Please describe your proposed solution.

This proposal is a continuation of the funded Catalyst F9 proposal Spectrum.Network | Layer 2 for DeFi.

Spectrum aims to enable ultimate interoperability on Cardano. The protocol serves as a programmable cross-chain layer that allows cross-chain messaging between Cardano and any other connected blockchain or general data source.

At its core Spectrum solves the “Oracle problem” which the “Interoperability problem” always boils down to. There are many solutions to this problem out there, some of them even offer programmable cross-chain layers. Nevertheless, ALL of them fail to provide a scalable solution to the problem. Can we really call a PBFT (Practical Byzantine Fault Tolerance) network where a fixed committee of only 8-16 nodes decides what's valid and what's not decentralized? There is no decentralization without scalability.

During the last year, we at Spectrum put an enormous amount of effort into designing a scalable protocol that solves “Oracles” and hence “Interoperability” in a trustless and decentralized way. The protocol has 2 layers. On the upper layer there are independent local committees, each dedicated to one particular data source, be it an external blockchain system or exchange rate of some fiat currency. Each committee runs a scalable collective signature protocol that we have designed and tested specifically for cryptographic primitives that are available on Cardano, Ergo, and many other blockchains RIGHT NOW. The aggregation is performed in logarithmic time, thanks to this each committee can scale up to thousands of nodes. Committees are also continuously rotated thanks to the Roll-dPoS consensus on the lower (master) layer. The master layer enables programmability and serves as a synchronization layer for simultaneous streams of events coming from external systems and served by local committees.

Notable improvements were done in the ledger design towards developers’ experience based on our own experience with dApp building on Cardano and Ergo. dApp builders on Spectrum can vary the amount of on-chain computations, e.g. choosing to perform a bit more computations on-chain for cases where a shared UTxO is involved (such as AMM Liquidity Pool, or Stablecoin Bank). This dramatically reduces the complexity of on-chain code required to implement complex DeFi dApps, while keeping the determinacy of the eUTxO approach.

The design of Spectrum makes it an ultimate platform for decentralized cross-chain applications serving Cardano (and other layer-1 platforms). DeFi apps built on Spectrum have full potential to replace centralized services like CEXes.

To sum up, we have conducted core research, evaluated protocol design and implemented the core of the protocol. There are still some vital things left to be completed to make Spectrum ready for production.

What our previous proposal didn't cover is:

• Default mode. The protocol relies on dynamic committees of independent validators in order to operate. When a committee is rotated it has to explicitly pass its “responsibilities” to the next committee. In the early days of the mainnet while the number of validators (decentralization factor) is not high enough there will still be a small probability that some committee fails. To handle this case we have outlined a design of the “Default Mode” — a helper subsystem of Spectrum's consensus that will ensure the network preserves safety in critical situations. That would save the protocol in the worst scenario. It requires research and implementation. (this proposal)
• Programmability layer. Spectrum needs a virtual machine and a language that fits its hybrid ledger design. Just adopting Ergoscript or Plutus is not an option. One of the possible options is MoveVM and Move, which provides safety, and convenience has a more-or-less mature ecosystem and provides formal verification capabilities. But it has to be modified to fit Spectrum's design. (this proposal)
• Upgradability. Initially Spectrum will support Cardano, Ergo and Ethereum, but thanks to committee sharding the system scales linearly in the number of supported chains. So the community will likely be willing to plug-in new blockchains with time. We envision this process as a routine, where developers implement a connector for a new chain, users create a configuration and vote for activation. Thus an upgradability framework should be developed. (this proposal)
• Testing at scale. Spectrum Node is not a lightweight software by any means and the protocol itself is intended to serve a network of thousands of nodes. To prepare the reference implementation for production usage, we have to test it at scale, this means we need hundreds of servers. (separate proposal: “Spectrum Network | Testing Protocol at Scale”)
• Security audit. The essential complexity of Spectrum is high and it has to be carefully audited. (separate proposal: “Spectrum Network | Security Audit”)

This proposal is about only the Default mode and Programmability layer. The rest are covered in related proposals.

— — —

We provided a high-level overview of our interoperability solution, focusing on its overarching aspects. To delve into the technical details of the project, we invite you to refer to our White Paper for more in-depth information.

How does your proposed solution address the challenge and what benefits will this bring to the Cardano ecosystem?

