# Abstract

This Info Action seeks community and constitutional signalling on whether the Cardano Treasury should pursue a **strategic token investment** in **DeltaDeFi**, a Cardano-native, Hydra-powered order-book DEX.

The proposal asks DReps and the wider community to endorse, in principle:

- A **Treasury commitment of up to ₳5,000,000**, to be precisely defined in a future **Treasury Withdrawal** governance action; and
- A **fixed 10% allocation of the DeltaDeFi total token supply** reserved for the Cardano Treasury as long-term upside participation.

Because **DeltaDeFi operates primarily on Hydra (L2)**, most trading volume will not directly translate into higher L1 transaction fees. Without an explicit upside channel, even a successful Hydra DEX would provide only limited direct financial benefit to the Treasury. This Info Action therefore ties any future withdrawal to:

- A **Treasury stake in the DeltaDeFi token** (for simplicity we denote it as **DLTA** in this proposal), and
- A **governed fee-routing and tokenomics framework** that commits a material share of protocol fees to DLTA token value accrual, so that **the Treasury’s 10% DLTA allocation participates directly in protocol profit**.

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# Motivation

## Who we are

**DeltaDeFi** is a Cardano-native project building a **Hydra-based, low-latency order-book exchange**, with:

- A spot DEX designed for API-driven and programmatic trading.
- A roadmap to advanced and professional trading tooling.
- An engineering stack and open-source tools that are already partially funded and delivered through **Project Catalyst** under SIDAN Lab / DeltaDeFi.

The team has a track record of building Cardano infrastructure (SDKs, Hydra tooling, governance tools, SPO operations) and engaging with the community through Catalyst, events and education.

## Why a Hydra-native DEX matters

Cardano currently lacks a **Hydra-native, production-grade order-book venue** comparable to leading perps platforms on other chains. Existing spot DEXes are valuable, but often show:

- Higher slippage for size,
- Limited market coverage, and
- Less appeal to professional traders and market makers.

Hydra offers the latency profile and UX needed for modern trading, yet remains **under-utilised in consumer-facing protocols**. A Hydra-based DEX like DeltaDeFi can:

- Demonstrate Hydra’s practical value beyond demos and testnets.
- Attract liquidity, builders and integrations around a concrete, revenue-generating product.
- Provide infrastructure for future Hydra-based DeFi and tooling.

## L2 vs L1 economics: closing the gap

For L1-native dApps, higher usage naturally leads to:

> more transactions → more L1 fees → more rewards for SPOs, delegators, and the Treasury.

A Hydra-based exchange behaves differently:

- Order matching and most user interaction occur **off-chain, inside Hydra heads**.
- Cardano L1 is used mainly for head lifecycle, and deposit & withdrawal.
- Even with high trading volumes, the **incremental L1 fee increase is modest**.

Without a deliberate design, a successful Hydra DEX could:

- Be economically important to users and liquidity providers,
- Yet provide **only weak, indirect financial upside to the Cardano Treasury**.

Allocating **token to the Treasury**, combined with a **clear fee-to-token value-accrual channel**, is intended as a **synthetic “fee share”** from L2 activity back to Cardano L1.

## Why a Treasury token investment (and not only grants)

Grants are effective at bootstrapping research and early prototypes, but:

- They tend to leave the long-term upside with the project, team and private investors.
- They do not, by themselves, create a recurring stream of value back to the Treasury.

A **Treasury token investment**:

- Aligns the protocol’s financial success with the Cardano Treasury.
- Creates a pathway for **future Treasuries to be refuelled** by successful ecosystem businesses.
- Is particularly appropriate for **Hydra-based protocols**, where L1 fees are not the primary monetisation channel.

This Info Action positions DeltaDeFi as a **case study** for such a model, without pre-empting the full details of the eventual Treasury Withdrawal.

## Team transparency, capability and cost efficiency

- **Full transparency of the core team**
- DeltaDeFi is **known for full transparancy to community**. Founders and core contributors operate under their real identities, appear publicly at events and on social media, and are accountable to the Cardano community.
- A recent public team introduction thread is available here:
- https://x.com/DeltaDeFi/status/1968643184843690094?s=20

