Pogun: Capital Without Compromise

Proposal as pdf: https://ipnso-com.ipns.dweb.link/?cid=bafybeibbrhuis55rl52hsp5rboooobjg4rvq7q5ly2mern7s7f3xcbjzwi

Bitcoin is a \$1.5T asset with virtually no native DeFi infrastructure. The race to become the dominant credit and liquidity layer for BTC is the largest open market opportunity in crypto. Pogun is an end-to-end Bitcoin liquidity and credit engine built to position Cardano as the definitive home of Bitcoin DeFi.

Demonstrating our commitment to the proper use of public funds, Pogun will return 20% of EBITDA to the Cardano Treasury until the initial funding is repaid. This will be followed by an ongoing 5% perpetual return.

Pogun delivers three integrated components:

• Credit Market (Q2 2026) - A non-margin peer-to-peer credit market. A fully on-chain, oracle-free lending protocol where collateral is only at risk upon default, not price fluctuations.
• Yield (Q3 2026) - A deposit-and-earn layer that routes user capital into yield-generating strategies across private credit, RWAs, and structured fixed-income products.
• Bridge (Q4 2026) - BitVM-powered trust-minimized bridge providing 1-of-N security for institutional-grade Bitcoin custody: bridge BTC to Cardano, borrow against it, and earn without surrendering custody of the underlying asset. To execute this roadmap, this treasury withdrawal requests ₳12.29M (equivalent to \$2.95M USD at a reference rate of \$.24/₳).

The Bitcoin Opportunity

The profile of the Bitcoin owner has broadened dramatically — from early ideological holders to a wide spectrum that now includes retail investors seeking returns on savings, high-net-worth individuals diversifying portfolios, and sophisticated institutional actors managing treasury positions. For the increasingly sophisticated investor, capital efficiency is paramount. The ability to borrow against BTC without selling it in order to fund operations, seize opportunities, or manage cashflow is the foundational use case that unlocks Bitcoin's \$1.5T+ market cap as productive collateral. The capital and institutional interest exists. What's missing is critical lending infrastructure to the standard they require.

The Cardano Advantage

Cardano is the fitting executional environment for Bitcoin credit infrastructure due to its structural symmetry. Cardano’s EUTxO model shares a direct architectural lineage with Bitcoin's UTxO model. This symmetry enables deterministic, parallelized financial logic that account-based chains like Ethereum and Solana can’t replicate without significant trade-offs and added complexity. For constructs like a BitVM bridge and a peer-to-peer credit market, which are both fundamentally UTxO-native, Cardano is chosen based on first principles, not by default.
Cardano's technical properties create compounding advantages for credit market infrastructure:

• Low, predictable fees. A credit market generates frequent on-chain activity, including epoch payments, collateral adjustments, bond transfers, and flash loans. On Cardano, a borrower can service a loan for pennies per transaction, making structured credit viable at any scale. And importantly, the fees are deterministic.
• No front-running or MEV. Cardano's deterministic EUTxO model eliminates mempool-based extraction, meaning there are no sandwich attacks on collateral and no MEV bots profiting from liquidations. For a credit market handling significant capital, this is a fundamental safety guarantee.
• Deterministic execution. Transactions are validated locally before submission. For complex operations like flash-loan self-liquidations, knowing exactly what will happen before you sign is not a luxury — it is a requirement.
• Native asset security. Bridged BTC exists as a Cardano Native Token (CNT), secured at the ledger level with the same guarantees as ADA. With Cardano the entire attack surface is eliminated; no ERC-20 approval exploits, no infinite approval drains, and no ‘Freeze and Seize’. Every major PoS ecosystem faces the same dilemma; native staking yields set a risk-free floor that DeFi must beat to attract capital. ADA's native staking delivers ~3% APY with no lockup, no slashing, and no smart contract exposure. The best DeFi protocols should take advantage of this. Pogun's credit market is designed with this principle: When a user deposits ADA as collateral, their native staking rewards continue to accrue uninterrupted. Participating in Pogun will never cost the user their baseline yield. Because Bitcoin has no native staking yield and no competing risk-free baseline, holders actively seek access to credit and liquidity without selling their positions. By bringing Bitcoin to Cardano, Pogun introduces a massive pool of capital that drives TVL, transaction volume, and DeFi activity without competing with ADA staking rewards. The two assets are complementary: ADA secures the network, BTC fuels the economy on top of it.

