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Problem Statement

There have been a number of DeFi protocols that have been presented in academic works that have not been implemented in realistic smart contracts. We have three high level goals for this RFP:

1. Compare practical performance of a mechanism to theoretical claims made in research
2. Surface implementation details that impact performance in ways that the original specifications were not able to predict
3. Describe security issues that arise from the development process

Background

Since DeFi had its meteoric growth in 2020, there has been a constant stream of research on how to improve existing DeFi protocols and for novel protocols. Many of these protocols have been proposed in forums, academic papers, and other venues online. However, not all of these protocols have been implemented and/or tested. Often these were not implemented not due to technical infeasibility, but rather a lack of a pure business or economical reason for implementing such a mechanism. For instance, privacy-preserving mechanisms in DeFi have been relatively unpopular as they are hard to design and cause users to have to pay more. However, these mechanisms can still be valuable to have reference implementations of, especially as a public good to the research and development community.

While there are numerous possible DeFi protocols to consider implementing (some examples will be highlighted in the sequel), it will be important for a successful candidate to find protocols to implement that strike a balance between computationally feasibility and novelty. We’ll provide two examples of protocol designs that are likely unsuitable for this grant.

1. There may be protocols that provide very strong theoretical guarantees on price, fairness, or other desiderata, yet require solving hard (e.g. PPAD or NP-hard) problems. These problems are likely infeasible to solve with blockchains.
2. There exist proposed protocols that improve the efficiency of existing protocols via novel implementation mechanics (e.g. new data structures, different refactoring of architectures, different implementation on a particular VM). These protocols don’t pass the novelty barrier (however, there is another RFP for the optimization of existing DeFi protocols that 

On the other hand, a successful proposal could be viewed as similar to Hayden Adam’s first proposal to the Ethereum Foundation that led to Uniswap V1. In particular, Hayden took a blog post by Martin Koppelman and Vitalik Buterin and implemented it before finding users of the protocol. The initial implementation spearheaded much of DeFi in late 2018 and perhaps a successful recipient of this grant will do the same!

Examples

There are a number of examples of ideas/papers being turned into successful protocols upon implementation. We will provide a (likely incomplete) list of these projects below:

Uniswap

• Inspiration: Blog Post
• Created by: Hayden Adams

Primitive Finance

• Inspiration: academic paper, Tarun Chitra, Guillermo Angeris, Alex Evans
• Created by: Alex Angel

Lido

• Inspiration: Blog post, Zaki Manian and Sunny Agrawal
• Created by: Konstantin Lomashuk and Vasilliy  

Flashbots

• Inspiration: Academic Paper, Phil Daian
• Created by: Phil Daian and Tina Zhen

TWAMM

• Inspiration: Blog Post, Dan Robinson
• Created by: Chronos