[ARCHIVED] The first fully distributed protocol to automate DeFi swaps

Proposal Title: Grant for Conveyor Labs decentralized automation protocol

Authors: Rory Graman, Founder/CEO @ Conveyor Labs

Date: May 9, 2022

Overview:

Conveyor Labs is building the first-ever fully decentralized, trustless, and non-custodial protocols to automate DeFi token swaps on EVM compatible chains (Eth, Polygon, Cronos, and BSC to name a few). We’re going to automate the $1T/year DeFi volume market.

Through a combination of decentralized off-chain systems paired with on-chain logic and validation, our protocol is able to act as the secure automated middle-man to swap the tokens in your wallet with the DEX LPs you already interact with. You own and hold your assets throughout the process from start to finish.

How It Works:

Our protocols allow a user to connect their ERC20 compatible wallet through our web UI, choose a trading strategy, and sign a single transaction to store their swap conditions on-chain. By signing this transaction, they simultaneously authorize the contract to swap a pre-defined amount of designated tokens in their wallet once their specific swap conditions are met.

Our network of off-chain decentralized Beacons initiates a swap for a user by calling the public functions stored on the contract to swap the pre-defined tokens for users when the defined market conditions are met. The values the Beacon enters are processed, verified, and computed by the on-chain contract, resulting in a secure, automated token swap without any reliance on internal or external infrastructure. Beacons have a financial incentive to confirm our transactions by receiving a small volume reward fee for each trade they successfully automate.

How Current Automated Systems Fall Short

The ecosystem we’re building is rebuilt from the ground up to allow for a fully decentralized, trustless, and non-custodial method for automation. There are three major components that are critical to safe and reliable swaps in DeFi:

Decentralization: (no internal systems are required to facilitate a swap)

  • most on-chain systems today have a small number of internal or allow listed executors to facilitate swaps, which requires their services to have 100% uptime to work reliably, else your trade doesn’t happen as expected. We solve this by allowing anyone to initiate a swap for a user, and back it up with thorough on-chain computation and validation to perform the swap.

Trustlessness: (You don’t have to trust that anyone is acting faithfully)

  • As mentioned above, other systems have executors that you have to ‘trust’ when executing your swap, or have upgradable smart contracts, which is a scary thing in DeFi. Owner functions can be subject to rogue internal team members who execute your trades at non-optimal times or swap into assets you didn’t approve. With our solution, there is no requirement to trust that a Beacon operator (or us) will act faithfully since our contract is immutable and zero owner functions can alter your trade outcomes.

Non-Custodial: (You hold onto your assets at all times)

  • Other systems may require you to send your assets to a shared contract in order to automate. This results in a contract with multiple users’ stored funds, which is a high target for attack, and in the event that the service has downtime or is abandoned, your assets can be stuck in a permanent untradeable state. With our solution, You hold the assets in your wallet up to the point that the assets are swapped, and the result is sent to your wallet in a single TX. Not to mention that you won’t be subject to double tax for assets that implement tokenomics.

Where can you use our solution?:

We’re designing our protocol to be deployed on all chains with EVM compatibility. We’re starting with Polygon, Ethereum, Cronos, and Binance Smart Chain. We’ll have compatibility with DEX LPs from Uniswap v2/v3, Sushiswap, PancakeSwap, and Mad Meerkat. We have plans to expand to other Layer 1’s and Layer 2’s like Arbitrum, Fantom, Avalanche, Gnosis Chain, Near, and many others. If you can swap it, we can automate it.

Target Market:

Traders of all types, including Institutional Funds, Investment DAOs, everyday traders, and Token Teams can benefit from automation for the assets they hold or maintain.

We are laser-focused on Institutional DeFi traders as our primary GTM strategy, but we’re creating our ecosystem in a way that’s easy to use for all traders, with special attention towards investment DAOs

How will your proposal, if activated, benefit BitDAO?

We’re designing the system so it’s similar to using Uniswap, but more advanced in that it will automatically perform swaps when the market conditions meet specific swap criteria. With investment DAOs (specifically BitDAO in this example), there needs to be a vote for when to swap Bit to other assets. We plan on creating additional trading techniques in the future to allow for take-profit, leveraged trading, and other trustless automated trading tools.

In the case of BitDAO, creating limit orders, utilizing a specified grid trading strategy, or deploying a DCA strategy will only require one vote to pass, and the automated swap process can be confirmed once using a multi-sig or Gnosis Safe wallet. Once that strategy is deployed, it’s completely automated based on the token amounts the DAO authorizes the contract to swap on their behalf. This could bring forth new possibilities previously not available in regards to controlled market trading, while still maintaining the high standards of decentralized community governance.

How long will it take to complete?

Our protocol development is nearly complete. We plan to deploy our buy/sell limit and stop-loss protocols to the general public near the end of June to mid-July 2022. We have a pre-planned audit through Quantstamp, a leader in smart contract security, set for the end of June to facilitate a rapid 2.5-week turnaround time for the audit to complete. We have started the initial web app designs for the trading interface, and frontend development will begin in about 2 weeks (near the end of May). The decentralized Beacon application will begin development mid-may and will be rigorously battle-tested for reliability and security

Who is involved?

There are three team members that make up Conveyor Labs.
Myself. I’m a 12.5-year Navy SEAL veteran, and a Y Combinator alumni (Charge Running W21 batch). I have over half a decade of running successful startups (no pun intended). My cofounder is a full-stack developer who specializes in Go (the language for the Beacon application) and solidity. He is also a winner of the February 2022 ETHGlobal Hackathon. Our third team member that joined the team last month is a Techstars alumni, has his masters in mathematics, a bachelor’s in CS, and is a full-stack developer.

