Please describe your proposed solution

We propose developing a decentralized credit protocol on Cardano to unlock private credit opportunities in emerging markets. This protocol will create a secure, scalable, and cost-efficient marketplace, enabling institutional investors and financial institutions to engage with real-world assets (RWAs).

Our proposed credit protocol builds on the existing innovations within the SundaeSwap DEX, the automated price discovery mechanism from Taste Test, permissioned liquidity pools, and the user-friendly scalability of the Gummiworm protocol. This architecture is specifically designed to address the limitations of existing decentralized finance (DeFi) credit protocols and enable the efficient trading of tokenized real-world assets (RWAs), such as private credit assets, in a compliant, secure, and decentralized manner.

The foundation of our solution combines best practices from leading credit protocols like Centrifuge, Goldfinch, Maple Finance, and TrueFi . These protocols have made significant advancements in undercollateralized lending, but our solution aims to address specific gaps:

1. Gummiworm Protocol for Scalability and Efficiency: While existing protocols face challenges with transaction speed and complexity, our platform will run on Gummiworm, a more user-friendly and real-world applicable version of Hydra designed to support thousands of simultaneous users (vs. Hydra’s peer-peer design optimization). This provides the speed and scalability needed for real-time bond issuance and trading without the technical overhead or bottlenecks seen in some DeFi systems.
2. Real-World Asset (RWA) Tokenization: We are extending our platform functionality by implementing a blockchain-based private credit protocol that supports investors throughout the entire investment lifecycle. By evaluating current credit protocols, we will aim to identify and architect an improved protocol on the Cardano blockchain. This could enable features such as Capital Formation, Credit Underwriting supported by the issuer, Scheduled and Conditional Disbursements, Tranches for risk diversification, and the ability to participate in Permissioned or Permissionless Pools. The protocol will also aim to support Revolving Pools, On-Demand Disbursements, and Asset as Collateral to ensure flexible and secure lending, while Lock-up Periods and a Secondary Market offer stability and liquidity for investors.
3. Permissioned Liquidity Pools for Compliance: Compliance is a major concern for institutional participation in DeFi. By leveraging our permissioned liquidity pools, inspired by the approaches of Maple Finance and TrueFi, we will aim to ensure that large institutional participants feel comfortable knowing that market participants will be properly vetted. These pools will enable compliant transactions while maintaining the transparency and efficiency of DeFi. This is critical for attracting institutional capital that requires regulatory assurances.
4. Custodial Bridge for Off-Chain Redemption: A unique aspect of our solution is the custodial bridge, which will enable token redemption either on-chain (with USDM) or off-chain (via bank APIs to redeem in USD). This provides real-world utility and bridges the gap between decentralized financial assets and traditional finance, facilitating seamless interaction between these two ecosystems.
5. Speculative Execution and Flexibility in Credit Terms: Using SundaeSwap v3’s customizable swap strategies and oracle integrations, we can enable speculative execution by dynamically adjusting bond terms (e.g., interest rates or maturities) based on real-time market data. The protocol’s advanced liquidity routing allows us to simulate multiple outcomes before executing the most favorable bond sale, while CIP-68 token flexibility ensures bond tokens can carry customizable terms that adapt to changing market conditions.

By combining these features, our platform offers a next-generation credit market that leverages decentralized technologies for real-world financial applications. This solution will serve as a proving ground for the Gummiworm protocol, showcasing its capabilities in a practical, compliant, and scalable environment while providing a decentralized platform for the issuance and trading of tokenized RWAs. It is designed to support institutional adoption, enhance liquidity, and reduce friction in the DeFi ecosystem.

In later phases, the protocol will provide solutions for accessing liquidity from other ecosystems by leveraging cross-chain infrastructure. It will also outline how to connect borrower data to on-chain assets through an RWA oracle, enabling investors to monitor their investments and gain visibility into underlying assets. The design will be guided by Input Output Global Inc. (REALFI Team) expertise in building credit risk management infrastructure.

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

This credit protocol has the potential to expand the utility of Cardano by enabling secure and compliant trading of real-world financial assets, like private credit assets on-chain. By leveraging our novel Gummiworm protocol and permissioned pools, we aim to provide institutions and investors with a compliant platform that ensures liquidity, trust, and real-world integration. This could revolutionize how private credit assets and other financial securities are traded, making Cardano a leader in the real-world financial space.

Impact Measurement: We are actively pursuing partnerships with financial institutions in emerging markets to not only streamline the use-case of our credit protocol on the Cardano blockchain but also to understand their specific needs and challenges.

We will report high-level partner pipeline analytics like number of partners contacted, number of active conversations, number of demos given, etc. If/when possible, we will aim to disclose partners as the details of partnerships are made public.

Outputs Sharing: Results will be shared through GitHub and via our X/Twitter account.

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?

Sundae Labs has a proven track record of delivering DeFi innovations, as demonstrated by the successful launch of SundaeSwap V3 and the Taste Test. With extensive experience in decentralized protocols, permissioned DeFi (see attached specification on permissioned liquidity pools), and integration with off-chain systems, we are well-equipped to deliver this project.