The Bitcoin DeFi Landscape

Crypto lending hit a record \$73.6 billion in Q3 2025, surpassing the previous cycle's peak. On-chain lending now commands 67% of that market, up from 49% since 2021. Yet a mere 1% of Bitcoin's \$1.5T+ market cap participates in DeFi. The bottleneck is not a lack of interest, but a lack of institutional-grade infrastructure.
Bitcoin has already matured into a recognized corporate treasury asset, with over 192 public companies now holding Bitcoin on their balance sheets. Between MicroStrategy, Metaplanet, and Twenty One Capital alone, over 843,000 BTC is held. These institutions are actively searching for sustainable yield and access to liquidity without selling. Today, the vast majority of crypto lending is executed on pool-based margin protocols. While pool-based lending was effective for bootstrapping liquidity during crypto's formative years, it poses significant risk to the borrower. Unpredictable interest rates, shared pool dilution, and oracle-driven liquidations are non-starters for institutional risk management.
The missing layer is structured credit. Institutions require the ability to borrow against BTC under terms that resemble private credit: fixed rates, bilateral agreements, and collateral at risk only upon definitive default, not intra-day price swings. Critically, the resulting debt instruments need to be transferable and tradeable, creating the secondary market that allows credit to scale.
Pogun is purpose-built to fill this gap. BTCfi capital today is overwhelmingly locked in staking protocols and wrapped token schemes, which are not productive credit infrastructure. The market is moving; what's missing is the lending layer that serious capital can rely on.

Why Now

This is an unprecedented time of growth, and Cardano is positioned to benefit. The GENIUS Act and institutional adoption have driven the stablecoin market past \$320 billion. With the introduction of USDCx and RealFi’s USDr, Cardano is finally equipped to capture this flow. Simultaneously, over 192 public companies now hold Bitcoin as a treasury asset with no productive deployment path. The demand, capital, and regulatory environments are aligned, but the infrastructure is missing.
The technical window is starting to open. BitVM has matured from an academic concept into implementable infrastructure. BitVM2 demonstrated on-chain dispute resolution; BitVM3 reduced verification costs to ~\$38 per challenge. Pogun is building a custom BitVM solution to serve as the foundation of its bridge, capturing an 1,800× reduction in off-chain operator overhead while maintaining equivalent security guarantees. For the first time, trust-minimized BTC bridges with 1-of-N security are practically buildable. It’s not just theoretically possible, but engineering-ready.
However, the competitive window is closing fast. Hundreds of millions in venture capital are flooding into BTC-backed lending protocols, yet the vast majority still rely on flawed margin-call mechanics. Well-funded teams across Ethereum, Solana, Starknet, SUI, and Bitcoin L2s are actively shipping alternative infrastructure. Liquidity and developer attention consolidate quickly in crypto; first movers capture disproportionate share.
Cardano possesses massive untapped transaction capacity and highly secure native infrastructure, yet TVL growth has trailed competing networks. This proposal is a direct response: a product that’s capable of generating capital, and brings external capital onto Cardano while the window is still open. Cardano must act decisively, or risk being permanently locked out of the largest addressable market in the industry.

Pogun is an integrated system built from three components that create a single economic engine. While each is independently valuable, together they create a loop — capital enters via the bridge, is deployed through the credit market, and generates yield through integrated strategies. They are presented here in launch order.

1.1 Credit Market

The Problem

On-chain lending today is dominated by pool-based margin protocols that liquidate borrowers' positions when the price falls below a threshold. For many institutions and long-term holders, this is a dealbreaker — and remains one of the single largest barriers keeping serious capital out of DeFi.

The Solution

Pogun Credit Market is modelled on how the largest global credit markets actually operate. Consider a corporate bond; a company issues debt at a fixed rate, makes scheduled coupon payments, and returns principal at maturity. The bondholder's collateral is never at risk of being liquidated because of market volatility — only if the issuer misses payments or fails to repay at term. This is the foundational logic of credit markets worldwide, and it is exactly how Pogun works on-chain.
Borrowers and lenders negotiate every parameter directly — principal, fixed interest rate, payment schedule, collateralisation price, and default tolerance — creating bilateral agreements fully enforced by smart contracts. The system is flexible by design: supporting both epoch-based loans with periodic partial payments and bullet loans with a single payment at maturity. Borrowers can also make partial repayments to withdraw collateral proportionally rather than waiting for full repayment. The borrower can only lose control of collateral upon definitive default: when the borrower breaches the agreed-upon consecutive missed-payment threshold, or fails to repay principal by the agreed term expiry. Just as a corporate bond's covenants define what constitutes an event of default — not one late coupon, but a pattern of non-performance — Pogun's smart contracts enforce the exact tolerance each lender sets at origination. Upon default, the lender submits a claim and the smart contract releases collateral — with no intermediary. Price volatility alone never triggers liquidation. There are no oracles, no liquidation bots, no pool mechanics.
For lenders, the direct negotiation model enables higher fixed yields than pooled protocols because they price specific counterparty risk directly — the same reason corporate bonds pay more than savings accounts. The fixed collateralisation price provides a known downside buffer, and Term Softening (below) gives lenders tools to work through difficult situations rather than being forced into binary outcomes.
The concept was originally envisioned by Fallen Icarus (Rusty Shapiro), whose work on non-margin lending mechanics within the Cardano ecosystem directly inspired and shaped this protocol's design.

