Please describe your proposed solution

As part of the MVP for Hydra-Enabled Accounting and Micropayments System we have implemented a custom accounting system that enables managing ADA balances for customers and merchants and orchestrating payments via NFC protocol. As part of the process, several limitations were identified:

• partial commits not yet supported by Hydra - this is in the roadmap of the Hydra team for coming months and assuming this is put in place, we would be looking to further enhance the solution in this direction to enable more cost efficient operations of the overall solution.
• Hydra head capacity - currently, based on our analysis and design, also due to unavailability of partial commits, we can only load a limited number of customers / merchants. To avoid this limitation we are planning on implementing a batching system that will enable linear scaling of the solution.

Further, we shall implement support for native (non-ADA) balances to be managed as part of the Hydra-based accounting system as well as payments orchestration respectively. In combination with bridging, leveraging this feature would also enable cross chain integration. In this sense, we shall bridge to Bitcoin blockchain and as a result enable support for BTC payments.

In order for the cross chain functionality to work, we shall also implement custodial wallet management functionality that will enable funds movement across integrated ecosystems.

As an outcome we shall have a cost efficient micropayments solution based on custom Hydra accounting system supporting NFC payments via ADA, USDM and BTC.

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

Cardano has supported smart contracts since September 2021, but developing real use cases required extensive development and testing. Now, with fundamental blockchain functionalities established, we are ready to explore practical applications. To transform Cardano and Hydra into platforms that facilitate everyday actions, like paying for groceries and services, we initiated the Hydra Accounting and Micropayments project. Through this project, we identified a number of enhancements required for this solution to scale to satisfy a growing amount of users and merchants.

The intended impact will be achieved by making micropayments accessible, with these final additions completing the system. Furthermore, to enable more users to be onboarded, we shall implement support for non-ADA balances (CNTs), which will allow implementation of USDM and BTC micropayments. Support for additional networks would enable cross chain pollination and trigger value flowing into the Cardano ecosystem.

As an outcome of the project implementation, there will be a number of capabilities that would represent value add for the Cardano ecosystem:

• Hydra-based accounting system supporting ADA and non-ADA assets - this can be leveraged for managing the books and records for users in various use cases requiring a scalable ledger system.
• Scalable micropayments solution leveraging Hydra Head protocol - this component can be reused to orchestrate payments by leveraging the Hydra based accounting system as well as it showcases how the accounting system can be integrated into real-life use cases.
• Support for ADA, USDM, BTC payments via NFC protocol - capability enabling NFC payments via ADA, ADA native tokens as well as integration with bitcoin network. This would also enable value flow into the Cardano ecosystem.
• Custodial wallet management - capability to create and manage user wallets in a non-custodial way, which can be reused as part of alternative use cases.
• Tight interaction with Hydra development roadmap and contribute to new features development - this aspect is an indirect contribution to the ecosystem by providing feedback and enhancements suggestions that in turn would extend the usability of Hydra.

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?

At Blazar Labs, we have over 3 years of experience in navigating the ecosystem, using the available tools and since 2023 developing blockchain solutions with real-world utility. During this time, we have partnered with established Cardano development firms to address scalability challenges using Hydra. Our team is also part of the Hydra working group at Intersect, where we actively contribute to enhancing Hydra’s practical usability. We successfully applied Hydra for tracking updates in the wine supply chain and are now exploring its broader potential in payments.

Additionally, a comprehensive research paper from a previous project demonstrates Hydra's capability to handle payment processing effectively.

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As part of the initial phase, while defining the architecture and design for leveraging Hydra for the underlying accounting system, several limitations were identified that impact the scalability and cost efficiency of the solution:

https://docs.google.com/document/d/1lpYT6uzvnfiqZDuPDaXrijjnO_MCDEef8JcLXNB55bs/edit?pli=1&tab=t.0

The design document outlining the rationales for implementing the initial version of the system:

https://docs.google.com/document/d/1b_G03TTuOSsm3Ex0B_aD5MMXu7G9K3Y87cQQQdN0-qE/edit?tab=t.0#heading=h.m7lrsogspphb

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We have meticulously planned each stage of this project and have already aligned all necessary team members and collaborators. From technical development to implementation, each contributor is prepared and committed to their role, ensuring smooth execution across all phases. This comprehensive coordination strengthens our ability to deliver with consistency, accountability, and high standards.

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

Milestone 1: - Enable support for non-ADA balances in the hydra-based accounting system

• Explore and design the solution to integrate with BTC.