The proposed Spectrum Network solution addresses the following aims of the challenge:

• Increasing the number or quality of tools and software: Spectrum Network provides developers with a comprehensive set of tools to facilitate cross-chain application development. This empowers them to enhance their skills in running nodes for Stake Pool Operators (SPOs), ecosystem development, and native asset development within the Cardano ecosystem.
• Increasing the scalability of Cardano: Spectrum Network introduces a solution for increased scalability through its implementation of an interoperable protocol. This allows for research and integrations of existing solutions, thereby contributing to the overall scalability and efficiency of the Cardano network.
• Increase in standards, resources, and research: By providing a robust framework for decentralized cross-chain interactions, Spectrum Network contributes to the improvement of standards and research in the Cardano ecosystem.

Spectrum Network provides benefits to three key groups within the Cardano community:

• Stake Pool Operators

We previously discussed that Spectrum Network implements an open Proof-of-Stake (PoS) consensus protocol. Cardano Stake Pool Operators (SPOs) are already familiar with the process of configuring and launching a PoS node for transaction validation. From the perspective of SPOs, launching a Spectrum Network Node is essentially similar to launching a Cardano Node. Thus, our solution offers SPOs an additional avenue to generate income by validating cross-chain operations.

• Developers

Spectrum Network empowers developers, development teams, and organizations with the necessary tools to build borderless cross-chain services and protocols. This spans from straightforward functionalities such as native token transfers between chains to the creation of sophisticated, natively cross-chain applications like cross-chain decentralized exchanges (DEXs), cross-chain lending protocols, and beyond.

Possible applications on top of Spectrum Network

• ADA holders and DeFi users

This category of users benefit from various natively cross-chain products and services delivered by developers accessing borderless liquidity without a centralized party. Refer to the “Value for money” section for a concrete example for the end users.

How do you intend to measure the success of your project?

The success of the project will look like the following:

Right after the mainnet launch:

• Protocol works and does what it should do: solves interoperability problem.
• Critical vulnerabilities in the protocol = 0.
• Number of up-and-running nodes ≥ 200.
• Development teams building on top of the protocol = 1-2.

Short-term (1-year perspective):

• Number of up-and-running nodes ≥ 1000.
• dApps on top of the protocol = 7-10.
• USD value TVL = $100m.

Long-term (5-year perspective):

• Number of up-and-running nodes:
• Year 2: ≥ 1500
• Year 3: ≥ 2000
• Year 4: ≥ 2500
• Year 5: ≥ 3000
• Development teams in the protocol:
• Year 2: 20-25 teams
• Year 3: 35-45 teams
• Year 4: 60-45 teams
• Year 5: 250-300 teams
• Total USD value locked in the protocol:
• Year 2: $400m
• Year 3: $1b
• Year 4: $3b
• Year 5: $10b

Please describe your plans to share the outputs and results of your project?

Code

• The source code of the Spectrum Network reference node is open and accessible to everyone in this repository.

Mediums

• Website: Provides high-level information that describes what Spectrum Network is and what opportunities it provides will be placed.
• Documentation: Provides in-depth information on how to set up, run and maintain Spectrum Network node. Also provides information on how to develop dApps on top of Spectrum Network.
• Whitepaper: Provides information on the technical design and features of the protocol. Whitepaper V1 is available here. We do not exclude that in the process of finalizing the main components of the protocol, we will need to add or remove something from the White Paper. All White Paper updates will be broadcast via our communication channels (Twitter, Discord, Telegram, Reddit).

Education (Platform — YouTube)

• 1 online workshop with the team “How to set up and run Spectrum Network node”.
• 1 online workshop with the team “How to build simple cross-chain dApp on top of Spectrum Network”.

We will regularly share updates on the progress of our work across our Twitter and other social media platforms.

What is your capability to deliver your project with high levels of trust and accountability?

• Our development team possesses extensive experience of over 4 years in the DeFi sector, including 2 years specifically dedicated to the Cardano space.
• Spectrum Finance boasts a reputable standing within both the Cardano and Ergo communities.
• The Spectrum Network project holds significant strategic value for our team and community, as it aims to establish a cross-chain DEX on top of our platform.
• Our development team has received successful funding twice through the Catalyst program, consistently delivering timely progress updates.
• In addition to the funding acquired through Catalyst, we have access to ample resources, ensuring we are not limited in terms of available means.
• We have implemented rigorous steps and processes to ensure proper management of funds, ensuring trust and accountability throughout the project delivery.

