Cardano’s DeFi ecosystem is growing rapidly, and that growth brings increased demand for a variety of products. DeFi investors and portfolio managers are looking for an easy way to get long and short exposure to assets.
Most Cardano investors simply hold tokens they like, hoping to mature their investment for price.
Lending protocols like Liqwid and Meld offer a cryptocurrency-backed marketplace with competitive APY. Meanwhile, SundaeSwap or Minswap liquidity providers receive dividends for providing funds to traders who trade tokens on those DEXes.
In traditional finance, traders often rely on derivatives like futures contracts, to gain price exposure to an asset without actually owning it.
Futures contracts are agreements to trade an underlying item at a future date, the “expiration” date. With futures, investors can modify the risk/return characteristics of a portfolio as they apply advanced trading strategies.
Traditional futures contracts are cash-settled at expiration or rolled over for a fee.
The Proposal: Perpetual Contracts
EternalSwap will be a trading platform for perpetual contracts. Analogous to futures contracts, these derivatives offer both long and short price exposure. However, unlike traditional futures contracts, perpetual contracts do not expire, meaning costly rollovers are unnecessary.
More importantly, perpetual contracts are flexible. Traders can apply leverage to trades in relation to their collateral, increasing efficiency and return on capital.
Along with long and short positions, this allows for more complex strategies around hedging and arbitrage.
EternalSwap will allow traders to trade on margin without the need for counterparties through vAMM, which guarantee liquidity and limit capital loss.
What are vAMMs?
Uniswap popularized the Automated Market Maker (AMM) model of decentralized exchanges. Instead of relying on an order book to order trades, an AMM trades asset prices along a constant output curve described by the simplified equation x * y = k.
Assets held in liquidity funds can be freely traded, as long as their available amounts maintain this price ratio.
While useful, basic MMAs have shortcomings, one of which is impermanent loss.
Virtual AMMs (vAMMs) get around the problem, by forgoing real asset trading. This virtualization prevents temporary loss and price slippage.
Buyers and sellers come and go with stablecoins, and are compensated relative to the performance of their positions. Traders only need to lock their collateral with EternalSwap, and price discovery occurs without swapping the underlying.
Due to path independence, vaults will always have enough collateral to pay all merchants trading against vAMM (assuming all uncollateralized assets are successfully liquidated before bankruptcy). This allows EternalSwap to operate with infinite liquidity with no transient losses to stakeholders as no liquidity providers are required.
Scaling solutions like Hydra will be a prerequisite, necessary for a successful implementation.
Initial building blocks of the EternalSwap platform will be delivered:
- Professional Technical Specification (a DApp “blueprint”)
- Website, Presentation Platform and Finalized Whitepaper (first draft completed but under review)
- Brand Assets (logos, brand portfolio , marketing materials, etc.)
3 months– Commission brand assets, launch website, and complete final review of EternalSwap whitepaper. Assign an engineering team to compose technical specifications.
6 months: complete technical specifications, with a structured and precise scheme of the EternalSwap DApp.
- Robust governance that integrates the Eternal token
- Instruments for more advanced trading techniques such as hedging
- Automated emergency management features
- Betting pool and reward structure
Requested funding totals USD 70,000 for a total time of 875 hours, and is detailed as follows:
- Initial Branding, Identity, Strategy and Contact Points: 30 hours
- Brand Website and Pitch Deck: 50 hours
- Completion of the technical document, including team review: 30 hours
- Problem Domain Analysis, Notation, Requirements Technicians: 80 hours
- Architecture and Design of Modules: 120 hours
- Analysis of Data Structures and EUTXO: 80 hours
- Security analysis of the minting policy and functionality of the token: 100 hours
- EUTXO and Diagramming of Modules: 75 hours
- General security analysis of smart contracts: 100 hours
- Timeboxing: 60 hours
- Change Budget: 150 hours
MLabs has quickly become one of the leading companies in development in the Cardano ecosystem.
They have one of the largest groups of PureScript/Haskell/Plutus developers in the community. They are IOG Plutus partners and regularly work with IOG to develop the Cardano blockchain and ecosystem, employing more than 80 developers, the company tells us. You can see the core members of the full team here.
MLabs tells us about the professional skills of the developers who will work on this proposed project.
Team members have developed several mission-critical Cardano and fintech applications.
As we are told in the proposal, the designated team is made up of the following members:
MLabs Founder and CEO
Mark Florisson. He founded MLabs in 2018 for consulting in AI, Fintech and information technology. He specialized in functional programming, particularly Haskell, as well as compilers and full-stack development. Currently, he leads the business strategy of MLabs and manages several clients and internal projects.
Head of Cardano Operations
Plutus Lead Developer
Maksymilian Brodowicz. He does a lot of research, both technical and product, financial and related to the user experience. Specifying and innovating protocols, his designs have been used in a variety of efforts. By education, mathematician and computer scientist, HoTT enthusiast and Haskell practitioner for five years.
George Flerovski. He manages a portfolio of projects on MLabs including decentralized exchanges, governance, auctions, performance optimization, and on-chain analytics. He completed his Master of Arts in Economics in 2017 and has five years of professional experience in data science and engineering. Prior to joining MLabs, George was involved in designing the streaming merge algorithm for concurrency on the Cardax decentralized exchange.
George has developed and loved Haskell since 2015, and has been involved with Cardano since 2018. He has carefully studied Cardano’s research papers and specifications, developing a deep understanding of the Cardano consensus protocol, smart contract framework, and network stack. He participated in the first cohort of the Plutus Pioneers Program in the summer of 2021 and was an active contributor to the Alonzo Blue, White and Purple testnets.
DeFi and Business Development
Luke Mahoney. He helps manage the business needs of various MLabs and client projects, both in the DeFi and NFT space. He also works as a product owner of Seabug, an NFT marketplace and protocol, and has helped in the early planning of DeFi projects such as DAO-Traded-Funds, Optim, and others. Before joining MLabs as an intern in the summer of 2020, he covered Cardano and blockchain developments for AdaPulse and other online outlets.
You can read the original proposal: EternalSwap: Perpetual contract DEX