- **Proven delivery capability on Cardano**
- The team has successfully delivered multiple **Project Catalyst–funded proposals** related to high-frequency trading and supporting tooling:
- Fund 11 – *DeFi Evolution: Pioneering High Frequency Trading on Cardano*
- https://projectcatalyst.io/funds/11/cardano-use-cases-concept/defi-evolution-pioneering-high-frequency-trading-on-cardano
- Fund 12 – *DeltaDeFi: Pioneering High Frequency Trading on Cardano*
- https://projectcatalyst.io/funds/12/cardano-use-cases-mvp/deltadefi-pioneering-high-frequency-trading-on-cardano
- Fund 12 – *DeltaDeFi Open-Source Libraries for High Frequency Trading*
- https://projectcatalyst.io/funds/12/cardano-open-developers/deltadefi-open-source-libraries-for-high-frequency-trading

- **Demonstrated cost efficiency**
- Funded by these three proposals combined, the team has executed to the current **beta mainnet stage** with a total budget of **effectively < USD 300k**, which is unusually low for building and operating an order-book DEX and supporting HFT infrastructure.
- This track record demonstrates careful and efficient use of ecosystem funding and prudent use of ecosystem funding, which is directly relevant to any future Treasury-backed investment.

---

# Rationale

## Overview of the proposed investment

This Info Action asks voters to signal support for:

- **Up to ₳5,000,000 from the Treasury** in a future Withdrawal GA.
- **Consideration:** a fixed 10% allocation of total DLTA token supply reserved for the Cardano Treasury.

The final amount, valuation method, and token-linked instrument will be subject to:

- A separate **Treasury Withdrawal governance action**, and
- A full, public **investment and tokenomics memorandum**.

The aim is to treat the Treasury as a **strategic, long-term stakeholder** on the cap table, alongside founders, contributors and external investors.

For the avoidance of doubt, the on-chain Treasury remains ADA-only. This proposal concerns the use of **withdrawn ADA** to acquire and hold a 10% DLTA stake **in a segregated, auditable address outside the Treasury pot**, administered on behalf of the Treasury in accordance with Article IV. The DLTA stake itself is not stored inside the on-chain Treasury, unless and until future protocol changes explicitly allow CNT holdings and governance decides to migrate it.

### Valuation basis

To keep expectations clear:

- This Info Action anticipates a future Treasury Withdrawal GA for **up to ₳5,000,000**.
- Of this, **at least ₳4,500,000** is intended to be used to **subscribe for DLTA**, in exchange for a **10% DLTA allocation** to the Treasury. If fully utilised, this implies an indicative fully diluted valuation of **₳45,000,000** for DLTA at the time of the investment.
- The remaining **₳500,000** is not part of the token purchase. It is expected to be used for **non-investment costs that directly protect and inform the Treasury**, such as:
- independent audits and legal/tax work where required; and
- design and implementation of the **auditable fee-routing and value-accrual system**, including public dashboards and reporting.

We arrive at the **₳45,000,000** indicative FDV by placing DeltaDeFi in the range of **early infrastructure / DeFi protocols** that already have a live product, but are still in the early stages of building volume and ecosystem integrations. This is broadly in line with valuations seen for comparable crypto infrastructure projects, and sits near the upper end of existing Cardano DEX valuations, which we believe is justified by: (a) the focus on Hydra-based infrastructure, (b) the strong Treasury-friendly tokenomics (≥70% of Net Protocol Fees to DLTA, 0% direct fee share to team/insiders), and (c) the explicit commitment to fund auditable fee-routing and reporting from part of the ADA amount.

The exact ADA amount subscribed for DLTA, the final valuation, and the detailed non-investment budget will be set out in a later **Treasury Withdrawal GA**, which can take into account DeltaDeFi’s actual traction and any independent input available at that time.

## Use of funds and roadmap snapshot (high level)

This Info Action does not move any ADA, but DReps and the community should understand **what a future Treasury-backed investment is intended to support**. At a high level, a subsequent Treasury Withdrawal GA would be structured around the following phases with an expected duration of 2 years:

- **Phase 1 – Hardening the Hydra spot DEX (0–6 months)**
- Bring the current beta mainnet exchange to a **fully hardened, monitored and audited** production state on Cardano.
- Expand market coverage (trading pairs), improve latency and reliability for **API-driven trading**, and mature incident response and risk monitoring.
- Continue maintaining and improving the **open-source libraries and tooling** developed under SIDAN Lab (e.g. HFT libraries, Hydra tooling), so that other builders can reuse the same components.

