Thank you for your review and consideration. Please see the full proposal in the attached for additional information.

• Automatic Formal Verification (Plutus High Assurance): Develop automated formal verification tool for Plinth/Cardano DApps. ($1,859,000)
• Property Based Testing Tool (Plutus High Assurance): Develop Plinth PBT Tool to automatically generate diverse inputs/actions. ($2,366,000)
• Static Analyzer (Plutus High Assurance): Develop "one-click" static analysis tool for Plinth contracts. ($777,140)
• Ouroboros Leios Implementation: Begin core implementation of Leios L1 consensus protocol. ($7,098,000)
• Cardano Node Architecture Refresh (Acropolis): Re-architect the Cardano node into a modular model (Acropolis). ($2,028,000)
• Hydra Development: Complete Hydra v1.0 mainnet and full audit, Cardano's L2 state channel solution. ($1,859,000)
• Minotaur AVS: Launch Minotaur, Actively Validated Service (AVS) leverage Cardano L1 security. ($1,900,000)
• Mithril Development: Enhance Mithril protocol for secure, efficient access. Speeds up sync, enables light clients. ($1,859,000)
• KES Agent: Implement security enhancement for SPO KES key storage and management. ($676,000)
• Ledger-HD: Move ledger state tables from memory to disk (LSM tech) to reduce RAM. ($1,352,000)
• Log-Structured Merge (LSM) including UTXO-HD: Integrate bespoke Well-Typed LSM-tree backend for managing on-disk state. ($1,352,000)
• Revised Stake Pool Incentive Scheme: Investigate potential adjustments to SPO incentive scheme. ($1,352,000)
• Nested Transactions (Babel Fees): Implement Nested Transactions ledger feature enabling tx batching. Facilitates Babel Fees. ($1,352,000)
• Plutus Core Roadmap: Execute roadmap for Plutus Core delivering key new primitives. ($2,704,000)
• Tiered Pricing Models (Plutus High Assurance): Introduce transaction prioritization mechanism to improve predictability during congestion. ($1,352,000)
• Transaction Monitoring System (Plutus High Assurance): Develop system to monitor transactions, detect potential fraud/anomalies. ($1,690,000)
• Maintenance and Support: Maintenance of existing code base, ongoing support. Includes cost of running Test & Tracing setup. ($14,682,000)
• Audit & Security Assurance: Engage independent audits and security assurance. Consolidated item. ($2,150,400)

GRAND TOTAL: $48,408,540

This proposal addresses several critical challenges and opportunities within the Cardano ecosystem necessary for its continued growth, competitiveness, and decentralization. Key problems include:

• Scalability Limitations: The current L1 infrastructure faces throughput constraints during high demand, hindering user experience and application potential. There's a need for significant scaling solutions at both Layer 1 (consensus) and Layer 2.
• Node Architecture & Performance: The existing node design presents limitations in terms of modularity, extensibility, performance (especially RAM usage), and ease of contribution from diverse development teams.
• Smart Contract Assurance & Developer Experience: Developers require enhanced tools for ensuring the security, correctness, and efficiency of smart contracts to build trust and reduce risks. Improving the Plinth/Aiken/Plutarch ecosystem and providing robust testing/verification tools is essential.
• SPO Viability & Security: Ensuring the operational security of Stake Pool Operators (SPOs) and investigating the fairness and sustainability of the incentive mechanism is vital for network health and decentralization.
• User Experience & Adoption Barriers: Friction points like mandatory ADA fee payments and unpredictable transaction inclusion during congestion need addressing to improve usability and attract broader adoption.
• Ecosystem Competitiveness: Cardano needs to integrate emerging blockchain paradigms like Actively Validated Services (AVS) to remain competitive and offer diverse functionalities.
• Core Maintenance & Knowledge Transfer: The foundational codebase requires ongoing maintenance, modernization, technical debt reduction, and structured knowledge sharing to ensure stability and enable broader community participation in core development.

In this proposal, IOE and its collaborators outline key core Cardano platform developments aimed at substantially improving network scalability, security, performance, and usability, while enhancing developer support.

Implementation of these initiatives offers substantial benefits across the Cardano community, which collectively, enhance Cardano's technical foundations, enabling it to support a larger, more complex, and more active ecosystem:

• For the Ecosystem: Delivers massive L1 throughput increase (Leios), robust L2 scaling (Hydra, Mithril), and positions Cardano competitively in new areas like AVS (Minotaur). Enhances overall network security, resilience, and decentralization. Fosters supplier diversity through knowledge sharing and modular architecture (Acropolis). The ROI stems from increased network capacity, utility, and attractiveness, driving adoption and value.
• For End Users: Experience significantly reduced network congestion and faster transaction processing (Leios), near-instant finality for specific applications (Hydra), the convenience of paying fees with native tokens (Nested Transactions/Babel Fees), and potentially more predictable transaction inclusion (Tiered Pricing). Enhanced security measures build user trust.
• For Developers & dApp Builders: Gain access to advanced tools for building more secure and efficient smart contracts (Plutus High Assurance suite, Plutus Core enhancements). Benefit from a more extensible and accessible node architecture (Acropolis), easier integration with L2s and light clients (Hydra, Mithril), and improved transaction capabilities (Nested Transactions). This lowers development barriers and enables more sophisticated applications.
• For Stake Pool Operators (SPOs): Benefit from significantly reduced node operational costs (lower RAM requirements via Ledger-HD, LSM/UTXO-HD), enhanced operational security (KES Agent), improved network performance, potential new revenue streams (Minotaur AVS), and a potentially fairer incentive structure (Revised Scheme investigation). Mithril improvements speed up node synchronization.

