Hashkey Grant Application - Canza Finance

[Sir-Deon]

Grant Type

Session 1

Email

[email protected]

Telegram

Canza Community Channel:
@canza_chat

X/Twitter Handle

@Canza_Finance

Discord/Community

Canza Community Discord Link:
https://discord.gg/rJmYCgxU

Canza Discord Channel Admin Name:
g0z1e

Previous Application

N/A

Code Audit

We have shared the CXDS codebase with reputable audit firms and received quotes for the auditing process. The soft launch of CXDS onto the HSK Testnet has enabled us to prepare for a thorough review.

Project Information

1. Project Description and Objectives:
The Centralized Exchange Default Swaps (CXDS) project is a groundbreaking financial solution addressing risks in centralized cryptocurrency exchanges. CXDS enables users to create credit default swaps (CDS) for exchange deposits, offering protection against defaults while providing yield opportunities for CDS sellers. Its primary goals are to enhance financial security, restore user confidence, and establish a dynamic DeFi market for risk management.

Notable exchange defaults include:
- Mt. Gox (2014), which lost 850,000 Bitcoins (~$450M)
- FTX (2022), with an $8B shortfall
- Bitfinex (2016)
- Coincheck (2018)
- QuadrigaCX (2019) among others.

With such failures highlighting vulnerabilities, the broader ecosystem remains resilient. Of these, only Bitfinex and Coincheck remain operational, reflecting a 2:5 survival ratio.
Despite these high-profile incidents, there are over 120 active exchanges globally, demonstrating overall stability in the market.
This environment creates a compelling opportunity for CXDS as a crypto asset insurance mechanism. By addressing the ongoing fear of fund loss and leveraging a proven demand for risk mitigation, CXDS can occupy a unique and critical role, enhancing trust and driving greater participation in the growing cryptocurrency ecosystem.

CXDS On Hashkey Testnet

2. Success Potential: - Explain why your project is likely to succeed (consider market demand, technical feasibility, and team capability)

The impact of CXDS in practicality

The CXDS project is uniquely positioned for success due to its alignment with market demand, technical feasibility, and the expertise of the Canza Finance team:

• Market Demand: The cryptocurrency ecosystem continues to face significant risks from centralized exchange failures, evidenced by losses totaling billions of dollars. With over 120 active centralized exchanges globally, the demand for protective solutions like CXDS is clear and growing. CXDS addresses this need by providing deposit protection and yield opportunities, offering a compelling value proposition for a wide user base.

• Technical Feasibility: CXDS is built on robust blockchain infrastructure, utilizing the HSK Testnet to ensure scalability, efficiency, and security. Its innovative "reverse zero-coupon swap" structure enables seamless integration into existing financial ecosystems while providing both user protection and market liquidity.

• Industry Validation: The concept of CXDS has already been reviewed by top insurance underwriters who have expressed significant interest, further validating its relevance and potential.

• Proven Team Expertise: The Canza Finance team has a strong track record in delivering impactful blockchain-based financial solutions. Notably, the team developed Baki Exchange, an infinite-liquidity FX protocol with over $1.1 million in trading volume, demonstrating their ability to create and scale innovative products.

• Multidisciplinary Skills: The team combines expertise in blockchain development, decentralized finance, traditional finance, and market risk management. This diverse skill set ensures the seamless execution and operational success of CXDS, from concept to market rollout.

3. Mission Alignment: - Describe how your project aligns with Hashkey's goals
The CXDS project aligns seamlessly with HashKey Group’s mission to bridge Web3 and real-world economies while fostering a secure, inclusive, and transparent financial system. Key areas of alignment include:

• Advancing Financial Security: CXDS directly addresses risks in centralized exchanges by offering a robust deposit protection mechanism. This aligns with HashKey’s focus on creating secure, trustworthy financial ecosystems and ensuring safety for users in the digital asset space.

• Expanding Blockchain Integration: By leveraging HashKey Chain, CXDS promotes the adoption of blockchain infrastructure in real-world financial applications. This reflects HashKey’s vision of developing regulated platforms that integrate blockchain into traditional financial systems.