- **Phase 2 – Expanding markets, infrastructure and ecosystem integration (6–12 months)**
- Establish and maintain core **“Top-Alts × Stablecoin × ADA”** spot markets from early on, so that traders can gain BTC-, ETH- and other major L1–equivalent exposure against:
- Cardano-native stablecoins (e.g. USDM, Djed, other regulated stables as they emerge); and
- ADA as the base asset.
- This market structure is the foundation of an active, healthy venue where professional traders and bots operate most aggressively. It is indispensable for creating sustainable liquidity and real market activity on DeltaDeFi.
- Scale **Hydra infrastructure** and supporting services (indexers, market data, monitoring) to handle higher volumes and more active traders across these markets.
- Ensure APIs and market data are designed so that **AI-based liquidity agents and automated trading systems** can participate on an equal footing with other traders.
- Integrate with other Cardano protocols and wallets to make DeltaDeFi a **reliable liquidity venue** for the wider ecosystem.

- **Phase 3 – Value accrual and long-term sustainability (12+ months)**
- Ship and harden the **value-accrual mechanisms** described in this proposal (fee routing, DLTA-based accrual logic, and pre-/post-TGE behaviour), so they work reliably under real volume.
- Establish a **repeatable reporting and audit process** for tokenomics: standard metrics, public dashboards, and periodic third-party checks, so the Treasury and community can independently verify how protocol fees flow to DLTA holders over time.

### Initial market-making and fair market conduct

To make DeltaDeFi usable from day one, an initial layer of **market-making (MM)** is needed so core markets have tight spreads and reasonable depth.

- **Internal MM capacity**
- DeltaDeFi has internal capacity to provide **neutral, risk-managed market making** on key pairs at launch. The purpose is to seed healthy order books, not to take large directional bets or extract special fees.

- **External market makers**
- Over time, additional **professional external market makers** may be invited. Without naming specific parties, DeltaDeFi will expect them to:
- Agree to written terms that forbid market manipulation and wash trading; and
- Accept that MM privileges can be reduced or removed if those terms are breached.

- **Anti-abuse stance**
- DeltaDeFi will not tolerate **wash trading, spoofing or similar abusive practices**, whether by internal or external participants, and will monitor activity patterns and, where possible, publish high-level metrics so the community can distinguish real usage from unhealthy behaviour.

## Tokenomics and fee routing: how the Treasury shares upside

To make the Treasury’s DLTA allocation meaningful, DeltaDeFi commits to the following principles, to be fully specified in a tokenomics whitepaper before any Withdrawal GA:

1. **Supply and allocations**

- DLTA will have a **fixed or hard-capped total supply**, with a public allocation table covering:
- **10%** – Cardano Treasury.
- **25%** – Team and contributors (multi-year vesting).
- **65%** – Community allocation (airdrop / emissions / future governance treasury / incentive programmes, etc.).

- At present, the **on-chain Cardano Treasury remains ADA-only**. The DLTA allocation is therefore:
- **Acquired using withdrawn ADA** under a future Treasury Withdrawal GA; and
- **Held in segregated, auditable administrator address outside the Treasury pot**, controlled by the DeltaDeFi Administration Committee (DAC) **on behalf of the Treasury**, under the administration and oversight rules of Article IV.

- If, in the future, Cardano governance introduces mechanisms that allow the **on-chain Treasury to directly hold Cardano native tokens (CNTs)**, and the community decides it is appropriate, the DAC commits to **transfer the Treasury’s DLTA allocation into the on-chain Treasury account** (or equivalent mechanism) via a subsequent governance decision.

- Any change to **max supply or emissions** will require on-chain governance and explicit disclosure of the impact on the Treasury’s 10%. For any **major tokenomics revision** (for example, changes to fee-routing percentages, emission schedules or core DLTA utility), we commit to a **two-step process**:
1. An **Info Action** explaining the proposed change and its impact on the Treasury and other holders; followed by
2. A separate **governance action** to implement the change, if the signal from the Info Action is positive.

2. **Net Protocol Fees and Protocol Profit**

- **Net Protocol Fees**: all trading, funding and liquidation fees that accrue to DeltaDeFi **after** LP / vault / partner revenue shares.
- From Net Protocol Fees, only the following **pre-profit items** may be funded:
1. Safety & insurance fund top-ups (up to a governance-defined target).
2. Infrastructure, **maintenance & operations**, and security budget (e.g. Hydra infra, hosting, monitoring, audits, bug bounties, essential operations staff directly required to run and secure the protocol).
3. Legally required taxes / regulatory fees.
- These pre-profit expenses cover only the direct costs of operating and securing the protocol, **not general founder or investor compensation**, which is instead aligned via vested DLTA allocations.

- In any epoch, **up to 30% of Net Protocol Fees** may be allocated to these pre-profit items. This cap cannot be increased, nor new pre-profit categories added, without on-chain governance.
- **Protocol Profit** is defined as the remainder:

> Protocol Profit = Net Protocol Fees − Pre-profit items
> with Protocol Profit **always at least 70% of Net Protocol Fees**.

