Please describe your proposed solution

Background:

Cardano developers are now exploring Bitcoin/Cardano interoperability with the goal of bringing Bitcoin’s liquidity to Cardano blockchain; this is extremely feasible because both chains share a similar UTXO model (which makes development/innovation easier), and as such we expect development to keep increasing.

Both chains can benefit massively from interoperability; Cardano will be able to capture some of BTC’s liquidity (which is more than 50% of crypto’s total market cap) for use in Cardano DeFi, while providing Bitcoin holders with smart contract functionality and DeFi opportunities that Bitcoin cannot offer natively.

The problem:

Bitcoin/Cardano interoperability development is currently focused on DApps and smart contracts, but the user experience is lacking; there is no single wallet that can provide users with all of the functionality they need (such as support for Cardano and Bitcoin in one interface, with hardware wallet support, BTC<>ADA swaps inside the wallet, multi-chain Dapp connector, and support for Runes and Ordinals tokens).

Our proposed solution:

Three enhancements to NuFi wallet that ensures BTC users have at least one wallet available that supports both chains and has necessary functionality for a secure and seamless experience:

1) Add Bitcoin support to NuFi wallet (inc. support for hardware wallet BTC accounts)

<u>Result</u>: a user will be able to restore their BTC accounts in NuFi’s interface and manage both Bitcoin and Cardano accounts from a single interface (with hardware wallet support for both chains; NuFi currently supports Ledger, Trezor and GridPlus). We will further improve this by supporting popular Runes and Ordinals standards.

2) Support BTC&lt;&gt;ADA swaps between accounts inside the wallet

<u>Result</u>: a user will be able to move BTC liquidity to Cardano using cross-chain Exchange functionality inside their wallet; this ADA can also be staked or used to trade Cardano tokens (using a Cardano DEX aggregator), all inside the wallet.

3) Add Bitcoin compatibility to NuFi’s DApp connector

<u>Result</u>: a user will be able to connect both BTC accounts and ADA accounts (separately and simultaneously) to useful Web3 DApps such as BTC&lt;&gt;ADA bridges, wrapping services, cross-chain exchanges, and other interoperability tooling.

<u>Result</u>: a user can use one wallet for all Bitcoin/Cardano Web3 interactions (which will greatly improve the Web3 user experience, especially when using DApps that operate on both chains).

Why NuFi wallet?

• A seamless multi-chain experience with BTC and ADA accounts together in one wallet, with possible support for Bitcoin rollups and sidechains (which can be added quickly and easily thanks to NuFi’s existing infrastructure)

• Support for hardware wallets’ Cardano accounts (Ledger/Trezor/GridPlus currently supported, more possible)

• In-wallet BTC&lt;&gt;ADA swaps, Cardano DEX aggregator, and buy ADA with card

• Support for ADA staking (plus user can choose which pool to stake to)

• Support for all Cardano transaction types and CIP standards

• Existing integrations with Cardano DApps

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

This proposal supports the development of Bitcoin/Cardano interoperability with a focus on UX and maximizing a Bitcoin holder’s opportunities in Cardano, by:

• Providing a sophisticated wallet that allows a user to manage BTC/ADA accounts together, and use DApps/tooling on both chains with one wallet

A Bitcoin holder can restore their BTC accounts into NuFi using a BTC wallet’s mnemonic/seed phrase or by pairing a hardware wallet’s BTC account

• Ability to connect Cardano and Bitcoin interoperable apps making it easy to use apps that use both BTC and ADA (such as BTC wrapping to Cardano, bridges, or other interoperability apps yet to come)

• Making ADA staking available to BTC holders, who can move liquidity from Bitcoin to Cardano and stake it to any Cardano stake pool from inside their wallet

• Making it easy to move liquidity between chains, with BTC&lt;&gt;ADA swaps possible inside the wallet

• Making Cardano token trading available to BTC holders, who can – after moving liquidity to Cardano inside their wallet – swap Cardano tokens using an integrated Cardano DEX aggregator (powered by DexHunter)

To measure the impact, we can collect user data related to the number of users using Bitcoin and Cardano accounts simultaneously, volume of liquidity moved between chains through the Exchange inside the wallet, and number of users accessing Bitcoin/Cardano interoperability tooling through NuFi’s DApp connector. This data, along with updates, will be shared on our X channel here, as well as on Cardano news sites and the Twitter channels of Cardano ambassadors and influencers, as well as Project Catalyst-related town halls and events.

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?

The NuFi wallet team has a long track record of delivering high-quality development work:

• Created NuFi wallet (a Cardano-first Web3 wallet with support for many popular chains; NuFi is the only truly multi-chain but Cardano-native wallet)
• Created AdaLite wallet (the first-ever light wallet on the Cardano blockchain)
• NuFi team members developed Cardano firmware for Ledger and Trezor hardware wallets in the past
• Completed a Project Catalyst Fund9 proposal which added Ethereum and Milkomeda C1 support to NuFi wallet to aid in ‘The Great migration from Ethereum to Cardano’
• Completed a Project Catalyst Fund11 proposal which created Cardano support for MetaMask wallet, and another Fund11 proposal which created an SSO (aka social account login) service for Cardano DApps
• Many partners in Cardano ecosystem who use NuFi’s onboarding services for DApps

We believe that Bitcoin/Cardano interoperability development will be a big thing in the future, as shown by Cardano teams such as FluidTokens (whose recent development includes exploration of a smart contract that can abstract a Cardano account from a Bitcoin wallet – here – alongside a DeFi protocol built on both Cardano and Bitcoin) and the anetaBTC team (whose development includes a wrapping service to bridge BTC to cBTC for use in Cardano DeFi).

