Please describe your proposed solution

Open Batching (OB) refers to the DEX architectural design that enables 3rd parties to handle the off-chain computation needed to process orders in an AMM DEX on Cardano. It represents a move away from a single centralized off-chain sequencer/batcher.

The current Open Batching model has two main flaws:

• Sequencers financially benefit from participating in the protocol by batching orders, without having to put anything at stake and without being vetted in an objective way.
• Sequencers can conduct a denial-of-service attack on the DEX, blocking real users, without any sort of repercussion.

This presents several challenges. Because batching happens off-chain, it's not possible to hold batchers accountable through a smart-contract based system that prevent malicious behavior. Our solution aims to overcome these shortcomings, it is presented in 2 parts:

1) Open Batcher Smart Contract:

The Minswap AMM v2 contract allows the batcher to be a wallet or a script address. Protocol settings can be updated and have the batcher be a new smart contract. This smart contract would allow anyone to batch orders on Minswap as long as they satisfy the protocol's predefined conditions (for example, own a certain amount of MIN for a certain duration).

2) Open-source Batcher Software

We will develop an open-source batcher software version that requires minimal dependencies and is straightforward to set up and start a new batcher. Batchers that satisfy the protocol's predefined conditions will be able to run this software and earn Batcher fees for their contribution to the protocol.

This batcher software will use a default batching algorithm that balances between execution fairness and speed. Given the batching process happens off-chain, we cannot embed into the batching smart contract the ability to detect malicious batcher actions such as denial-of-service attacks. The DAO can vote to ban any batcher they deem malicious and the batcher authorization (license) will be revoked via a multi-sig transaction. The scope of this is outside the Proposal as it belongs to Minswap governance system.

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

The benefits for the Cardano ecosystem of Minswap Labs building an Open Batching solution are the following:

• Increased composability across Cardano DeFi: some DeFi projects require direct interaction with DEXs, which is not possible with a single sequencer. With OB, projects will be able to run their own sequencer, making these DeFi integrations easier. Composability and DeFi protocols building on top of each other is one of the main Unique Selling Points of DeFi and would unleash a new plethora of opportunities.

• Additional revenue stream for SPOs: with $ADA staking rewards diminishing some SPOs have been forced to shut down and running a Stake Pool has become less profitable. With OB, SPOs could run a sequencer and utilize their current infrastructure setups to generate additional revenue.

• Improvement on available tooling: by researching, designing and implementing a better batching protocol, other DEXs will be able to emulate the Minswap OB protocol or perhaps even improve upon it.

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?

Minswap Labs understands the critical importance of trust and accountability when building in Cardano. We've established ourselves as a leader within the Cardano ecosystem through our unwavering commitment to these values.

Proven Track Record of Excellence:

Our success speaks for itself. Minswap Labs is the team behind Minswap DEX (<https://minswap.org/>), currently boasting the highest Total Value Locked (TVL) on Cardano. Not only this, but we’re also progressing great on all of our approved proposals from past Catalyst Funds. These achievements demonstrate our capability to execute complex DeFi projects with the utmost security and transparency.

Validating Feasibility: A Multi-Pronged Approach

We don't just rely on past success; we meticulously validate our approach before development begins. Here's how:

• Deep Expertise in Cardano Development: Our team comprises several highly experienced Plutus engineers that have been working on developing Plutus-based Smart Contracts for more than 3 years.
• Community Collaboration: We believe in open communication. Throughout the development process, Minswap Labs will actively engage with the Cardano community. By soliciting feedback from users, developers, and other stakeholders, we can ensure the final product aligns with the needs and expectations of the community, fostering widespread adoption and trust.
• Building on Transparency: Open-sourcing further reinforces our commitment to transparency. This allows the community to scrutinize the code. Developers can contribute to the project's ongoing evolution, accelerating innovation within the Cardano DeFi ecosystem.

What are the key milestones you need to achieve in order to complete your project successfully?

Milestone 1: <u>Research open batching solutions and present our elaborate solution (4 weeks)</u>

• Milestone Output: Comprehensive research report and detailed design specification for the Open Batching solution.
• Acceptance Criteria:
• Thorough analysis of existing batching solutions and their limitations
• Detailed technical specification of the proposed Open Batching model
• Risk assessment and mitigation strategies identified
• Evidence:
• Published research report on Minswap's GitHub repository
• Technical specification document outlining the Open Batching architecture

Milestone 2: <u>Develop and open-source the Open Batcher Smart Contract - (4 weeks)</u>

• Milestone Output: Fully functional Open Batcher Smart Contract
• Acceptance Criteria:
• Smart contract successfully implements the designed Open Batching model
• Contract is audited by a third party
• Documentation for contract interaction and deployment completed
• Final adjustments and optimizations based on audit findings
• Evidence:
• Open-sourced smart contract code on Minswap's GitHub repository
• Comprehensive documentation for developers and users
• Final Audit Report

