Please describe your proposed solution.

Current solutions based on bridges are inadequate in more areas: security, level of decentralization, and compatibility, polluting the blockchain with redundant bridged tokens.

We aim to create a scalable protocol that can be used to trade assets between Cardano and other blockchains that is not based on a bridge. This can be realized in multiple variants of so-called atomic swaps, or hash time locked contracts (HTLC), proposed over the past years in the Bitcoin community. While being more tricky to implement than a simple bridge, we believe this is the right step towards interoperability of Cardano with other blockchains. At the same time, this approach is generic and doesn't require specific smart contract support on the other blockchain.

We aim to enable atomic swaps between Cardano and other blockchains based on a protocol that uses a combination of signatures and timelocks. To illustrate, let's say Alice wants to buy 1,000 ADA for 1 ETH. Instead of using a centralized exchange or a bridge, Alice simply submits an offer on the Ethereum blockchain. This offer is noticed by Bob, who may want to buy 1 ETH for ADA, and similarly submits an offer on the Cardano blockchain. The two then exchange certain digital signatures in such a way that ensures only one of these two outcomes is possible: a) Alice and Bob both get their assets or b) the transaction is fully reverted. In case a), Alice receives her ADA on the Cardano blockchain, while Bob receives his ETH on the Ethereum blockchain. In case b), no value is transfered across blockchains. Note that the assets being exchanged don't leave their native blockchain and are not held in custody, minimizing associated risks. Assets don't need to be wrapped or unwrapped, making the process easy to understand for non-technical users. Alice or Bob may choose to become a market maker, eliminating the need for vulnerable bridge liquidity pools. While this protocol is generic, we plan to provide a proof of concept implementation for EVM and Plutus which most developers are familiar with. We already have a few possible variations of this protocol in mind.

Please describe how your proposed solution will address the Challenge that you have submitted it in.

We aim to create a scalable, user-friendly protocol that can be realistically used to transfer value between chains without an intermediary. This will greatly contribute towards future interoperability of different blockchains.

What are the main risks that could prevent you from delivering the project successfully and please explain how you will mitigate each risk?

Because there is sound research showing the feasibility of this approach, we are certain the project can be completed successfully. The main question is whether the approach is usable in practice - yet by proposing a minimal solution and understanding its limitations we would still consider the project a success.

Please provide a detailed plan, including timeline and key milestones for delivering your proposal.

Please see the breakdown in the next section.

Please provide a detailed budget breakdown.

Total: 25,000 USD

The budget will be used to partially cover research and development costs, as well as formal verification and testing of the proposed protocol. Finally it will be used to develop an open source proof of concept implementation of the protocol (Plutus <-> EVM).

As the requested amount may not be efficient to cover the full costs of research, development and auditing the MuesliSwap team is planning on covering the remaining costs.

Research & Development: 180 hours (12,000 USD)

• literature review
• design of scalable cross-chain swaps
• publishing findings

Security analysis & testing: 10,000 USD

• formal verification & scalability testing : 100 hours (5,000 USD)
• external consultations: 5,000+ USD

Reference implementation: 120 hours (6,000 USD)

Please provide details of the people who will work on the project.

The MuesliSwap development team together with external help will work on this project. The core MuesliSwap development team currently consists of 9 developers with previous experience in different fields, including software engineering, theoretical computer science and machine learning. With Muesliswap being the first major dApp launching in November 2021, the team has gained a lot of experience in developing Plutus smart contracts and corresponding on/off-chain decentralized finance infrastructure. We have developed and are developing multiple different smart contracts on Cardano mainnet (liquidity pools, order book DEX, staking contracts). We are planning to apply this knowledge and our development power to our Fund9 proposal.

If you are funded, will you return to Catalyst in a later round for further funding? Please explain why / why not.

We are not planning to return for further funding in a later round for this specific project. The remaining costs of development are planned to be covered by the MuesliSwap team.

Please describe what you will measure to track your project's progress, and how will you measure these?

We will measure the completion of deliverables as described above. The deliverables will be publicly shared with the community. Code will be made available in a GitHub repository.

What does success for this project look like?

As discussed above, the project concludes with the 3 deliverables: formal description of cross-chain trading protocol (paper) + security analysis + reference implementation deployed on testnet.

Please provide information on whether this proposal is a continuation of a previously funded project in Catalyst or an entirely new one.

This is a new proposal from the MuesliSwap team.