The technical feasibility is validated by our extensive experience architecting and auditing Cardano smart contracts and our ability to deliver scalable, compliant, and efficient solutions. We will leverage the Gummiworm protocol to ensure fast and secure transactions, and our Taste Test infrastructure will be adapted to facilitate bond sales.

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

Milestone 1: Milestone 1: Gummiworm Integration and Environment Setup (Month 1-2)

• Output: Gummiworm protocol spun up in a test environment with permissioned liquidity pools.

• Acceptance Criteria: Successful deployment of a Gummiworm head for real-world asset trading to testnet environment, with initial testing completed.

• POA: Demo video hosted on YouTube, promoted on our X/Twitter account.

Milestone 2: Milestone 2: Development of Mint and Sale Smart Contract (Month 2-3)

• Output: Smart contract enabling brokers to mint bond tokens and initiate sales.

• Acceptance Criteria: Bond token smart contract functioning in the test environment, with test brokers able to initiate bond sales.

• POA: Demo video hosted on YouTube, promoted on our X/Twitter account.

Milestone 3: Milestone 3: Taste Test-like Sale Mechanism Implementation (Month 3-4)

• Output: Integration of a fixed-price sale mechanism for bond tokens, similar to the Taste Test.

• Acceptance Criteria: Surplus bond tokens are burned after the sale, and the system handles price stability on testnet.

• POA: Demo video hosted on YouTube, promoted on our X/Twitter account.

Milestone 4: Milestone 4: Custodial Bridge and Redemption Feature (Month 4-5)

• Output: Custodial bridge allowing brokers to redeem bond tokens for USDM or USD.

• Acceptance Criteria: Test brokers can redeem bonds through the bridge, with successful on-chain and off-chain transactions.

• POA: Demo video hosted on YouTube, promoted on our X/Twitter account.

Final Milestone: Final Milestone: Full Platform Testing and Public Beta Launch (Month 5-6)

• Output: Full testing of the platform, public launch,final report and video.

• Acceptance Criteria: Platform is live, with initial users conducting bond sales and redemptions.

• POA: Demo video hosted on YouTube, promoted on our X/Twitter account.

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

Sundae Labs (Technical Infrastructure, Development & Stakeholder Engagement Lead):

Responsibilities:

• Protocol Architecture and Development: Lead the design and development of the decentralized credit protocol by leveraging existing infrastructure.
• DEX Extension for Secondary Market Trading: Extend the SundaeSwap DEX to support secondary market trading of credit assets, ensuring only authorized participants can trade, providing a compliant and secure trading environment.
• Stakeholder Engagement: Lead the engagement and coordination of key stakeholders, including institutional investors, issuers, and the wider Cardano community, ensuring active participation and alignment with project goals.
• Ongoing Technical Support: Provide ongoing technical support, platform maintenance, and future upgrades to ensure the protocol’s long-term success.
• Project Management: Oversee the coordination of all project tasks, track milestones, and manage cross-functional collaboration to ensure timely and successful delivery of all project phases.

Input Output Global Inc.(REALFI Team) - Credit Protocol and Risk Management Lead:

Input Output Global Inc (REALFI Team) will be engaged by Sundae Labs as a subcontractor to carry out the following activities:

Responsibilities:

• Credit Protocol Specification and Design: Lead the specification of the credit protocol and contribute to the design of key functionalities, ensuring the system is optimized for institutional onboarding, and private credit offerings.

Please provide a cost breakdown of the proposed work and resources

Sundae Labs:

Project and Product Management: $20,000 USD

Coordination of project tasks, timelines, and stakeholder engagement.

Protocol Architecture and Development: $150,000 USD

Design and development of the decentralized credit protocol.

Total for SundaeLabs: $170,000 USD

Input Output Global Inc (REALFI Team):

Credit Protocol Specification and Design: $10,000 USD

Oversight of product requirements and alignment between technical development and business goals.

Total for Input Output Global Inc (REALFI Team): $10,000 USD

Grand Total: $180,000 USD

No dependencies.

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

The requested budget represents excellent value for money, given the scope of the project and its potential to revolutionize DeFi and RealFi on Cardano. By building on existing proven technology (SundaeSwap V3 and Taste Test) and integrating a new protocol (Gummiworm) and novel pool type (Permissioned pools), this project will provide a scalable, compliant, and efficient credit protocol. The impact on Cardano’s ecosystem through the tokenization of real-world financial assets, combined with the use of permissioned liquidity pools, will make Cardano a leader in compliant DeFi solutions by attracting new institutional liquidity to the community.

Out of Scope Items:

This proposal focuses primarily on building a decentralized credit protocol on Cardano, integrating SundaeSwap’s DEX, Taste Test’s automated sales, permissioned liquidity pools, and Gummiworm to tokenize and trade real-world financial assets. However, activities related to building credit oracles, onboarding market makers and institutional partners, legal structuring (including the costs of legal instruments), formal security auditing, and further product distribution activities will not be included in the scope of this proposal.