Key design features:

• Term Softening. Lenders can extend deadlines, lower rates, or forgive penalties to restructure debt — without requiring borrower signatures. This mirrors real-world markets and incentivises relationship-based lending over liquidation-first behaviour.
• Flash-Loan Self-Liquidation. A borrower who wants to exit a loan early but lacks upfront capital can do so in a single atomic transaction: the protocol borrows capital, unlocks collateral, swaps on a native DEX, and repays the debt — guaranteed to succeed or fully revert. This leverages Cardano's eUTxO determinism to deliver composability that EVM chains cannot replicate.
• Transferable Bond Tokens. Active loan positions are represented as native tokens. These debt obligations exist as tokens that can be transferred between lenders, laying the foundation for a secondary fixed-income market on Cardano — a primitive that remains largely absent from L1 infrastructure.
• Open On-Chain Composability. The credit market operates entirely on-chain as open infrastructure. Developers can integrate Pogun's peer-to-peer lending mechanics directly into their own DApps, wallets, or treasury management platforms. The protocol is 100% non-custodial, just peer-to-peer agreements enforced by open-source smart contracts. At launch, the credit market will support ADA and all Cardano native assets as collateral, with BTC arriving on the platform following the launch of our bridge in late 2026. Smart contracts for the credit market are currently undergoing a formal security audit by TxPipe, with completion expected by 27 May 2026.

Benefit to Cardano

Pogun equips Cardano with institutional-grade credit infrastructure specifically designed for corporate treasuries and funds who require predictable financing. Every active loan generates recurring on-chain transaction volume through periodic payments, and transferable Bond Tokens.

1.2 Yield DApp

The Problem

Bitcoin is a predominantly idle asset, but by giving it utility as collateral, there is a massive opportunity to increase ADA's participation in DeFi. However, connecting this collateral with available liquidity is difficult because managing bilateral positions is complex for most capital holders. The core challenge is capital efficiency.

The Solution

A yield app built on top of the credit market, allowing users to select fixed-term strategies and earn automated returns. Capital is matched with offers on the credit market at a protocol level. The protocol locks tokens against the borrower's collateral, automatically releasing principal and yield at maturity.
The yield app will launch after the Credit Market, once the loan book has established a live performance track record. By abstracting peer-to-peer negotiation, Pogun Yield provides a scalable, single-click entry point for passive capital to participate in the on-chain credit economy.

Benefit to Cardano

The yield app opens Cardano's credit infrastructure to passive capital. It drives sustained demand for stablecoins by channeling liquidity into active lending. Every transaction flows through on-chain infrastructure, generating volume and TVL. Long-term, institutional tiers will bring BTC-holding family offices, DAT treasuries, and insurance reserves onto Cardano — capital that has previously never touched the ecosystem.

1.3 BitVM Bridge

The Problem

Cross-chain infrastructure only solves the problem of moving assets, not how to effectively deploy them when they arrive. Bringing BTC to Cardano without deep, integrated utility leaves capital stranded—a newly bridged asset without an immediate destination is effectively useless to its holder.
Beyond utility lies the hurdle of technical insecurity. Existing bridges are either centralized or reliant on multisigs. While proposals for SPO-managed multi-signatures exist within the Cardano ecosystem, they inherit fundamental BFT limitations (requiring supermajorities), introduce massive coordination overhead, and place full trust in the destination chain’s validators. For institutional Bitcoin holders, relying on a foreign chain's consensus for the safety of their primary asset is a deal-breaker.

The Solution

Pogun solves both the utility and technical problems simultaneously. BitVM enables a trust-minimized, 1-of-N security model—the bridge remains secure as long as a single honest operator exists. Crucially, institutions can act as one of the N operators themselves, guaranteeing the security of their own assets without relying on third parties.
Our team’s early experience building Cardinal [3] served as a critical stepping stone. As we pushed toward production readiness, we hit significant constraints with generalised bridging approaches. This led us to develop a custom BitVM implementation that incorporates the latest research breakthroughs:

• Optimized Circuit Footprint: Generalized BitVM frameworks create massive proof sizes. By writing a custom implementation strictly for our bridge logic, we drastically reduce proof generation time, on-chain footprint, and execution costs.
• Capital-Efficient Operator Economics: Standard models require operators to lock bond significant capital during long challenge-response windows. Our tailored challenge mechanism lowers the upfront capital burden, enabling a wider, more robust operator set.
• Mithril for State Attestation: Bitcoin cannot natively read Cardano’s state. We leverage Mithril because it compresses Cardano's entire state into a lightweight, cryptographically secure certificate that a Bitcoin operator can efficiently verify on-chain on Bitcoin.
• Groth16 for ZK Proofs: Bitcoin's finite block space and lack of opcodes is limiting. Groth16 provides constant-size verification, allowing us to validate complex Zero-Knowledge proofs within standard Bitcoin transaction constraints.

Benefit to Cardano

Pogun’s BitVM bridge acts not just as an economic pipeline for the Pogun Credit Market, but as shared infrastructure benefiting any application on Cardano. By pairing institutional-grade trust assumptions (1-of-N security) with immediate DeFi utility, Pogun establishes Cardano as the most secure destination for Bitcoin.