3. **100% of Protocol Profit to DLTA value accrual**

- **100% of Protocol Profit** will be routed to **DLTA token value-accrual mechanisms**, such as:
- Direct profit distribution to DLTA token holders; and/or
- Periodic DLTA buybacks (with the option to burn); and/or
- Funding a protocol treasury denominated in ADA / stables / DLTA and governed by DLTA holders.
- Because pre-profit items are capped at 30%, this guarantees that **at least 70% of Net Protocol Fees always accrue, directly or indirectly, to DLTA token holders**, including the Treasury.

4. **No direct protocol fee share to team / insiders**

- **0% of Net Protocol Fees** will be paid as a direct revenue share to the team or private investors.
- Protocol fees will flow only to:
- LPs / vaults / partner revenue shares;
- Pre-profit items (safety, infrastructure, **maintenance & operations**, security, taxes) within the 30% cap; and
- DLTA token value accrual as defined above.
- Team and contributor upside is instead aligned with the ecosystem through their **DLTA allocations (with multi-year vesting)** and any separate equity arrangements, not through a privileged fee stream.

5. **Transparency and reporting**

- DeltaDeFi will publish **regular fee-routing reports**, including:
- Gross fee volume.
- LP / partner shares.
- Allocations to each pre-profit bucket.
- Protocol Profit.
- How Protocol Profit was deployed (distributions, buybacks, burns, protocol treasury funding).

This structure aims to be explicit, auditable and governance-controlled in a way that is suitable for a public Treasury stakeholder.

### Transitional Treasury fee share prior to TGE

- **Pre-TGE fee sharing**
- Prior to DLTA TGE (and before the Treasury receives its DLTA allocation), DeltaDeFi will **direct 10% of Net Protocol Fees** to a dedicated, publicly auditable ADA address earmarked for the Cardano Treasury or its designated administrator.
- This creates an immediate, direct fee-sharing channel from early protocol usage to the benefit of Cardano.

- **Post-TGE transition**
- Once DLTA is live and the Treasury’s DLTA allocation is in place, this **direct fee-share will be discontinued**, and the Treasury’s economic upside will instead be primarily tied to:
- The **DLTA value-accrual mechanisms** described above; and
- Any future Treasury decisions on how to deploy or divest its DLTA holdings.

## DLTA token utility and governance

DLTA is intended to be more than a passive financial claim in future. At a high level:

- **Governance**
- DLTA holders will govern:
- Key protocol parameters (fees, risk limits, listing standards).
- Use of the protocol treasury and any risk-relief reserve.
- Adjustments to emission schedules and fee-routing within predefined guardrails.

- **Economic utility**
- DLTA may be used to:
- Access fee tiers / discounts.
- Participate in certain MM / vault programmes and higher rate limits.
- Influence how protocol surplus is directed (e.g. towards growth, reserves, or additional buybacks).

The **Cardano Treasury’s DLTA allocation** will:

- Be **economically equivalent** to other DLTA tokens; and
- Not be used to dominate day-to-day protocol governance. Any active deployment (e.g. partial sale, strategic partnership, delegated voting) would require separate governance decisions on Cardano.

## Administration and oversight

It is envisaged that the resulting ADA and DLTA stake will be **directly administered** by the project team under clear rules.

- **Direct administration (DAC)**
- A **DeltaDeFi Administration Committee (DAC)** will be named in the Treasury Withdrawal GA as administrator, with responsibility for:

- **Custody of assets**
- Any ADA withdrawn from the Treasury for this investment;
- The **Treasury’s DLTA allocation** once issued; and
- Any trading fees in ADA or other CNTs that are routed to the Treasury under the agreed fee-sharing model.

- **Disbursement of ADA**
- Sending ADA from the admin addresses to DeltaDeFi in line with the approved investment terms (e.g. SAFT, milestones, tranches).

- **Transfer of Treasury-owned assets when required**
- If an on-chain **multi-asset Treasury** mechanism is implemented, the DAC will transfer the full ADA and CNT balances held for the Treasury into that on-chain Treasury account; and
- If a separate **Governance Action** is later approved to move some or all of these assets to another approved address, the DAC will execute that transfer.