• Driving Financial Inclusion: CXDS bridges the gap between traditional financial risk management tools and decentralized finance, expanding financial services to underserved markets. This complements HashKey’s mission to provide inclusive financial solutions through innovative technology.

• Supporting HSK Token Utility: CXDS integrates HSK as a transactional medium, collateral option, and incentive tool, enhancing the token’s adoption and value within a growing ecosystem. This aligns with HashKey’s goal of positioning HSK as a vital component of its regulated Web3 infrastructure.

4. Innovation: - Highlight what makes your project unique or innovative
The CXDS project is highly innovative, offering unique features that differentiate it from traditional financial solutions:

• Reverse Zero-Coupon Swap Structure: CXDS employs a novel mechanism where premiums are paid upfront, and collateral is locked until maturity or default. This ensures funds are always available for claims, providing enhanced security and reliability.

• First-of-its-Kind for Centralized Exchanges: While credit default swaps are well-known in traditional finance, CXDS pioneers their use specifically for cryptocurrency exchange deposits, filling a critical gap in risk management.

• Dual-Utility Design: CXDS offers benefits for both buyers and sellers. Buyers gain protection for their deposits, while sellers earn yield by providing collateral, creating a dynamic and balanced market ecosystem.

• Seamless Blockchain Integration: Built on the HSK Testnet, CXDS leverages scalable blockchain infrastructure to provide secure, efficient, and transparent operations, ensuring technical robustness.

• Market Accessibility: Designed for institutional and retail users, CXDS makes advanced financial instruments accessible to a broader audience, promoting financial inclusion and innovation.

5. Is it open source?
Currently, the CXDS project is not fully open source. However, specific components of the platform may be shared with the community as the project matures. This approach ensures transparency while maintaining the security and integrity of critical systems. Open-sourcing select features in the future could encourage collaboration and foster innovation within the DeFi and blockchain ecosystem specifically in regards to exchange integration and solutions as a service.

6. Free or fee-based for end users?
CXDS is a fee-based platform. Users purchasing credit default swaps (CDS) will incur a small transaction fee, typically 0.3% of the notional value covered. This fee structure ensures the platform's sustainability while providing value-added services, such as deposit protection and yield generation. The transparent and minimal fees make CXDS accessible and beneficial for both retail and institutional users.

7. Interoperability with the Hashkey ecosystem:
CXDS is designed to seamlessly integrate with the HashKey ecosystem. The platform leverages HashKey Chain, a Layer 2 blockchain, to enhance scalability, security, and transaction efficiency. Additionally, the HSK token is incorporated as a transactional medium, collateral option, and incentive tool within CXDS, driving its utility and adoption. This interoperability strengthens the connectivity between CXDS and HashKey’s infrastructure, expanding both ecosystems and delivering a cohesive user experience.

Market Analysis

1. Competitors and Differentiation:
The Centralized Exchange Default Swaps (CXDS) project operates in a niche market with limited direct competition. While traditional credit default swaps (CDS) exist in traditional finance, they primarily cover corporate or sovereign debt and are not tailored for cryptocurrency markets. In the crypto ecosystem, some platforms provide similar insurance-like products, but they focus on different areas:

• Nexus Mutual: Primarily offers coverage for smart contract failures and DeFi protocol risks, not centralized exchange defaults.

• InsurAce: Provides multi-chain DeFi insurance but does not focus on centralized exchanges.

• Unslashed Finance: Offers DeFi-focused insurance products for specific risks like stablecoin de-pegging or validator slashing, with no products for centralized exchange risks.

CXDS differentiates itself by exclusively addressing risks associated with centralized cryptocurrency exchanges. Its "reverse zero-coupon swap" structure provides tailored solutions for protecting user deposits and offers yield opportunities for CDS sellers. This unique approach fills a critical gap in the crypto insurance market, setting CXDS apart from competitors in the DeFi and risk management space.

2. Current User Base and Estimation Method:
Contribution and Premium Assumptions
Average Contribution per User: $5,000 in collateral per CDS contract.
Premium Payment per User: 3% of the notional coverage (i.e., $150 per $5,000 covered).
Coverage Estimate
Total Coverage per User: $5,000 in protection.
Total Premiums Paid: Based on user contributions and the updated premium rate.