Milestone 3: <u>Develop and open-source the Open Batcher Software - (8 weeks)</u>

• Milestone Output: Efficient Open Batcher Software
• Acceptance Criteria:
• Software successfully interacts with the Open Batcher Smart Contract
• Minimal dependencies and straightforward setup process
• Includes a default batching algorithm balancing between fairness and speed
• Evidence:
• Open-sourced batcher software on Minswap's GitHub repository
• User guide and installation instructions

Milestone 4: <u>Launch the Minswap Open Batching Protocol on Testnet and Mainnet - (4 weeks)</u>

• Milestone Output: Fully operational Open Batching system on both testnet and mainnet
• Acceptance Criteria:
• Successful deployment and operation on testnet without critical issues
• Smooth transition to mainnet with all components functioning as designed
• Community engagement and initial adoption by third-party batchers
• Evidence:
• Deployment addresses and transaction hashes
• Initial performance and adoption metrics

Final Milestone: Project Close-out - (4 weeks)

• Milestone Output:
• Detailed project close-out report
• Detailed project close-out video
• Acceptance Criteria:
• Completed close-out report and close-out video explaining the Open Batching solution.
• Evidence:
• Published close-out report on Minswap's GitHub repository
• Close-out video Video uploaded to Minswap's official channels

Who is in the project team and what are their roles?

The Minswap Open Batching Proposal is being spearheaded by Minswap Labs, a passionate and experienced team dedicated to empowering the Cardano DeFi ecosystem. Our team comprises talented individuals with diverse backgrounds, united by a common goal: to create innovative and user-friendly DeFi solutions on Cardano and take it to the next level.

Leadership with a Vision:

Long Nguyen (Co-founder): A DeFi native and visionary leader, Long’s expertise has been instrumental in shaping Minswap DEX into the leading dApp within Cardano DeFi. His experience and insights gleaned from interviews at Cardano Summit 2023 will guide the Open Batching protocol’s development.

Technical Brilliance:

Our team consists of highly skilled developers and project managers with a deep understanding of Cardano’s architecture and security best practices. The team is strategically based in the US, Asia and Europe. These talented individuals will ensure the Open Batching protocol is performant, and integrates seamlessly with the existing Minswap DEX infrastructure.

<https://www.youtube.com/watch?v=QKXPONr6XRY>

Please provide a cost breakdown of the proposed work and resources

Our total budget request is 460,000 ADA (around $161,460 @ 1 ADA = $0.35), allocated across the following milestones:

Milestone 1: <u>Research open batching solutions and present our elaborate solution (4 weeks)</u>

• 2 Senior Developers: (2 devs 160 hours $82/hour) = $26,240
• 1 Project Manager: (1 PM 80 hours $70/hour) = $5,600

Subtotal: $31,840 (90,971 ADA)

Milestone 2: <u>Develop and open-source the Open Batcher Smart Contract - (4 weeks)</u>

• 1 Senior Developer: (1 dev * 160 hours * $82/hour) = $13,120
• 1 Junior developer: (1 dev * 160 hours * $56/hour) = $8,960
• Auditing Cost: around $24,500 (70,000 ADA) quoted from our previous experience with Cardano audit Firms

Subtotal: $46,580 (133,080 ADA)

Milestone 3: <u>Develop and open-source the Open Batcher Software - (8 weeks)</u>

• 1 Senior Developer: (1 dev * 320 hours * $82/hour) = $26,240
• 1 Junior Developer: (1 dev * 320 hours * $56/hour) = $17,920

Subtotal: $44,160 (126,100 ADA)

Milestone 4: <u>Launch the Minswap Open Batching Protocol on Testnet and Mainnet - (4 weeks)</u>

• 1 Senior Developer: (1 dev * 160 hours * $82/hour) = $13,120
• 1 Junior developer: (1 dev * 160 hours * $56/hour) = $8,960
• 1 Project Manager: (1 PM * 80 hours * $70/hour) = $5,600

Subtotal: $27,680 (79,000 ADA)

<u>Milestone 5: Project Close-out - (4 weeks)</u>

• 1 Project Manager: (1 PM * 160 hours * $70/hour) = $11,200

Subtotal: $11,200 (32,000 ADA)

Total Project Cost: $161,460 (around 460,000 ADA)

This breakdown aligns with our funding request of 460,000 ADA and accounts for a 6-month project.

No dependencies.

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

The Minswap Open Batching solution for Cardano DEXs aims to address the shortcomings of the current prevailing models by introducing an Open-Source Smart contract and an Open-Source Batcher Software. This will enable increased composability, provide additional revenue for SPOs, and improve overall tooling for the Cardano ecosystem.

The Proposal represents value for money for the Cardano ecosystem because of the potential benefits it offers in terms of unlocking new DeFi opportunities, making Stake Pool operations more sustainable, and contributing to the development of a more robust and competitive DeFi ecosystem.