Strategy. Currently works for a leading cloud-based accounting platform for small businesses and has previously worked for start-ups, studios and a public point-of-sale company. He routinely conducts user research and uses their results and behavioural data to inform designs and product strategies to help everyday people accomplish their goals.

Paul Beattie: CEO of a remote-first company providing Cloud-based Enterprise Resource Planning (ERP) solutions to New Zealand and Australian medium-sized organisations. Optimising processes and assisting customer organisations to scale through efficiency. Experienced accounting software product manager and marketer.

Robert O'Brien: Distributed Systems Software Engineer (Financial Systems) and Entrepreneur. Co-Founded three start-ups in Financial Data Analytics, International Trade Payments, and Impact Investing. Plutus and Atala Prism Pioneer. Co-organiser of the Catalyst Eastern Town Hall, a Cardano Catalyst Community initiative.

Mobile Application developer(s) with Flutter experience will be recruited, ideally from the Cardano Community.

Our Solution

The purpose of this proposal is to design and implement a prototype mobile app used to conduct our first round of Catalyst Rapid Funding Retroactive Financing Experiments[3]. These experiments aim to test Risk-Adjusted Bonding Curve as a novel grassroots DeFi project funding mechanism.

Our proposal will perform user research, UX design, and mobile app prototyping to develop a usable investor interface for RABC based funding and investment. The behavioural persona and customer journeys will cover Investors, but we will also touch on Proposers and Sponsors. This proposal aims to help seed design work that can be used for Impact Finance, DAOs, and Catalyst Rapid Funding DApps.

Teaching a complex topic like the RABC for a targeted behavioural persona requires detailed research, design, and data to achieve the desired behaviour and user goals. However, as a grassroots financing tool for global collectives, such as Project Catalyst, we need to make sure everyday people understand and can use the financial instrument to access and participate in a global bond market.

Typical product design assets include interviews, personas, service blueprint, mental model diagrams, and customer journeys. Clickable prototypes will be developed in Figma, and the mobile app prototype will be developed in Flutter[6]. The mobile app will interface with a testnet implementation of the RABC executing on the Plutus Application Backend[7] via Blockfrost APIs[8].

Our primary behavioural persona and customer journey will focus on the Investor. Future work will take our insights and learnings from our completed experiment to investigate and design:

1. A more comprehensive Investor Portfolio Mobile Wallet for Catalyst Proposals.
2. A Project Template Studio to help projects define and parameterise the RABC for Catalyst Proposals, Impact Finance and DAO work bounty use-cases.
3. Sponsor/Investor Portfolio Manager DApp to help sponsors and investors manage Catalyst sponsored proposals or other impact finance scenarios.

Impact on Challenge Metrics

Risk-Adjusted Bonding Curves are a fast way to enable project financing in an open, decentralised ecosystem. Proposers, project teams, and DAOs can spin up continuous markets to help fund and manage their activities. At the core of the market mechanism is a continuous automated market maker. Unlike decentralised exchanges, typical in DeFi, the underlying bonding curves make markets in project-specific tokens, minting and burning them on demand. The value of a project token represents a successful outcome. At maturity, it provides a fixed income- a coupon payment. RABCs are a financial instrument that simultaneously has the properties of Bonds, Equity, and Options.

We're formally designing and engineering a secure Plutus implementation of the RABC; designed to work with Stake Pools. The engineering approach aims to reduce vulnerabilities even when RABCs are composed into complex arrangements. The design is optimised for the unique properties of the Cardano EUTXO architecture, Hydra layer two scaling, and the decentralised typology of the Cardano's Stake Pools. The implementation is being developed and supported by an emergent grassroots DAO.

At yümi (You & Me), we're optimising for open-source DAO-2-DAO decentralisation at every level of the Web3 stack; the RABC is a central pillar of our work. The RABC is a unique blockchain native dequity[9] instrument. A type of Bond with adaptive performance characteristics. Bonds are an essential debt instrument for governments and corporations. As of 2021, the size of the bond market (total debt outstanding) is estimated to be at $119 USD trillion worldwide[10]. We believe the RABC will be an essential dequity instrument for global collectives. It provides a basis for trustless low-cost, and transparent project financing, accounting, and compensation mechanisms; as such, we envisage a massive RABC market on Cardano. The first use-case is for the Cardano ecosystem, a mechanism for Catalyst Rapid Funding[11].

Key Performance Indicators

Key Metric: Project Velocity[12], defined as input activity associated with user research, UX and UI design, and mobile app prototype development.

We are using Github Issues and Project Boards to track project tasks/activity of the proposal team (even if they have no code component to them). Closed Github issues and codification (naming semantics and labels) measure project activity. All activity metrics will be derived from Github; team contributions will be codified according to Orbit Love[14] and CHAOSS Contributions[15]. Specific tools, types and weights will be determined in initial project planning. Examples of activity metrics for the design work include:

• Collaborators interviewed
• Interviews transcribed
• Insights generated
• Concept built
• Concept tested
• Results collected

What Success Looks Like

Catalyst community proposers and community groups voluntarily choose an RABC funding model over the current three-month democratic method (blind tests can be used to verify this). That implies people understand the RABC funding model and are motivated to invest in projects and proposals when they have no prior knowledge of Catalyst. DAOs have started exploring ways to use RBACs for financing and work bounties.