Milestone Outputs:

• Enhanced hydra-based accounting system that supports non-ADA balances
• Payment support for USDM
• Architecture and design for cross chain integration

Acceptance Criteria:

• Working hydra-based accounting system supporting non-ADA assets
• Working payment app supporting USDM
• Clear design document addressing key viewpoints associated with cross chain integration to Bitcoin.

Evidence of Milestone Completion:

• Link to GitHub with code repo
• Link to public drive with video outlining the accounting system enhancement and USDM payments
• Link to public drive with document addressing cross chain integration concerns

Milestone 2: - Integration with incremental commits (it's supposed to be implemented in a couple of months). This will allow more users in a single Hydra head.

• Implementation of a backend for attacking the batching. Given that a single head can manage a limited amount of users, it's necessary to have a middleware that takes care of creating batches of utxos for adding or withdrawing funds, managing different hydra heads.
• Enhancements based on MVP findings

Milestone Outputs:

• Solution to scaling the payments system, given existing Hydra Head limitations

Acceptance Criteria:

• Working solution to batch utxo's to scale the number of users that can be served by the system
• Working solution leveraging incremental commits and addressing findings from MVP phase

Evidence of Milestone Completion:

• Link to Github with code repo
• Link to public drive with video outlining the batching system and the incremental commits

Milestone 3: - Implement a backend for managing user wallets in a custodial way.

• Integration with a bridge for allowing users from other blockchains to work with hydra-pay app.
• Marketing campaign

Milestone Outputs:

• Enhanced Hydra Pay app integrated with bitcoin network
• Marketing campaign report

Acceptance Criteria:

• Working app that allows BTC payments
• Documented marketing campaign report outlining conducted activities and achievements

Evidence of Milestone Completion:

• Link to GitHub with code repo
• Link to public drive with video demoing the support for BTC
• Link to public drive with document containing the marketing campaign report

Final Milestone: - Merchants collaboration and testing

• Project completion report

Milestone Outputs:

• Merchants collaboration report
• Project closure report

Acceptance Criteria:

• Documented project closure report
• Documented merchants collaboration report focused on spreading awareness around our solution

Evidence of Milestone Completion:

• Link to public drive with pdf document outlining the completion report
• Link to public drive with pdf document containing the merchants collaboration and testing report

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

Tudor Cotruta

Tudor's role involves maintaining and facilitating interactions within the Cardano ecosystem, managing the project to ensure deadlines and commitments are met. He actively contributes to communication with stakeholders, developers and payments systems partners.

LinkedIn:

<https://www.linkedin.com/in/tudor-cotruta-a6661a88/>

Sorin Canter

Sorin holds a degree in applied mathematics, a master's in information technology, and has over 20 years of experience in the IT industry in various roles. He comes with extensive leadership and management experience across multiple verticals. His role is to provide analytical insight to the project, digest and leverage technical matters, and proactively contribute to the development process.

LinkedIn:

<https://www.linkedin.com/in/sorin-canter-21716327/>

Please provide a cost breakdown of the proposed work and resources

• Enable support for non-ADA balances in Hydra based accounting system - 15k ADA
• Batching and additional scalability enhancements - 55k ADA
• Custodial wallet support - 40k ADA
• Bridge and enable support for BTC payments
• Design and architecture - 10k ADA
• Implementation - 20k ADA
• Merchants collaboration and testing - 25k ADA (23k ADA funded by Blazar Labs)
• Marketing campaign - 5k ADA
• Milestones submission - 1.4k ADA

Total - 148400 ADA

Dependencies on Hydra partial commits feature, which is being developed by the Hydra team and will be available in eta 2 months.

However this is not a blocker, we can implement the partial commits feature when it becomes available.

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

A platform can only add value to the ecosystem if it supports real, sustainable, ongoing business operations. Blazar Labs focuses exclusively on these types of use cases—ones that, with continued development, will enhance usability for Cardano, enabling fast and convenient ADA payments. Additionally, it supports Bitcoin payments based on Cardano technology, a feature that not only showcases Cardano's versatility in the crypto world but also prepares the tech for integrating any cryptocurrency payments, all powered by the highly adaptable Hydra ledger created for this purpose.

We believe the following specific capabilities will deliver value both to the Cardano developers and broader Cardano community

• The work includes several scaling elements to enable cost efficiency for real world payments and increased user capacity per Hydra head
• The work will yield an enhanced Hydra-based accounting system that supports non-ADA balances paving the way for non-ADA payments
• The Hydra Pay app will be enhanced to support USDM and potentially other native ADA tokens
• The Hydra Pay app will be bridged to Bitcoin ecosystem and enable payments with respective ecosystems tokens