1.4 Complete DeFi solution

Pogun is built on a single thesis: the mechanics of credit—term structure, enforcement, repayments, and yield—can be implemented on-chain with greater precision and transparency than in traditional finance. We are building infrastructure that allows the world’s most valuable digital assets, including Bitcoin, to serve as productive capital. By uniting these components, we ensure digital assets operate under the same economic logic that governs mature financial markets. Pogun is DeFi built to the standard that serious capital requires.

2. Governance and Advisory Structure

Pogun’s development is guided by a Product Committee comprising key technical leaders from the Cardano ecosystem, alongside an Advisory Board contributing deep economic and cross-chain architectural expertise.

2.1 Product Committee

The Product Committee oversees protocol design, deployment decisions, and strategic direction to ensure alignment with Cardano's broader DeFi landscape.

Funding Disclaimer: Participation on the Product Committee is entirely pro-bono. No treasury funds, tokens, or alternative forms of compensation are allocated to committee members for their guidance.

2.2 Advisory Board

The Advisory Board provides specialized expertise in tokenomics, Bitcoin integration, and institutional operations.

3. Technical Specification: The Pogun Stack

Pogun is a three-layer product stack [1] : a non-margin-call credit market, a yield dApp, and a trust-minimized Bitcoin bridge that preserves UTxO identity. Together they enable a complete Bitcoin DeFi system — lock BTC, borrow stablecoins against it, generate yield, repay, and recover the exact same Bitcoin UTxO — without custodians, without wrapped-token trust assumptions, and without triggering a taxable disposal event.
The bridge is built on a custom implementation of the BABE witness encryption protocol, evolving from the Cardinal construction demonstrated live on Bitcoin mainnet at Bitcoin 2025. Pogun is a production implementation of the BABE protocol, with additional engineering optimizations and fixes contributed by our cryptography team.

3.1 Protocol Lifecycle [2]

• Peg-In. A user posts a LockTX on Bitcoin, committing a UTxO into a Taproot-governed output controlled by the Pogun operator set. The Taproot script tree encodes protocol rules — operator cooperation paths and timeout-based reclaim — as individual leaves. Once operators attest the lock, a Bond Token is minted on Cardano: a non-fungible 1:1 representation of the specific locked UTxO.
• Dual-Token Layer. The Bond Token can be held as-is; maintaining a direct claim on the exact locked Bitcoin — or converted into fungible 'BTC (primeBTC) via a Cardano smart contract. This conversion is reversible. For immediate liquidity, 'BTC can also be exchanged for native BTC via real trustless atomic swaps using adaptor signatures.
• Peg-Out. The holder burns the Bond Token on Cardano (CommitBurnTX → BurnTX). Inclusion of the burn is proven to Bitcoin via a recursive Groth16 proof over the Mithril certificate chain (see below). Once verified, a SpendTX releases the originally locked UTxO on Bitcoin. In the optimistic case, this completes without on-chain challenge steps.
• Dispute Resolution. Operators stake BTC as collateral bonds. If an operator observes an invalid unlock attempt, the fraud-proof path activates. The protocol supports flexible challenge structures, from mandatory validity proofs on every unlock to purely optimistic paths with proofs only on dispute. Resolution is executed via BABE witness encryption and Groth16 state proofs attesting both the Cardano-side burn and the Bitcoin-side state.

3.2 Security Model: 1-of-N Optimistic Verification

The Pogun Protocol uses a 1-of-N security model: the bridge remains secure as long as a single operator is honest. This stands in contrast to n-of-m BFT bridges where a supermajority must sign off on Bitcoin transactions — coordination complexity that grows with the validator set and becomes impractical beyond a small number of nodes.
If a withdrawal attempt is challenged, only the honest actor is able to submit a proof of innocence. The protocol protects the Bitcoin.
The architecture provides Bitcoin-rooted assurance via emulated covenants in Taproot script — the cryptographic exit path remains independent of Cardano's consensus health. This avoids the signature storm inherent in threshold schemes like MuSig2 or FROST, where coordination overhead grows linearly with the validator set.

3.3 Verification Layer: BABE Witness Encryption

The core verification challenge for any BitVM-based bridge is cost. BitVM3 solved on-chain cost (~\$38 vs BitVM2's ~\$14,200) by moving Groth16 verification into garbled circuits, but the full verifier circuit size for semi-honest security is 40.5 GiB — a serious operational burden per challenge instance. The actual amount of storage per-operator is in the order of multiple TBs for ~ 10 operators.
BABE (Garg, et. al.) takes a fundamentally different approach: rather than garbling the entire Groth16 verifier, it leverages witness encryption as its core primitive for enforcing correctness, incurring substantially lower overhead while providing equivalent security. An operator evaluates a small garbled circuit computing a single BN254 scalar multiplication only after being challenged as part of decryption.

These several-orders-of-magnitude off-chain improvements are what makes Pogun’s production bridge operationally viable.