What are the main goals for the project and how will you validate if your approach is feasible?

• Objective 1: Achieve seamless interoperability with Cardano. A successful native cross-chain transfer, such as exchanging ERG for ADA, denotes the achievement of this goal.
• Objective 2: Empower Cardano developers with a tool for building decentralized cross-chain applications. The recognition of a development team utilizing the protocol as a successful implementation would signify reaching this goal.
• Objective 3: Attract users from other ecosystems to Cardano by offering natively cross-chain decentralized applications and services. A 10% year-on-year increase in created Cardano addresses within the first year after the protocol's mainnet launch (excluding average organic growth and other causes) would indicate success.
• Objective 4: Generate an additional revenue stream for Cardano Stake Pool Operators. A 20% monthly income increase for SPOs within the first year after the mainnet launch of the protocol would be considered successful in achieving this goal.
• Objective 5: Provide the entire Cardano community with access to cross-chain liquidity from other ecosystems directly through their Cardano wallets, without relying on centralized exchanges (CEXes) as intermediaries. Achieving a 30% month-over-month increase in decentralized finance transactions within the first year after the protocol's mainnet launch (excluding average organic growth and other causes) would be considered successful.

Please provide a detailed breakdown of your project’s milestones and each of the main tasks or activities to reach the milestone plus the expected timeline for the delivery.

Milestone 1: Complete Default Protocol Mode design (Duration: 1 month)

• Task 1: Formalize the specification of the "Default" protocol mode.

Success criteria: Documentation of the protocol specification completed and submitted.

Milestone 2: Implement Default Protocol Mode (Duration: 2 months)

• Task 1: Develop the implementation of the Default Mode based on the finalized specification.

Success criteria: Completion of the implementation in the reference client, satisfying the Default Mode requirements.

Milestone 3: Research VM options. Prepare a detailed roadmap for adoption (Duration: 3 months)

• Task 1: Research various Virtual Machine (VM) options, with a focus on MoveVM.
• Task 2: Determine necessary improvements and modifications required to integrate the chosen VM into Spectrum.

Success criteria: Delivery of a detailed roadmap outlining the required enhancements for seamless VM integration within Spectrum.

Milestone 4: Implement improvements and integrate VM into Spectrum (Duration: 4 months)

• Task 1: Implement improvements and modifications to the chosen VM (e.g., MoveVM) based on the roadmap.
• Task 2: Develop the necessary standard library (stdlib) components for Spectrum, such as math, collections, cryptography, and transaction context.
• Task 3: Integrate the chosen VM into Spectrum, ensuring compatibility and support for smart-contract calls within the TransactionEvaluator component.
• Task 4: Perform comprehensive test coverage to verify integration and functionality.
• Task 5: Define VM configuration parameters for costing tables.

Success criteria: Successful implementation of VM improvements, complete integration of the VM into Spectrum, and associated testing/validation.

Milestone 5. Complete Upgradability Framework Design (Duration: 1 month)

• Task 1: Formal Specification of Upgradability Framework

Success criteria: Documentation of the Upgradability Framework is completed and submitted.

Milestone 6. Implementation of Upgradability Framework (Duration: 1 month)

• Task 1: Implement Upgradability Framework according to the specification.

Success criteria: Completion of the implementation in the Upgradability Framework satisfies the requirements.

Project Management Approach:

The project will follow an agile project management approach, with regular communication and collaboration among the project team members. The work breakdown structure is organized into distinct milestones, each focusing on specific deliverables and tasks. Throughout the project, diligent milestone tracking, progress reporting, and iteration planning will ensure efficient implementation.

Projected Cost:

A detailed budget outlining the specific costs associated with each milestone and its tasks will be provided in subsequent questions as requested.

Please describe the deliverables, outputs and intended outcomes of each milestone.

Milestone 1:

• Deliverables: The formal specification of the Default protocol will be documented and appended to the White Paper, making it accessible to the community through the provided link: https://spectrum.fi/spectrum_wp_v1.pdf.

Milestone 2:

• Deliverables: Implementation of the Default Mode in the open-sourced codebase hosted on GitHub. Progress will be demonstrated through a series of pull requests, showcasing the completed work.

