Please describe your proposed solution.
Stablecoins are currently behind as far as adoption in Cardano is concerned. As of July 5th 2023, the Total Value Locked of Stablecoins on the Cardano DeFi ecosystem is of around $4.67mn, far behind other ecosystems. For an ecosystem such as Cardano focused on real world adoption and RealFi, it is imperative to be ready and to push for stablecoin adoption. Without liquidity and proper tools such as an open-source Stabelswap, it is hard to make a strong case for using and transacting with stablecoins on Cardano.
Stable assets, and especially stablecoins, are an essential part of a successful DeFi ecosystem. For example, Curve Finance is currently the 4th largest DeFi application in the Ethereum ecosystem with 3.6bn $USD Total Value Locked. A major part is locked in the “Tri-Pool” which contains USDT, USDC and DAI. This could be replicated on Cardano with existing Cardano stablecoins to create reliable and deep liquidity pools with stablecoins.
A stableswap is a type of DEX that is focused on stable asset trading with minimal slippage and more efficient trading for liquidity providers. It uses the Stableswap invariant, a better function for stable pairs where the curve is flattened, creating a range where prices remain constant. This flattened curve allows for swaps to occur with minimal slippage, even as larger trades affect a token’s liquidity.
Finally, the Cardano dApp ecosystem lacks open-source Smart Contract code. Minswap Labs is committed to open-sourcing the Stableswap contract. In addition, the Stableswap will be built on Aiken, a programming language and framework based on Rust that allows rapid development of Plutus v2 smart contracts with optimal performance and gas cost.
How does your proposed solution address the challenge and what benefits will this bring to the Cardano ecosystem?
The benefits for the Cardano ecosystem of Minswap Labs building an open-source Stableswap are:
- Increased DeFi usage: Cardano will become a more attractive ecosystem for users looking to trade and obtain yield on their stable assets in an efficient manner.
- Higher Liquidity across the ecosystem: stablecoins are essential for many DeFi participants. An efficient, open sourced Stableswap will give DeFi participants a high assurance and more incentives to provide stable assets as liquidity.
- Minimal Slippage on trading Stablecoins: the Stableswap Invariant has been proven to be the most efficient model for a DEX to enable stable asset trading with minimal slippage.
- Higher throughput DEX through Aiken: the Minswap Stableswap will be the first major DeFi product to utilize Aiken and leverage its improvements. Aiken simplifies Smart Contract development and deployment while focusing on accessibility and user-friendliness for developers.
- Open Sourcing an Aiken-Smart Contract: open sourcing a major DeFi Smart Contract based on Aiken and audited by TxPipe (which developed the Aiken language) will majorly benefit the Cardano developer community. It will provide an example of what a productionized DeFi contract looks like built on Aiken.
How do you intend to measure the success of your project?
Two types of measures will be used to measure the success:
Quantitative Measures:
- Stable Assets Liquidity: how much stable assets liquidity is the Minswap Stableswap capturing across Cardano?
- Stable Assets Volume: how much stable assets volume is the Minswap Stableswap capturing across Cardano?
- Monthly Unique Active Wallets: how many monthly unique wallets are using the Minswap Stableswap?
- Throughput improvements: how does an Aiken based (Plutus V2) Smart Contract improve throughput of DeFi dApps on Cardano?
Qualitative Measures:
- Composability across Cardano DeFi: how are other protocols using the Minswap Stableswap to offer new features for their users and enhance composability across the ecosystem?
- Open Source usage: how are developers finding the Aiken Minswap Stableswap useful?
- User Feedback: constant feedback from the community around the throughput, features and user experience will be gathered and used for improvements.
Please describe your plans to share the outputs and results of your project?
There will be 3 stages in the project and each will require a different strategy:
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Prior to launch of the Stableswap: there will be an education campaign in collaboration with Cardano Spot regarding the importance of stableswaps for DeFi ecosystems. Once the audit is fully completed, an Audit Report will be released. Then, the Smart Contract will be open-sourced and a Bug Bounty period will commence. Once the Bug Bounty period is finalized, the Stableswap will be launched.
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During the launch of the Stableswap: platform launch will be shared on all public channels. An article will be released with the specifics of the Minswap Stableswap, as well as the throughput improvements enabled by Aiken.
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After the launch of the Stableswap: data related to the quantitative and qualitative measures mentioned above will be gathered and shared through all public channels.