3.4 Mithril Integration: Recursive Chain Attestation

Pogun uses Mithril with recursive SNARKs instantiated as Groth16 to attest the entire Cardano blockchain state in a single proof. The Mithril certificate chain — from genesis to the block containing the relevant BurnTX — is compressed into the recursive SNARK. Verification on Bitcoin does not require replaying Cardano's consensus history; a single Groth16 proof attests that a specific transaction was included in a valid chain endorsed by sufficient stake. The Bitcoin-side verification via BABE checks this proof. If valid, the peg-out proceeds; if invalid, the challenger halts execution and slashes the operator's bond.

3.5 Credit Market and Yield App

The Non-Margin Credit Market is a standalone lending protocol on Cardano accepting any native token as collateral, including Bond Tokens and BTC. The institutional differentiator: posting a Bond Token as loan collateral preserves the exact Bitcoin UTxO identity throughout the loan lifecycle. Upon repayment, the borrower recovers the identical UTxO — a non-taxable event under current guidance in most jurisdictions, as the user never disposed of their Bitcoin.
The Yield Application connects directly to the Credit Market, enabling the generation of yield by providing liquidity.

This completes the full cycle: BTC → bridge → Bond Token → borrow stables → yield → repay → recover exact UTxO.

4. Financial Revenue Model & KPIs

Pogun generates revenue from three sources: fees from the Credit market, the Yield dApp, and BitVM Bridge.

Credit Market Fees

• Origination fee: 1.0% of loan principal, collected at loan activation
• Servicing fee: 10% of interest
• Combined take rate: ~2.4% at launch (1% origination + borrower APR × 10% servicing rake), compressing to ~2.1% as average APR declines at scale
• Flash loan fees: flat fee per transaction
• Zero-fee launch period: all protocol fees waived June to September 2026.

Bridge Fees

• Bridge fee:
  • 0% BTC -> Cardano
  • 0.2 % Cardano -> Bitcoin
• Bridge operating cost: 40% of bridge gross revenue (approximation of node infrastructure, ZK proof generation, relayer costs)

Yield DApp Fees

• Yield DApp fee: 10% of yield generated for users (performance fee on AUM yield)
• Average yield on strategies: ~8% APY blended across RWA, private credit, and tokenised instruments

4.1 Treasury Return Commitment

Most treasury-funded proposals are grants. They fund work, the work ships, and the treasury sees no financial return. Pogun is structured differently: the treasury makes an investment that pays back and then provides a permanent income stream. Full terms of the return commitment are defined in Section 6.6.

4.2 Benefits to Cardano

Market sizing

Crypto-collateralized lending reached a record \$73.6 billion in Q3 2025, with on-chain protocols commanding 67% of that market (Galaxy Research). The market closed Q4 2025 at \$69.6 billion, and Galaxy projects total outstanding crypto lending to exceed \$90 billion by end of 2026. Over 300,000 BTC (~\$22B) is currently deployed across DeFi through wrapped assets (WBTC, cbBTC), Bitcoin L2s, and staking protocols. The TAM for both lending and BTCfi represents a big market opportunity.

Cardano Vision 2030: Targets for 2027

The Cardano ecosystem has adopted Vision 2030 KPIs as the framework for evaluating treasury-funded initiatives, including a \$3B TVL target. The table below maps Pogun's projected TVL by product against that target by the end of 2027.

A Flywheel Investment

The Cardano Foundation's governance advisory team raised an important question: Should the Treasury fund commercial ventures with established revenue models, and if so, what structure makes sense? We agree with the premise.

• Contractual payback. Pogun is committed to returning the USD-equivalent funding amount from EBITDA, then paying 5% of EBITDA in perpetuity. This is a treasury investment with a defined return.
• Milestone-gated disbursement. Funds are released in four tranches, each contingent on verified delivery (Section 5). The treasury never pays for work that hasn’t been completed.
• Refund clause. If the project fails, if the team dissolves, or if the bridge proves infeasible, undisbursed funds are returned (Section 6.5).
• On-chain verification. Revenue, EBITDA, and treasury returns are reconcilable with on-chain data. Quarterly reports (Section 8) provide full reconciliation. If the Cardano ecosystem is to move beyond grant dependency toward commercial sustainability, it needs a working model for how treasury-funded ventures operate: seed capital in, repayment out, then a perpetual contribution. Pogun is that model.

4.3 KPIs

Cardano's Vision 2030 framework (Intersect Product Committee) defines three primary ecosystem KPIs and five strategic pillars. This section maps Pogun's projected contribution against both.

Core KPI Contribution (End of 2027, Base Case)

Strategic Pillar Alignment

Beyond the headline KPIs, the Vision 2030 strategy defines five pillars with specific objectives.