Milestone 3:

• Deliverables: Publication of a comprehensive roadmap outlining necessary improvements required for the chosen Virtual Machine solution. The roadmap will be made available in the GitHub repository as a markdown (.md) file.

Milestone 4:

• Deliverables: Integration and implementation of the chosen Milestone 3 Virtual Machine solution into the Spectrum Network's ledger. This will be achieved through a series of pull requests made to the Spectrum repository. As a result, Spectrum Network will possess the capability to support programmable cross-chain transactions.

Milestone 5:

• Deliverables: Formal specification of the Upgradability Framework will be documented and inserted into the White Paper, making it accessible to the community through the provided link: https://spectrum.fi/spectrum_wp_v1.pdf.

Milestone 6:

• Deliverables: Implementation of the Upgradability Framework in the open-sourced codebase hosted on GitHub. Progress will be demonstrated through a series of pull requests, showcasing the completed work.

Please provide a detailed budget breakdown of the proposed work and resources.

NOTE THAT WE ARE REQUESTING 40% OF THE PROJECT COST. THE REST WILL BE COVERED BY SPECTRUM LABS INC.

Use the table for easier reading

Milestone 1. Complete Default Mode design (Total cost: 54,658.39 ADA)

• Formal specification of the “Default” protocol — 54,658.39 ADA

Milestone 2. Implement Default Mode (Total cost: 109,316.77 ADA)

• Implement Default Mode according to the specification in the reference client — 109,316.77 ADA

Milestone 3. Research VM options. Prepare a detailed roadmap of improvements that have to be applied to the chosen solution in order to adopt it (Total cost: 163,975.16 ADA)

• Research MoveVM: Output scope of required work in order to integrate it into Spectrum — 163,975.16 ADA

Milestone 4. Implement the improvements and integrate VM into Spectrum (Total cost: 218,633.54 ADA)

• Implement improvements to MoveVM (or other chosen VM) — 54,658.39 ADA
• Implement stdlib for Spectrum — 40,993.79 ADA
• Integrate the VM into Spectrum — 68,322.98 ADA
• VM configuration: Estimate parameters for costing tables — 54,658.39 ADA

Milestone 5. Complete Upgradability Framework Design (Total cost: 54,658.39 ADA)

• Formal Specification of Upgradability Framework — 54,658.39 ADA

Milestone 6. Implementation of Upgradability Framework (Total cost: 54,658.39 ADA)

• Implement Upgradability Framework according to the specification — 54,658.39 ADA

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

##Founders

Ilya Oskin

Tech Lead

Engineering Leader with 6 years of experience in the blockchain industry. Keen on functional programming. Took part in the development of the reference node of the eUTxO-based blockchain Ergo and its explorer. Designed and developed the first version of the ErgoDEX protocol from scratch. The main architect of the Spectrum Finance Cardano AMM. Lead researcher and developer of the Spectrum Network

In the scope of the proposal, Ilya is responsible for the research and development of the technical components of the protocol.

GitHub · LinkedIn

Yasha Black

Product Lead

Product manager, product analyst, UX/UI, and JavaScript developer with 7 years of experience in the IT industry. Built a strong product team, and designed the first version of the Spectrum Finance user interface. Grew up Spectrum Finance product to 15,000 active addresses (Ergo side).

Yasha will lead and control the research and development processes of this proposal ensuring that everything is delivered on time and understandable for the end user.

LinkedIn

##Core team

Timofey Gusev

Lead Core Developer

Developed smart contracts and execution bots for Ergo and Cardano sides of Spectrum Finance protocol (Scala, Haskell, Plutus). Designed and developed an internal Cardano explorer.

In the scope of the proposal, Timofey is responsible for the implementation of various components of the Spectrum protocol in Rust.

GitHub · LinkedIn

Alexander Romanovsky

Lead Core Developer

Developed smart contracts and off-chain services for Ergo and Cardano sides of the Spectrum Finance AMM protocols (Scala, Haskell, Plutus, Plutarch).

In the scope of the proposal, Alexander is responsible for the implementation of various components of the Spectrum protocol in Rust.

GitHub · LinkedIn

Ruslan Salakhov

Lead JavaScript Developer

Build the architect of the current Spectrum Finance interface. Has 7+ years of experience as a JavaScript developer and 5 years in building interfaces and tools in fintech.

In the scope of the proposal, Ruslan is responsible for the implementation of Documentation mediums (doc site and landing page).