- The DAC will be a small multi-person committee responsible for executing the agreed investment transaction(s) and safely holding the ADA and DLTA on behalf of the Treasury. The committee is comprised of:
- Hinson - Co-founder & CEO of DeltaDeFi
- Mike Hornan - Cardano Ambassador / Governance Educator
- etc
- etc
- etc
- etc

- **Custody and safeguards**

- ADA and DLTA will be held in a **multi-sig, segregated, publicly auditable address** that are **not mixed** with any other project or investor holdings.
- The multisig address will be disclosed in the Withdrawal GA metadata so the community can independently monitor balances and movements.
- While ADA is under administration, the address will be delegated to the **auto-abstain** option and **never to SPOs**, in line with the Constitution.
- If Cardano governance later allows the **on-chain Treasury to hold CNTs directly**, and a subsequent governance decision requires it, the DAC will **transfer the Treasury’s 10% DLTA allocation** into the designated Treasury CNT holding mechanism.

- **Why direct administration**

- In an investment-style arrangement, most of the Treasury’s exposure is in the **DLTA position itself**, not in a stream of milestone-based operational payments. Minimal administration is need and thus direct administration by the DAC keeps the structure simple while still being constrained by on-chain rules, public addresses and audits.

- **Independent Audits**

- The Treasury Withdrawal GA will reserve budget for **independent audits and monitoring**. (should name the auditor)
- The DAC will publish semi-annual reports covering:
- ADA disbursement; and
- the size and location of the DLTA position held for the Treasury.
- All relevant transactions / `tx-hashes` will be verifiable on-chain.

## Timeline and current governance context

This proposal is an **Info Action** only. It is submitted during the current **2025 Net Change Limit (NCL)** period, which puts a cap of 350M ADA on all Treasury withdrawals. That cap is already mostly spoken for by existing ecosystem budgets and withdrawals, so this proposal **does not** ask for any ADA to be withdrawn in 2025.

If this Info Action is approved:

- We **will not** submit a Treasury Withdrawal governance action under the 2025 NCL.
- We will wait until the **2026 NCL and ecosystem budget are approved** and then submit a Treasury Withdrawal GA for **up to ₳5,000,000**, making sure it fits within the 2026 limits.

In simple terms:

1. **Now (2025):** DReps and the community vote on whether a Treasury-funded token investment in DeltaDeFi is a good idea in principle, and whether **up to ₳5,000,000** is an acceptable upper bound.
2. **Later (after 2026 NCL is set):** A separate Treasury Withdrawal GA is submitted that:
- States the **exact ADA amount and payment schedule**, and
- Locks in the administration, custody and reporting model described in this Info Action.

If this Info Action is **rejected**, we will not submit a Treasury Withdrawal GA under this structure unless we first return with a revised Info Action.

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# Constitutionality checklist (Info Action scope)

- **Purpose**
- This proposal is for work intended to enhance the **liquidity, usability and long-term sustainability** of Cardano by establishing a Hydra-based trading venue and aligning it with the Treasury.

- **Article III.5 – On-chain governance process**
- The proposal will be submitted in a clear, standard format, with:
- A title, abstract, motivation and rationale; and
- A URL and content hash for this off-chain document.

- **Article IV.1 – Future development of the ecosystem (budget intent)**
- This Info Action is meant to signal support for a budget allocation dedicated to Hydra-based DEX infrastructure and associated open-source libraries developed by SIDAN Lab (for example, the repositories under https://github.com/sidan-lab).
- Ongoing Hydra development will be supported by the continuous maintenance and operation of DeltaDeFi.

- **Info Action nature**
- This is an **Info Action**, not a Treasury Withdrawal:
- It **does not change any protocol parameters**.
- It **does not move any ADA** from the Treasury.
- It records community and DRep sentiment on the *principle* and indicative maximum size of a Treasury token investment in DeltaDeFi.

- **Article IV – Budgets and Treasury withdrawals (future work)**
- Any subsequent **Treasury Withdrawal GA** based on this Info Action will:
- Respect Net-Change Limit constraints.
- Allocate budget money for independent audits and oversight.
- Ensure funds are held in segregated, auto-abstain-delegated accounts.

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# Conclusion

This Info Action invites the Cardano community to decide whether the **Cardano Treasury should invest into DeltaDeFi. It is also attempted to set as an example tocreate a **direct, auditable link between DeltaDeFi’s success and the long-term financial health of the Cardano Treasury** by:

- Start with share of revenue and migrate into a **Treasury ownership stake in the DLTA token**, and
- A **governed fee-routing framework** that channels a substantial share of protocol profit into DLTA value accrual

This proposal pushes the boundary our governance system and constitution, and hopefully inspired a next wave of proposals which share success with Cardano treasury in a more direct manner.