The co-founders met in June 2021, and have been working together in a professional environment on DeFi trade automation systems. We launched a centralized MVP in late Jan, and our automated system has transacted over $275K worth of tokens. We’ve accomplished this by partnering with token teams to automate the selling of their team/dev/marketing tokens in a way that doesn’t negatively impact the charts which in turn provides them the liquidity needed to fund their project.

What are the milestones?

July

  • Deploy buy/sell limits, stop-losses on Polygon, Ethereum, Cronos, and BSC
  • Beacon application release
  • Website development complete / released
  • audit complete
  • begin aggressively onboarding Institutional DeFi investors and investment DAOs for initial feedback for UI/UX optimizations

August

  • Implement UI/UX optimizations & reinforce website scalability
  • Begin development on Grid Trading & DCA strategy protocols
  • Onboard internal customer outreach and success team for DAOs and institutional traders

September

  • Audit / Deploy Grid Trading & DCA protocols
  • Launch on additional L1’s/L2’s with DEX LP compatibility for each chain.

Note a more robust timeline can be found in our documentation via the Documentation link below.

Specifications:

  1. Raise Information

We’re currently raising a $2.370M seed round at a $30m post via safes. We have previously secured $130k from Orange DAO (a collective of over 1200 YC alum building/investing in web3) & an Angel investor. This raise will enable us 18 months of runway to grow, scale, and develop towards optimal product-market fit.

  1. Budget

With our team being small, and having $100k in Google Cloud credits, our monthly spend is mainly on salaries to keep the team growing, marketing tools, email, and miscellaneous administrative required spend. Our current runway ends at the end of July. We are seeking a grant/investment from BitDAO to assist us with building our product in return for a white-glove onboarding, AMA’s, and special attention for any community members, representatives, or treasure managers that want to learn more about the system, or need help setting it up.

  1. Add technical details and/or links to source documentation

Here are our docs highlighting the internals of the system.
Here is our pitch deck

Next Steps? If this proposal is accepted, what are the immediate action items?

We would send a safe agreement to treasury managers or approved representatives at BitDAO for review and signatures. Pending an accepted proposal, we would receive and convert Bit to usdc to safegard investment funds against market volatility

If interested, please let me know in the comments! The next step (pending community thumbs up) would be to ask for delegate votes to gain the 200k Bit to resubmit a formal proposal.

Review Process

The BIT Community and delegates might discuss and verify the following before considering proposals.

Personnel

  • Is the team credible?
  • Are they qualified to do this work?

Technical

  • Does the proposal make sense technically?
  • Does this fit into, or compliment, other projects in the BitDAO ecosystem?
15 Likes

I’m unable to make a poll! Can someone add a temperature check poll for me, please?

1 Like

Also not working for me, I’ll check into it

Temperature Check Poll

Would you like to see this proposal go to vote?
  • Yes
  • No
  • Needs work

0 voters

2 Likes

all set! Thanks for the help!

1 Like

Realized I never asked how much I would be seeking from the grant request. $100k would be the target!

1 Like

Hi Rory, looks interesting. Please check DMs. Will like to arrange a call to understand more thanks.

1 Like

Although the DEFI track is very attractive, we must learn a lesson in the event of the LUNA crash. Because in the absence of security, any high returns are meaningless, and DEFI protocol loopholes will cause Systemic risk. I think the new DEFI protocol has not been tested by the market for a long time, and it is impossible to confirm whether it can resist flash loan attacks, and it cannot blindly invest a lot of money.

2 Likes

Responded! Excited to chat

1 Like

I appreciate the feedback! I agree that no protocol is 100% secure, which would logically be impossible to achieve. However, we are creating a protocol to automate non-custodial trades for that very reason.

Using your example of LUNA, of the millions of holders, how many were on vacation last week or didn’t have trade access when the price started to decline? How many of them in hindsight would have wanted to set a stoploss once the price fell below their acceptable threshold?

I will agree that DeFi is still very much in it’s infancy, but in order to progress this technology, it demands constant iteration and innovation from those willing to progress it while receiving support from those who want to help make it happen. We are taking our shot at automating a historically manual process for the betterment of those who see DeFi as a future application with limitless use and possibilities.

2 Likes

One of the best-formatted proposals on this forum. Well done!

My two cents as a DeFi product mangaer: Conditional order has been a popular feature request. Many recent DEXs support this via proprietary offchain servers or 3rd-party infra like Chainlink Keepers. However I doubt if this idea can support a stand-alone project.

Besides the viability of coditional swap automation, I don’t think BitDAO is ready to make direct investment into general-purpose crypto projects yet. Priority shall be given to proposals directly contributing to BIT utility, BitDAO’s treasury utilization and ideally a better organzied grant procedure.

One of the issues with having Conditional Orders always open for DeFi is that, if the oracles malfunctioned, all the conditional orders might get triggered which will create additional buy/sell orders and trigger even more conditional orders. Oracles are the vulnerabilities and single points of failures should be eliminated (CEXs are no different).
What will you do to prevent these incidents?

Interesting Proposal !

In accordance with the forum archiving policy, this discussion will be moved to the General Archive. If you would like to continue the discussion, you can update your discussion topic or soft proposal and repost in the Discussions category.