GitHub · LinkedIn

Alex Oranov

Senior Blockchain Researcher and Analyst

Has 5 years of experience in research and development, including scientific work, industrial solutions related to artificial intelligence, and data analysis. Participated in the smart contracts design and development of the Yield Farming protocol (Ergo side). Researcher and one of the Whitepaper authors of the Spectrum Network protocol.

In the scope of the proposal, Alex is responsible for the implementation of various components of the Spectrum protocol in Rust.

GitHub

Timothy Ling

Senior Core Developer (Rust)

Was a researcher in mathematical finance and code contributor to the Ergo sigma-rust project. Since joining Spectrum, he has contributed to the mainnet launch of the Yield Farming program by developing the off-chain bots in Rust. He is now immersed in the construction of Spectrum Network.

In the scope of the proposal, Timothy is responsible for the implementation of various components of the Spectrum protocol in Rust.

GitHub

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

We base our cost estimates on our team's hourly rate. In this proposal, we are requesting 40% of the project cost as the rest will be covered by the Spectrum Labs team.

It’s hard to cover all possible value/money cases because there are in-numerous amounts of them. We will provide one example with a highly frequent use case for all Cardano users — exchange one asset for another.

As you’ve already understood from the text of this proposal Spectrum makes it possible to build natively cross-chain dApp. In our use case example, we will compare actions which are needed to be performed by a user to exchange ETH to WMT (Cardano native token) using an abstract natively cross-chain decentralized exchange and also an abstract CEX. The metrics we will measure are the cost of the use-case execution in terms of money and time. Let’s go.

🪄 Use-case: Exchange 10 ETH to WMT (Cardano native token)

Check this 🎨 Figma diagram for a nice visual representation of the use case.

Steps using CEX

1. Open EVM-compatible non-custodial wallet (Metamast or other)
2. Send 10 ETH to a CEX (Binance, KuCoin, Kraken, or other)
3. Wait for deposit confirmations [⏱️~14 minutes for EVM, source]
4. Has ETH/ADA pair?
5. Yes
6. Exchange ETH to ADA [💰spot fee (approx 0.4% for taker) = 10 ETH * 4% =0,04 ETH = 72 USD]
7. No
8. Exchange ETH to USDT [💰spot fee (approx 0.4% for taker) = 10 ETH * 4% =0,04 ETH = 72 USD]
9. Exchange USDT to ADA [💰spot fee (approx 0.4% for taker) = 10 ETH * 4% =0,04 ETH = 72 USD]
10. KYC passed
11. Yes
12. Withdrawal ADA to Cardano wallet [💰withdraw fee = 1 ADA = 0.3 USD, ⏱️~10 minutes ]
13. No
14. Pass KYC (from a few minutes to several days)
15. Withdrawal ADA to Cardano wallet [💰withdraw fee = 1 ADA = 0.3 USD, ⏱️~10 minutes]
16. Receive ADA to a non-custodial Cardano wallet ()
17. Go to Cardano DEX and connect your wallet
18. Exchange ADA to WMT [💰swap fee (lq pool 0.3%) = 54 USD, ⏱️~1-10 minutes]
19. DONE!

⏱️ Total time spent: ~30-45 minutes (KYC passage time is not included)

💰 Total money spent: 126.3-198.3 USD

❗️DEPOSITING ON CEX ENTAILS CUSTODY RISKS

Steps using CEX

• Go to a DEX that is built on top of Spectrum Network
• Connect non-custodial EVM-compatible wallet
• Connect non-custodial Cardano-compatible wallet
• Exchange 10 ETH to WMT [💰swap fee (lq pool 0.3% + network fees) = 60 USD, ⏱️~2-10 minutes]
• DONE!

⏱️ Total time spent: ~2-10 minutes (KYC passage time is not included)

💰 Total money spent: ~60 USD

Value for money

We approximately determined time and USD value executing the same use-case using a CEX and a DEX built on top of Spectrum protocol. As you can see both metrics differs significantly!

The value we provide only for this particular use case for ALL Cardano members:

• Reducing the time needed for exchanging ETH to a Cardano native token by 4.5-15 times.
• Decreasing the loss in USD value on fees by 2-3 times.

Our other proposals related to Spectrum Network:

• Spectrum Network | Security Audit
• Spectrum Network | Testing Protocol at Scale