User Growth and Financial Estimates

• Integrated Binance Wallet to assist user onboarding in the airdrop program
  Reference:
  https://x.com/BinanceWallet/status/1875180318191456561
  https://x.com/Canza_Finance/status/1875297950152454550

Binance integrated with CXDS

• CoinMarketCap marketing collaboration:
  Previous HSK campaign: https://coinmarketcap.com/community/post/340552077/
  Will use CMC Airdrop Winners plus participants in the above campaign to test out testnet deployment and gain users and traction. Will
  use funnels to convert over participants and traffic users 6.8M

• Canza Finance Telegrma mini-app on-chain quests:
  Reference: https://x.com/Canza_Finance/status/1878773411880800347
  Also will use HSK custom Quests in our Telegram Mini App to onboard users from emerging markets and APAC markets to complete HSK
  tasks

User Growth and Financial Estimates

Time Period	Adoption Rate	Estimated Users (from Exchanges)	Number of Integrated Exchanges	Total Users	Total Contributions ($)	Total Premiums Paid ($)	Total Coverage ($)
Day 1	2%	100,000	5	40,000	200,000,000	6,000,000	200,000,000
Month 6	5%	250,000	10	100,000	500,000,000	15,000,000	500,000,000
Year 1	10%	500,000	15	200,000	1,000,000,000	30,000,000	1,000,000,000

Key Insights

• On Day 1, with five exchanges integrated, 40,000 users contribute $200 million in collateral and pay $6 million in premiums, showcasing significant initial financial potential.

• By Month 6, with ten exchanges onboarded and 100,000 users, CXDS generates $15 million in premiums and $500 million in coverage.

• By Year 1, 15 exchanges onboarded and 200,000 users result in $30 million in premiums and $1 billion in coverage.

• Final CXDS Whitpaper:
  email team for access - [email protected]

• Hashkey x CXDS Proposal PDF:
  email team for access - [email protected]

Recipient Address

0xc45F2cBC6AfdF73A86f86Ca7ca77Ec39D9aaDF76

Budget and Plan

1. Grant Size and Justification:
We are requesting ~380,000 HSK to support the development, launch, and scaling of the CXDS platform. This grant will cover:

• Development Costs: Integration of CXDS into the HashKey Chain and platform optimization for scalability and security.

• Marketing and Awareness Campaigns: To drive adoption among retail and institutional users, emphasizing the benefits of HSK utility within CXDS.

• User Incentives: To encourage early adoption, we will offer reduced premiums and rewards for initial participants using HSK for transactions and collateral.

The requested amount reflects the strategic importance of CXDS in expanding HSK's utility and strengthening the HashKey ecosystem.

2. Project Execution Plan (Roadmap):

• Phase 1: Pilot Phase (0-3 months)
  Integrate HSK as a transaction option on CXDS.
  Test scalability and performance using HashKey Chain.
  Launch pilot campaigns targeting early adopters.
  Develop the CXDS concept and structure building a Credit Default Swap protocol to address centralized exchange risk

• Phase 2: Development Phase (3-6 months)
  Develop advanced features, including automated risk pricing and governance mechanisms.
  Expand API integrations for seamless interoperability with additional platforms.
  Onboard five key centralized exchanges.

• Phase 3: Expansion Phase (6-12 months)
  Scale to 10 additional exchanges and broaden user outreach.
  Implement a governance framework for community-driven decision-making.
  Launch global marketing campaigns targeting institutional clients.

3. Token Distribution (Percentages and Initiatives):

• Development (40%): 152,000 HSK allocated for technical development, audits and infrastructure integration.

• Marketing & User Incentives (35%): 133,000 HSK to fund campaigns and user rewards for adoption.

• Liquidity Pool (15%): 57,000 HSK to bootstrap stablecoin liquidity for CXDS collateral pools.
  Reserve & Contingency (10%): 38,000 HSK reserved for unforeseen expenses or scaling needs.