The tangible outcomes vary per initiative but collectively aim to significantly enhance Cardano's core infrastructure. Deliverables include:

• Core Protocol Enhancements: Mainnet integration of major upgrades like Ouroboros Leios (dramatically increasing L1 throughput) and Nested Transactions (enabling Babel Fees) via Hard Fork events.
• Architectural Improvements: A Proof-of-Concept and subsequent releases for the modular Acropolis node architecture, enabling greater extensibility and node diversity. Integration of the LSM backend improving on-disk state management (UTXO-HD, Ledger-HD) to significantly reduce node RAM requirements.
• L2 & Scaling Solutions: Audited release of Hydra Head v1.0, deployment of a live Minotaur AVS network, and enhanced Mithril protocol releases providing decentralized signature diffusion, node integration, and succinct proofs for faster syncing and light client support.
• Tooling & Developer Experience: Release of Plutus High Assurance tools (Automatic Formal Verification, Property Based Testing CLI/VSCode integration, Static Analyzer), delivery of new Plutus Core primitives (MSM, ModExp), compiler/library enhancements, and performance tooling (benchmarks, dashboards).
• Security & Operational Improvements: Implementation of the KES Agent for SPOs, delivery of a Transaction Monitoring System (Alpha backend/frontend), and research reports/potential implementation for the Revised SPO Incentive Scheme.
• Ongoing Maintenance: Continuous delivery of node releases, bug fixes, performance improvements, and knowledge transfer artifacts. Specific milestones, Software Readiness Level (SRL) targets, and detailed "Definition of Done" criteria will be defined for each initiative during contracting and execution phases.

NOTE: Requested funding in this proposal are shown as USD ($) estimates only. Payment for services rendered will be requested in ADA. Provided this proposal is accepted, the USD-to-ADA rates will be determined during contracting process with Intersect. A placeholder price of $0.50 USD per ADA was used for calculation purposes, resulting in a placeholder USD-to-ADA conversion rate of 2.00 (1 USD = 2 ADA).

The estimated total development and audit resources required across these initiatives is 140-160 FTEs over the proposed 12-month development period (though specific initiative durations may vary). This largely consists of experienced IOE resources, supplemented by significant contributions from longstanding supporting collaborators, including but not limited to: Anastasia Labs, BCryptic, Galois, Globant, Greenwave, Lerna Labs, MLabs, Modus Create, Obsidian Systems, PaloIT, PNSol, Quviq, SAIB, Serokell, Sundae Labs, TxPipe, Vacuumlabs, and Well-Typed. IOE intends to work closely with Intersect to ensure knowledge sharing, technical education, and to foster a diverse supplier pool for Cardano's future.

Input Output (IO) realized Cardano's vision for a secure, scalable, decentralized platform through a research-driven, phased delivery (Byron to Voltaire). Leveraging formal methods, functional programming, and rigorous engineering, IO produced key achievements including Proof-of-Stake, Ouroboros consensus, Plutus smart contracts, native tokens, and scaling solutions like Hydra and Mithril.

IOE and its partners' involvement spans the entire existence of Cardano, and is demonstrated daily by its active development, support, and maintenance. Key personnel essential to this long-standing contribution are retained to continue this effort through 2025 and into 2026.

IO remains committed to furthering Cardano’s technical development, research and community engagement.

Following development, formal verification, validation, and mainnet deployment, initiatives delivered under this proposal will transition into the ongoing Cardano Maintenance and Support scope. This scope includes essential activities like maintenance of the existing and new codebase, code modernization, addressing technical debt, bug fixes, disaster recovery, full node wallet maintenance/enhancements, and node performance improvements. A key aspect is preserving and sharing the vital knowledge embedded within the teams. While initially led by IOE, the intention is for these maintenance responsibilities to transition over time to a diverse range of capable ecosystem collaborators, supported by dedicated knowledge sharing and technical education efforts facilitated in collaboration with Intersect.

While individual initiatives will have specific inbound and outbound dependencies managed during execution, several prominent dependencies significantly impact timelines and delivery capabilities across the portfolio:

• Ouroboros Leios Implementation: Critically depends on the successful integration of the Log-Structured Merge (LSM) backend (replacing LMDB), completion of Ledger-HD (moving remaining state to disk), and interactions with Network, Crypto, and Voting layers. It also requires analysis of its impact on Ouroboros Peras.
• Cardano Node Architecture Refresh (Acropolis): Relies on the Cardano Blueprint “Eidos” documentation initiative, the Pallas Rust libraries, and the Caryatid microservice framework.
• Mithril Development: Dependent on Cardano’s network layer and the development of specific mini-protocols for Mithril communication involving TxPipe and Cardano Node teams.
• Nested Transactions (Babel Fees): Implementation is contingent on prior successful hard forks and the finalization of features included in the target hard fork combinator event.
• Ledger-HD & UTXO-HD: Both depend on the successful integration of the LSM tree backend.
• Automatic Formal Verification (PHA): Leverages the Lean4 proof assistant and the Z3 SMT solver as backend components.
• Blueprint “Eidos” Documentation: Has outbound dependencies on the progress of Acropolis and Amaru (Rust Node).