diff --git a/proposals/Canton Native Yield Coin-CC20.md b/proposals/Canton Native Yield Coin-CC20.md new file mode 100644 index 00000000..c1746939 --- /dev/null +++ b/proposals/Canton Native Yield Coin-CC20.md @@ -0,0 +1,237 @@ +Development Fund Proposal + +Author: Margarita Finance (margarita.finance) +Status: Draft +Created: 2026-04-10 +Label: defi-liquidity + +Champion: Melvis Langyintuo + +--- + +Abstract + +Margarita Finance proposes to deploy CC20 — a Canton Coin-denominated agentic yieldcoin +targeting ~20% APY — on the Canton Network. CC20 tokenizes an institutional-grade revolving +covered call strategy on CC/USDC into a permissionless, DEX-tradeable yield token. The +strategy is executed via multi-counterparty RFQ with Tier 1 institutional market makers, +managed by an regulated portfolio manager, and settled via a bankruptcy-remote Luxembourg +SPV. Margarita Finance has deployed this infrastructure for NEAR20 (NEAR +Protocol) with foundation-backed liquidity and SOL20 with Solana backed liqudity coming next. CC20 brings the same battle-tested +yield infrastructure natively to Canton, creating a flagship DeFi yield primitive for the +Canton Coin economy. + +--- + +Specification + +1. Objective + +Canton currently lacks a native, on-chain yield product for CC holders. CC holders have no +passive yield mechanism denominated in their native token. This proposal delivers CC20: a +Canton-native yieldcoin that generates yield by running a systematic and propriatory covered call strategy +on CC with institutional market makers, wrapping the accrued option premium into a +continuously appreciating token. The target APY is ~20% based on backtesting and market +maker quotes; this is a target, not a guarantee. CC20 gives the Canton ecosystem its first +institutional-grade yield primitive — composable, permissionless at the DEX layer, and +compliant at the issuance layer. + +2. Implementation Mechanics + +Strategy: Daily rebalancing into weekly ATM covered calls on CC. Each day, 1/5th +tranche of the NAV is deployed into a fresh 1-week option position. Competitive quotes are +collected from multiple Tier 1 institutional market makers (including STS Digital, GSR, and +others) via multi-counterparty RFQ. The best execution is selected by the regulated +portfolio manager. Collected option premium accrues daily +into the CC20 token's NAV. + +Tokenization: CC20 is issued by a Luxembourg bankruptcy-remote SPV as independent Portfolio Manager and +Calculation Agent. Margarita Finance acts as product sponsor — providing strategy parameters, +smart contract infrastructure, and agentic operational tooling. Assets are held in Fireblocks +institutional custody. Trade execution and counterparty selection are fully independent of +Margarita Finance. + +On-chain Settlement: CC20 smart contracts are deployed on Canton. Token mints and burns +are publicly verifiable on-chain. NAV is calculated daily by Verified Assets Limited and +published as a price feed. Investors hold CC20 tokens whose price reflects the growing +strategy NAV; yield accrues continuously into the token price with no fixed maturity. + +DEX Access: CC20 tokens are distributed to qualified investors via the permissioned +issuance layer (KYC at SPV level) and made available permissionlessly on Canton-compatible +DEX infrastructure for secondary trading. This dual-layer structure — permissioned issuance, +permissionless secondary — replicates the architecture proven with SOL20 on Raydium and +NEAR20 on RHEA Finance. + +Agentic Operations: Operational workflows (RFQ issuance, on-chain product minting, NAV +reporting) are automated via an agent-powered backend. AI is not used in investment +decision-making or portfolio management, which remains the exclusive domain of Verified +Assets Limited. + + 3. Architectural Alignment + +CC20 aligns directly with Canton's architecture and ecosystem priorities: + +- Privacy-preserving settlement: Canton's native privacy model is well-suited to + institutional OTC derivative workflows, where trade-level confidentiality is a requirement + for Tier 1 market maker participation. CC20's settlement layer benefits from and + demonstrates Canton's privacy primitives in a live financial product. +- Financial-grade composability: Canton is designed for institutional financial + workflows. CC20 is a production financial instrument — not a prototype — bringing + real institutional capital flows and regulated infrastructure onto Canton rails. +- DeFi liquidity: CC20 creates the first sustainable, non-inflationary yield source + denominated in CC. This is foundational for DeFi composability: yield-bearing CC20 can + serve as collateral, be integrated into lending protocols, and attract external liquidity + to the Canton ecosystem. +- CIP alignment: CIP-0082 explicitly targets "DeFi app(s), liquidity seeding, and + critical infrastructure." CC20 fulfills all three: it is a live DeFi application, seeds + CC liquidity via institutional market maker participation, and provides reusable + tokenization infrastructure for future Canton-native yield products. + + 4. Backward Compatibility + +No backward compatibility impact. CC20 is a net-new smart contract deployment and DEX +liquidity pool. No existing Canton contracts, integrations, or workflows are modified. + +--- + + Milestones and Deliverables + + Milestone 1: Smart Contract Deployment & Audit + +- Estimated Delivery: 3 weeks post-approval +- Focus: Deploy and independently audit CC20 smart contracts on Canton testnet +- Deliverables / Value Metrics: + - CC20 token contract deployed on Canton testnet + - Independent security audit completed (Hacken, consistent with existing MF audit + engagement) + - Audit report published publicly + - Contract addresses and deployment documentation published + + Milestone 2: Market Maker