4. Token Distribution Timeline:
Month 1-3: 40% distributed for development and pilot activities.
Month 4-6: 35% distributed for scaling and marketing efforts.
Month 7-12: 25% reserved for liquidity expansion, incentives, and contingencies.

5. Post-Incentives Sustainability:
Post-incentive, CXDS will generate sustainable revenue through:
Transaction Fees: A 3% premium on CDS contracts provides a steady income stream.
Collateral Utilization: Leveraging locked collateral to generate additional yield within the ecosystem.
User Growth: Increasing adoption across exchanges ensures scalability and revenue growth.

6. Additional Accountability Info (Smart Contract Addresses, Wallet Addresses, etc.):
We will provide full transparency by sharing:

• Smart Contract Addresses: All deployed CXDS contracts on the HashKey Chain.

• Wallet Addresses: For grant disbursements and operational expenses.

• Audit Reports: Post-audit findings to ensure trust and security in all deployed solutions.

Hashkey Relationship

1. Problem Solved for Hashkey:
CXDS addresses the lack of risk mitigation tools for centralized exchanges, a critical issue for cryptocurrency users. By integrating HSK as a transactional medium and collateral option, CXDS increases the utility of HSK while promoting financial security, trust, and user retention in the HashKey ecosystem.

2. Value Proposition:
The partnership between CXDS and HashKey provides:
Increased HSK Utility: HSK becomes central to transactions, collateral, and rewards within CXDS, driving adoption and liquidity.
Enhanced Ecosystem Connectivity: CXDS leverages HashKey Chain, demonstrating its scalability and security to a broad user base.
Revenue Growth: Premiums from CDS contracts contribute to sustainable revenue streams that benefit the HashKey ecosystem.

3. Growth Potential for Hashkey:
CXDS has the potential to significantly expand HashKey's reach:
User Base Expansion: Integrating with CXDS attracts retail and institutional users concerned about exchange risks, increasing HSK adoption.
Ecosystem Growth: Collaboration with CXDS drives utility for HSK and strengthens its position as a key asset in DeFi risk management.
Market Leadership: CXDS positions HashKey as a leader in providing innovative financial security solutions for the cryptocurrency industry.

4. Commitment to Building on Hashkey:
CXDS is fully committed to building and scaling on the HashKey ecosystem by:
Integrating HashKey Chain: Utilizing its Layer 2 blockchain for scalability, security, and efficiency.
Adopting HSK: Making HSK the primary token for transactions, collateral, and incentives.
Strengthening Collaboration: Aligning development and marketing efforts to promote HashKey’s ecosystem globally.

5. Deployment Status:
Testnet: CXDS has been soft-launched on the HSK Testnet for initial testing and scalability assessments.
Hashkey Deployment link:
https://cxds-hsk.netlify.app/
Audit: The codebase has been shared with audit firms, and quotes have been received.
Timeline: Full deployment is expected by the end of the quarter, with additional features and integrations planned during the first year.

Milestones

1. Milestone 1: Initial Concept Validation
Description:
Develop the CXDS concept and structure building a Credit Default Swap protocol to address centralized exchange risk
Conducted a market analysis to identify the need for CDS solutions in the cryptocurrency sector.
Reviewed the concept with top insurance underwriters, receiving validation and interest.
Timeline: Completed in 1Q 2025.

2. Milestone 2: Testnet Deployment
Description:
Deployed CXDS on the HSK Testnet to test functionality, scalability, and user experience.
Shared the codebase with audit firms and received quotes for the next steps in the auditing process.
Conducted initial testing to assess the system’s performance and user engagement.
Timeline: Completed in Q2 2025

3. Milestone 3: Strategic Partnerships
Description:
Secured alignment with HashKey to integrate HSK as a transactional medium within CXDS.
Initiated discussions with centralized exchanges for onboarding and coverage integration.
Launched preliminary marketing efforts to create awareness of the CXDS platform and its benefits.
Timeline: Completed in Q3 2025

Terms Confirmation

• I confirm that all information provided is true and accurate
• I understand and agree to comply with the grant policies
• I understand the KYC requirements
• I confirm token distribution complies with legal requirements