Our work's output will contribute to Project Catalyst learnings around using smart-contract market mechanisms to efficiently discover, finance, and fund projects. After the Retroactive Funding experiment, we will contribute specific insights on the use of RABCs as a funding mechanism.

After One Month:

• Project plans established and KPI reporting setup.
• Discovery plan written and outlined.
• User interviews are scheduled an initial set is conducted.
• User interviews were conducted, and insights combed
• Flutter Developer recruited
• Flutter Cardano Wallet SDK, and Dart Wallet Backend API evaluated
• Development testbed connecting Flutter to the Plutus Backend and test transactions performed

After Three Months:

• Research report delivering findings highlights.
• Key areas of focus from research for a testing plan.
• Tests developed in Figma, ready for development.
• Performing Flutter Mobile App RBAC testnet transactions.
• Initial prototype mobile app UX designs implemented (based on Flutter Cardano Wallet SDK).

After Six Months:

• Retroactive Funding Experiments have started.
• Funding experiment completed and findings reported.

After Twelve Months:

• Initial investor experience fully designed and mobile app at beta status.
• Two more funding experiments have been conducted using large funding amounts, proposals, and investors.
• Funding proposals in an open market are live on the mainnet.

Licensing

All our source code will be licensed under a free and open-source (OSI) license, e.g. MIT, and contributions must be contributed patent-free. Contributors will be required to agree to a Contributor Covernant[16].

Published content will be licensed under the Creative Attribution-Non-Commercial-ShareAlike International (CC BY-NC-SA) License v4.0. The specification will be published under a Creative Commons Attribution-NoDerivatives 4.0 International (CC BY-ND 4.0) license.

Code, documentation, project activity and Jupyter notebooks will be made available on Github or similar service.

Budget Breakdown

The requested Fund 7 budget is for wages and expenses for three months for a senior product designer and a flutter software developer plus project management support. The funds for this proposal are to be used to design and implement the Investor user experience suitable for essential interaction with RABC based bonds. Further funds will be requested to help develop other customer journeys and features that are needed to fully develop the customer(s) value proposition.

• User Experience Design: 36,000 USD
• Mobile Development: 31,200 USD
• Project Management: $8,340 USD
• User Testing (50 sessions): $4000
• User Testing and Design Software x (12 Months) = $8000
• Developer Software Services & Server Fees: $335 x (12 months) = $4,200

To conduct user research and develop the user experience, we will be using numerous tools. Interviews recorded with Zoom/Google Meet. Research transcription and taxonomy tracking software (Dovetail). Design tool (Figma) and whiteboarding (FigJam). Recruitment tool: Typeform when recruiting people currently invested in Catalyst or UserTesting for wider reach. Testing participants will be compensated for their time.

Overall the budget is based on a pro-rata hourly rate spread over three team members working on the project. FTE hourly rate of USD$75 includes all overheads; Adjusted for experience, nature of work, and short term intermittent nature of project funding. The market rate for a Senior Product designer ($95K USD + Benefits).

Affiliated proposals

Retroactive Funding Experiments[3] cover the work required to execute a funding experiment. The funding experiments can only start when sufficient progress has been made on the prototype mobile application.

The funding experiments build upon and validate the work of the Retroactive Project Funding SDK[5] (Fund6), and insights gained will feed into the specification work associated with the Give Users security and confidence (Fund6) project. The DeFi+Catalyst 🔥 Retroactive Finance mobile app development is dependant on test implementations of the RABCs.

DAO Treasury Building Block[17] are the foundations for the Retroactive Project Funding SDK.

The technology and experimental insights will also help the Distributed Autonomous Accelerator[18] proposal.

References

[1] Risk-adjusted System Dynamic research: https://github.com/BlockScience/Risk-Adjusted-Bonding-Curves

[2] Social Impact Bond: https://ellierennie.medium.com/how-to-improve-karl-and-vitaliks-really-good-idea-d49ee6dca60d

[3] Retroactive Financing Experiment: https://cardano.ideascale.com/a/dtd/Retroactive-Financing-Experiment/384995-48088

[4] The Future of Decentralized Finance: https://www.youtube.com/watch?v=vzsUSG5CSj0&t=180s

[5] Retroactive Project Funding SDK: https://cardano.ideascale.com/a/dtd/Retroactive-Project-Funding-SDK/369011-48088

[6] Flutter: https://flutter.dev/

[7] Plutus Application Backend: https://iohk.io/en/blog/posts/2021/10/28/plutus-application-backend-pab-supporting-dapp-development-on-cardano/

[8] Blockfrost API: https://blockfrost.io/

[9] Dequity: https://en.wikipedia.org/wiki/Oliver_E._Williamson

[10] Bond market size https://en.wikipedia.org/wiki/Bond_market

[11] F7: Catalyst - Rapid Funding Mechanisms https://cardano.ideascale.com/a/campaign-home/26236

[13] CHAOSS Project Velocity https://chaoss.community/

[14] Orbit Love: https://orbit.love/

[15] CHAOSS Types of Contributions: https://chaoss.community/metric-types-of-contributions/

[16] Contributor Covenant: https://www.contributor-covenant.org/

[17] DAO Treasury Building Block: https://cardano.ideascale.com/a/dtd/Distributed-Treasury-Building-Block/384907-48088

[18] Distributed Autonomous Accelerator: https://cardano.ideascale.com/a/dtd/Distributed-Autonomous-Accelerator/382562-48088