Integration & Strategy Go-Live + +- Estimated Delivery: 5 weeks post-approval +- Focus: Connect CC covered call RFQ workflow to Canton settlement; first live + strategy cycle executed +- Deliverables / Value Metrics: + - Minimum 2 institutional market makers quoting CC covered calls via RFQ + - NAV price feed live and publicly accessible + - Luxembourg SPV compartment activated for CC20 issuance + - First weekly option cycle executed and settled + + Milestone 3: Mainnet Launch & DEX Liquidity + +- Estimated Delivery: 6 weeks post-approval +- Focus: CC20 live on Canton mainnet with permissionless DEX access and seeded liquidity +- Deliverables / Value Metrics: + - CC20 deployed on Canton mainnet + - DEX liquidity pool launched with seed liquidity + - Permissionless secondary market trading live + - Technical documentation and integration guide published for Canton developers + +--- + + Acceptance Criteria + +The Tech & Ops Committee will evaluate completion based on: + +- Deliverables completed as specified for each milestone +- Demonstrated functionality or operational readiness +- Documentation and knowledge transfer provided +- Alignment with stated value metrics + +Project-specific conditions: + +- Security audit report must be from an independent, qualified auditor with findings + addressed or formally acknowledged +- NAV price feed must be live, and updated at minimum daily +- Market maker participation must include minimum 2 independent Tier 1 counterparties +- DEX liquidity pool must demonstrate active trading on Canton mainnet +- All on-chain activity (mints, burns, NAV updates) must be publicly verifiable + +--- + + Funding + +Total Funding Request: 200,000.00 CC + +*Note: Margarita Finance requests that the Committee provide guidance on benchmark CC +amounts for comparable infrastructure proposals, as CC/USD rate at time of award will +affect real-value calibration.* + + Payment Breakdown by Milestone + +- Milestone 1 — Smart Contract Deployment & Audit: 100,000.00 CC upon committee acceptance +- Milestone 2 — Market Maker Integration & Strategy Go-Live: 50,000.00 CC upon committee + acceptance +- Milestone 3 — Mainnet Launch & DEX Liquidity: 50,000.00 CC upon final release and acceptance + + Volatility Stipulation + +Project duration is under 2 months. Should the project timeline extend beyond 2 months +due to Committee-requested scope changes, any remaining milestones must be renegotiated +to account for significant CC price volatility. + +--- + + Co-Marketing + +Upon mainnet launch, Margarita Finance will collaborate with the Canton Foundation on: + +- Joint announcement coordinated with Canton Foundation communications +- Technical blog post covering the CC20 architecture, strategy mechanics, and Canton + integration +- Inclusion of CC20 in Margarita Finance's ecosystem partner communications across + Solana Foundation, NEAR Foundation, and other active partnerships +- Developer documentation published to Canton ecosystem resources +- Margarita Finance will reference Canton Network in all CC20 investor-facing materials + +--- + + Motivation + +Canton Coin currently has no native yield product. CC holders who wish to earn yield on +their position must bridge assets off-chain or accept custodial risk in CEX staking +programs. This is a structural gap: without a native yield primitive, CC has limited DeFi +composability and reduced attractiveness as a reserve or treasury asset for protocols and +institutions building on Canton. + +CC20 fills this gap with a production-grade solution backed by a track record: Margarita +Finance's x20 yieldcoin infrastructure is live on Solana (SOL20) and NEAR Protocol +(NEAR20), with foundation-backed liquidity and institutional market maker +participation. The underlying strategy — revolving covered calls executed via multi-dealer +RFQ — has been backtested across market cycles and is managed by Verified Assets Limited, +an FCA-regulated portfolio manager. + +For the Canton ecosystem, CC20 delivers: a non-inflationary CC yield source for holders +and protocols; a flagship DeFi application demonstrating Canton's suitability for +institutional financial products; and reusable tokenization infrastructure that can +support future Canton-native yield instruments across additional asset classes. + +--- + + Rationale + +The covered call yieldcoin structure is the preferred approach for three reasons: + +Proven infrastructure. SOL20 and NEAR20 are live, not prototypes. The smart contracts, +SPV structure, regulated portfolio manager relationship, and market maker network are +operational. Deploying CC20 is an extension of proven infrastructure to a new chain, not +a greenfield build. + +Institutional-grade compliance. The Luxembourg SPV / regulated PM structure +provides a compliance layer that pure DeFi yield approaches cannot. This is important for +Canton, which explicitly targets institutional adoption. CC20 is the yield product +institutions can hold without regulatory ambiguity. + +Sustainable yield mechanics. Unlike liquidity mining or inflationary reward schemes, +covered call premium is a real economic return derived from market maker demand for +options exposure. The yield does not dilute CC supply and is not dependent on protocol +token emissions. This makes CC20 a durable, market-driven yield source rather than a +temporary incentive program. + +Alternative approaches considered: (1) staking rewards — rejected as inflationary and +not Canton-native; (2) lending protocol yield — rejected as dependent on borrower demand +and not yet available on Canton at scale; (3) cross-chain yield bridging — rejected as +introducing unnecessary bridge risk. The covered call yieldcoin approach delivers +sustainable, compliant, Canton-native yield with the lowest implementation risk given +existing infrastructure.