Pogun directly advances three of them:

• Vision 2030 Pillar 1: Infrastructure & Research Excellence
  • Relevant Objective: I.1 Scalability & Interoperability
  • Pogun Alignment: The BitVM bridge is cross-chain interoperability infrastructure — shared, open, and available to any Cardano DApp. It makes the Bitcoin ecosystem natively accessible to Cardano.
• Vision 2030 Pillar 2: Adoption & Utility
  • Relevant Objective: A.1 High-Value Verticals (DeFi, RWA)
  • Pogun Alignment: Pogun directly targets two of the four explicitly named verticals: DeFi (credit market, yield) and RWA (tokenised fixed-income strategies via yield layer).
  • Relevant Objective: A.3 Developer Experience
  • Pogun Alignment: The credit market is fully documented, open-source infrastructure designed for third-party composability. Any wallet, DApp, or treasury tool can integrate Pogun's lending primitives.
• Vision 2030 Pillar 5: Ecosystem Sustainability & Resilience
  • Relevant Objective: E.1 Financial Stewardship & Tokenomics
  • Pogun Alignment: The strategy calls for the treasury to evolve from a passive pool to a yield-generating, multi-asset treasury. Pogun's return model: 20% EBITDA repayment followed by 5% perpetual return, is a direct implementation of the objective: treasury capital deployed as an investment, not a grant.

5. Deliverables, Milestones & Disbursement Gates

Development is organized into four phases, each corresponding to a disbursement tranche as outlined in Section 7. Funds for each phase are released only upon verified completion of the prior phase's milestones. Gate verification is performed by an independent administrator.

5.1 Phase 1: Foundations & Credit Market (Q2 2026)

**Focus: Infrastructure setup and mainnet launch of the non-margin credit market.

1.1 — Smart Contracts & Security Audit

• Deliverable: Finalized contracts for negotiation, activation, flash loans, and fees
• Verification: Audit report published
• Pass Threshold: Complete audit by TxPipe; no unresolved critical vulnerabilities

1.2 — Backend Protocol Services

• Deliverable: Transaction building server, chain data query APIs, pallas-validate integration
• Verification: Technical verification
• Pass Threshold: Fully functional and tested on Pre-Production testnet

1.3 — Frontend Application

• Deliverable: Marketplace and discovery interface, borrower/lender flows, dashboards, notifications, account systems
• Verification: Public URL
• Pass Threshold: UI accessible and fully integrated with backend services

1.4 — Pre-Production Deployment & QA

• Deliverable: Full system deployed on Cardano Pre-Production testnet
• Verification: Documented test results
• Pass Threshold: Structured QA report published, including adversarial and negative testing

1.5 — Mainnet Launch & Documentation

• Deliverable: Production deployment with technical reference, API documentation, and integration guides
• Verification: On-chain verification, public URL & published docs
• Pass Threshold: Contracts live on mainnet; demonstrated end-to-end loan lifecycle; API documentation and developer integration guides publicly accessible

Gate Decision: All criteria 1.1–1.5 must pass to trigger Phase 2 disbursement.

5.2 Phase 2: Yield Layer & Bridge Alpha (Q3 2026)

**Focus: Launching the integrated yield layer for native assets and bringing the trust-minimized bridge to testnet.

2.1 — Yield Infrastructure & Integrations

• Deliverable: Yield routing infrastructure connecting deposits to yield-generating strategies
• Verification: Functional verification
• Pass Threshold: Infrastructure deployed; successfully accepting deposits and facilitating access to yield strategies

2.2 — Yield Application Launch

• Deliverable: Yield DApp frontend, user dashboard, and strategy selection interface
• Verification: Public URL accessible
• Pass Threshold: Users can deposit assets and initiate yield strategies

2.3 — Bridge Token & Transaction Engine

• Deliverable: BTC representation mechanism, transaction submission layer, operator key management, and BitVM prototype
• Verification: Functional verification (testnet)
• Pass Threshold: BTC representation mechanism deployed; BitVM prototype functional on Cardano testnet

2.4 — Atomic Swaps Integration

• Deliverable: Adaptor Signature-based cross-chain atomic swap libraries
• Verification: Functional verification (testnet)
• Pass Threshold: Atomic swaps integrated and functioning within the bridge alpha environment

2.5 — Bridge Alpha Environment

• Deliverable: Internal end-to-end cross-chain testing
• Verification: Documented test transactions
• Pass Threshold: Successful execution of complete peg-in and peg-out transaction loops

Gate Decision: All criteria 2.1–2.5 must pass to trigger Phase 3 disbursement.

5.3 Phase 3: Bridge Mainnet & Yield Expansion (Q4 2026)

**Focus: Mainnet activation of the trust-minimized bridge, establishing the complete end-to-end Bitcoin DeFi cycle.

3.1 — Proof Generation Engine

• Deliverable: Production Groth16/Mithril ZK-proof generation system attesting Cardano state on Bitcoin
• Verification: Performance benchmarks
• Pass Threshold: Proof generation completes successfully; proof verification succeeds on-chain

3.2 — Security Model Activation

• Deliverable: Full 1-of-N challenge-response security architecture for bridge operators
• Verification: Technical verification
• Pass Threshold: Challenge-response mechanism operational with at least one successful live demonstration