In addition, NuFi wallet's Cardano users have been requesting Bitcoin integration for a long time, validating that there is a demand and a need for the approach detailed in this proposal.

Our experience of building a multi-chain wallet makes us best suited to deliver this project to the highest standards. In terms of our team’s ability to manage funds properly, we demonstrated our ability to do this in Fund9 and Fund11, where we received Project Catalyst funding and handled funds effectively so as to complete the projects on time and in full.

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

Milestone 1: Add Bitcoin Support - 2 months

Outputs

• Add BTC accounts &amp; derivations methods (SegWit and Taproot)
• Add support for hardware wallets' BTC accounts (Ledger + Trezor)
• Create send/receive user flows

<u>Acceptance criteria</u>: Bitcoin accounts can be created/restored inside NuFi wallet (including from hardware wallets' BTC accounts), and BTC can be sent/received

<u>Evidence of milestone completion</u>: we will provide video evidence of this functionality working correctly inside NuFi wallet, and invite reviewers and community members to try the new functionality first-hand

Milestone 2: BTC&lt;&gt;ADA Swaps, Runes, Ordinals - 1 month

Outputs

• Enable in-app BTC&lt;&gt;ADA swaps
• Add support for Runes
• Add support for Ordinals

<u>Acceptance criteria</u>: BTC can be swapped to/from ADA inside NuFi wallet, and Runes and Ordinals support is working properly, meaning these can be managed inside NuFi wallet

<u>Evidence of milestone completion</u>: we will provide video evidence of this functionality working correctly inside NuFi wallet, and invite reviewers and community members to try the new functionality first-hand

Milestone 3: Bitcoin DApp Connector, Speedup transaction - 1 month

Outputs

• Add Bitcoin support to NuFi's DApp connector
• Pending TX + Speedup Transaction functionality
• Create marketing materials and user documentation

<u>Acceptance criteria</u>: NuFi wallet is able, through its DApp connector, to connect to Bitcoin DApps; the transaction-related functionality is working properly; a marketing plan with marketing materials has been created; and user documentation has been published in NuFi's knowledge base

<u>Evidence of milestone completion</u>: we will provide video evidence of DApp connector and transaction-related functionality working correctly inside NuFi wallet, and invite reviewers and community members to try the new functionality first-hand; for the marketing plan, a link to a document outlining the plan and materials will be provided, as well as a link to the user documentation published in NuFi's knowledge base

Final Milestone: Outputs

• Create and submit a closeout video and closeout report

<u>Acceptance criteria</u>: the closeout video and closeout report is approved by Catalyst reviewers and the Catalyst team

<u>Evidence of milestone completion</u>: a link to the closeout video and closeout report will be submitted

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

Michal Petro - Project Lead

<https://www.linkedin.com/in/michalpetro/>

Lubos Svolik - Project Manager

<https://www.linkedin.com/in/lubossvolik/>

Rafael Korbaš - CTO

<https://www.linkedin.com/in/rafael-korba%C5%A1-4b2a31b7/>

Richard Izip - FE Lead, UX/UI design

<https://www.linkedin.com/in/richard-izip-253622112/>

Kamil Džurman - Full-Stack Developer

<https://www.linkedin.com/in/kamil-d%C5%BEurman-0b18b6149/>

Andrej Želonka - FE Developer, UX/UI design

<https://www.linkedin.com/in/andrej-%C5%BEelonka-0563681a9/>

Gabriel Kerekeš - Full-Stack Developer

<https://www.linkedin.com/in/gabriel-kerekes/>

Peter Benc - Full-Stack Developer

<https://www.linkedin.com/in/peter-benc-290b76142/>

Ben Goldie - Community Manager

<https://www.linkedin.com/in/goldieben/>

Please provide a cost breakdown of the proposed work and resources

Milestone 1: Add Bitcoin Support - 2 months

Add BTC accounts &amp; derivations methods (SegWit and Taproot)

Research, implementation, testing = 20 days @ $500/day = 28,571 ADA

Add support for hardware wallets' BTC accounts (Ledger + Trezor)

Research, implementation, testing = 10 days @ $500/day = 14,286 ADA

Create send/receive user flows

Research, implementation, testing = 9 days @ $500/day = 12,857 ADA

Milestone 2: BTC&lt;&gt;ADA Swaps, Runes, Ordinals - 1 month

Enable in-app BTC&lt;&gt;ADA swaps

Research, implementation, testing = 3 days @ $500/day = 4,286 ADA

Add support for Runes

Research, implementation, testing = 15 days @ $500/day = 21,429 ADA

Add support for Ordinals

Research, implementation, testing = 15 days @ $500/day = 21,429 ADA

Milestone 3: Bitcoin DApp Connector, Speedup Transaction - 1 month

Add Bitcoin support to NuFi's DApp connector

Research, implementation, testing = 12 days @ $500/day = 17,143 ADA

Pending TX + Speedup Transaction functionality

Research, implementation, testing = 12 days @ $500/day = 17,143 ADA

Create marketing materials and user documentation = 5 days @ $320/day = 4,571 ADA

No dependencies

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

The cost of this development can be offset by an inflow of BTC liquidity into Cardano that this development can help make possible; this BTC liquidity can flow into Cardano DeFi and other protocols, as well as ADA staking and Cardano tokens.