3.3 — Complete Stack Security Audits

• Deliverable: Independent security audits for bridge contracts, proof circuits, and operator software
• Verification: Audit reports published
• Pass Threshold: All audits complete with no unresolved critical issues

3.4 — Bridge Mainnet Launch

• Deliverable: Public trust-minimized bridge enabling permissionless BTC bridging to Cardano
• Verification: On-chain verification & public URL
• Pass Threshold: Bridge UI live; peg-in and peg-out operations with real BTC proven on Cardano mainnet

3.5 — Yield Expansion Readiness

• Deliverable: Institutional onboarding pipeline and yield waitlist migration plan
• Verification: Public documentation
• Pass Threshold: Onboarding pipeline documented; waitlist capital migration plan published and ready for execution

Gate Decision: All criteria 3.1–3.5 must pass to trigger Phase 4 disbursement.

5.4 Phase 4: Observability & Revenue Maturity (Q1 2027)

**Focus: Institutional-grade operations, public transparency infrastructure, and transition to self-sustaining revenue.

4.1 — Orchestrator Observability Systems

• Deliverable: Network health monitoring, operator alerting, and error recovery systems
• Verification: Technical demonstration
• Pass Threshold: Systems deployed and operational for all bridge operators

4.2 — Protocol Documentation Finalization

• Deliverable: Complete technical documentation, open-source references, and third-party integration guides
• Verification: Public URL
• Pass Threshold: Full documentation covering bridge architecture, credit market, operator onboarding, and security model

4.3 — Treasury Return Commencement

• Deliverable: First treasury return or published financial report
• Verification: On-chain transaction or published report
• Pass Threshold: If EBITDA is positive: first return payment sent to Cardano Treasury with quarterly report. If EBITDA is negative: quarterly report documenting revenue, costs, and projected timeline to first return.

Gate Decision: All criteria 4.1–4.3 must pass to conclude the funded project scope and transition into the perpetual return phase (Section 8.2).

6. Budget & Administration

6.1 Financial Summary

6.2 Budget Allocation

6.3 Phase-Based Disbursement Schedule

Funds are released in four tranches, each gated by milestone verification.

Phase 1 is disbursed upon governance action ratification. Each subsequent phase is disbursed only after the designated administrator verifies that the prior phase's milestone criteria (Section 6) have been met. If a phase gate is not passed, remaining funds are not released until remediation is agreed or the refund clause (Section 6.5) is triggered.

6.4 Designated Administrator

Contract Management

A written off-chain Legal Contract will be created between Input Output and the Cardano Development Holdings (CDH), as mandated by the Constitution, and will be administered by Intersect. This will include details of the project delivery schedule and dispute resolution.

Project Delivery

All milestones, acceptance criteria, payment amounts and expected delivery dates will be agreed between the Input Output and Intersect, acting on behalf of the CDH. Input Output will deliver according to the agreed-upon project schedule within the Legal Contract, of which the necessary information will be made public via the budget management platform via transaction metadata.
Defined by the milestones within a Legal Contract, Input Output will submit and attest milestone acceptance to the community, Intersect or 3rd Party Assurer.
Project progress will be monitored via Intersect's delivery assurance function which will be communicated to the community.
Acceptance of the work will be supported by a 3rd Party Assurer, who will be responsible for reviewing and signing off the work completed at each project milestone against the corresponding milestone deliverables detailed within the Legal Contract. This work is funded from a portion of this treasury withdrawal.

Budget Management Tooling

To administrate treasury funds on-chain, Intersect will utilize the treasury management smart contract framework developed by Sundae Labs. The smart contracts have been extensively tested including audits from TxPipe and MLabs.
Final mainnet validation test can be seen via the Disburse action within transaction: 0f591dc544ae14102dbb4a74d5311a6acffc1772b163d8b7a9656b9525950b17
This withdrawal will utilise Intersect’s 2025 treasury reserve contract with address being: stake17xzc8pt7fgf0lc0x7eq6z7z6puhsxmzktna7dluahrj6g6ghh5qjr
Funds will later be migrated to a 2026 treasury reserve contract once established.

Specifics

Intersect will utilize a single Treasury Reserve Smart Contract (TRSC), with many Project-Specific Smart Contracts (PSSC), managed by Intersect. Intersect's management consists of three 'admin' and two Intersect 'leadership' roles. An Oversight Committee consisting of five external, independent third-party entities will provide checks and balances on Intersect, and safeguard against errors and unilateral control. The administration of both TRSC and PSSCs will be managed by Intersect, with external oversight on certain actions from the Oversight Committee.
The 2025 TRSC Oversight Committee consists of Sundae Labs, Cardano Foundation, Dquadrant, Xerberus and NMKR. Their role is to independently verify key administrative actions using on-chain logic, ensuring accuracy and consistency without exercising discretion over governance decisions.
For all details on Intersect's configuration please see the Smart Contract Guide on the knowledgebase.
The high level permissions are as follows:

• TRSC Fund and PSSC Modify
  • Two of the three Intersect admins, two of the five trusted entities and one of the two Intersect leadership sign-off must authorize
• TRSC Disperse
  • Two of three Intersect admins, three of five trusted entities and two of two Intersect leadership sign-off must authorize
• TRSC Pause and Resume
  • Two of three Intersect admins, and one of two Intersect leadership sign-off must authorize
• TRSC Sweep
  • One of three Intersect admins, and one of two Intersect leadership sign-off must authorize
• TRSC Reorganize
  • Two of three Intersect admins and three of five trusted entities must authorize

Processes

Upon enactment of this governance action, funding for this project will be directed into the TRSC's stake account. All instances of TRSC and PSSC can not be staked with a SPO and will be delegated to the auto-abstain predefined DRep. From here funds will be withdrawn into a UTxO remaining at the TRSC.
When a 2026 TRSC is established, the funding for this project will be migrated via the ‘disburse’ action.
When the Legal contract is prepared and Input Output is ready, funding for this project will be transferred using the Fund action to a PSSC. All milestones will be outlined within the metadata.
A dashboard will be available for the community to audit the TRSC or PSSC and track metrics related to this withdrawn ada as well as being immutably verifiable on chain.

6.5 Administrative Guardrails

• Milestone-Based Disbursement: Funds are released to the project team upon successful verification of quarterly milestones by the designated administrator.
• Fund Segregation: All ADA held by the administrator prior to disbursement will be kept in separate, community-auditable accounts. Wallet addresses will be published upon fund receipt.
• Delegation Restrictions: Administrator-held funds will NOT be delegated to any Stake Pool Operator and will be delegated to the predefined auto-abstain voting option, per Article II, Section 7.
• Dispute Resolution: All contractual agreements governing fund usage will include formal dispute resolution provisions.
• Refund Clause: Remaining unspent funds shall be returned to the Cardano Treasury under the following circumstances:
  • Milestone failure: If the project team fails to meet the delivery requirements for any phase within 90 days of the phase deadline, and no remediation plan is agreed with the administrator, all remaining undisbursed funds are returned.
  • Team dissolution: If the core team is unable to continue development, all undisbursed funds are returned within 30 days.
  • Fundamental technical infeasibility: If the BitVM bridge is determined to be infeasible for Cardano integration by an independent technical review commissioned by the administrator, undisbursed bridge-specific funds are returned. Credit market and yield DApp funds already disbursed and spent on delivered work are not subject to refund.
  • Voluntary termination: If the project team voluntarily terminates the project, all undisbursed funds plus any unspent disbursed funds are returned within 30 days.
  • Partial delivery: If some but not all phases are completed, only the funds allocated to undelivered phases are returned.

6.6 Revenue Return Commitment

Pogun commits to returning value to the Cardano Treasury under the following binding terms.
Terms

• Phase 1 — Grace period: No returns are due while Pogun’s quarterly EBITDA is negative.
• Phase 2 — Repayment: Once Pogun achieves positive quarterly EBITDA, 20% of quarterly EBITDA is paid to the Cardano Treasury. Payments continue until the USD-equivalent value of \$2.95M has been returned. ADA amounts per payment are calculated at the prevailing market rate at the time of each quarterly payment.
• Phase 3 — Perpetual return: After the full funding amount has been repaid, Pogun pays 5% of quarterly EBITDA to the Cardano Treasury in perpetuity. Verification
• Revenue and EBITDA are derived from on-chain protocol fees (credit market origination and servicing, bridge fees, yield DApp performance fees) and are independently verifiable.
• Quarterly transparency reports (Section 8) provide full financial reconciliation including revenue by source, operating costs, EBITDA, and treasury return payments.
• Treasury return payments are tracked on-chain with amounts reconcilable against reported revenue.

Commencement

The return obligation begins upon first disbursement of funds and continues indefinitely. The grace period (Phase 1) does not have a fixed end date — it ends automatically when quarterly EBITDA turns positive.

7. Prior Funding Disclosure For Input Output Group

No funds from any prior Treasury allocation have been directed toward Pogun development. This proposal represents Pogun's first request for Cardano Treasury funding.
Input Output has received ADA from the Cardano Treasury across multiple workstreams in the prior 24 months. The total IO Treasury allocation is ₳130,708,860, of which ₳78,459,777 (60%) has been received to date.

Note: for Catalyst, this only reflects the workstream that focuses on the Hermes Infrastructure and UX/UI improvements, not the execution and operation of Funds 14-16. Per Info Action, this is in the process of transitioning to Cardano Foundation.

8. Reporting & Accountability

8.1 Reporting Cadence

Pogun's reporting obligations are tied to the treasury return commitment (Section 6.6) and continue for as long as the return obligation is in effect. The Pogun team is responsible for preparing and publishing all reports. Failure to publish a report within the stated window will be disclosed and explained in a subsequent report.

• Delivery (Q2 2026 – Q1 2027)
  • Cadence: Quarterly, within 30 days of quarter-end
  • Scope: Fund usage vs. budget by category, milestone status, remaining balances, and administrator disbursement confirmations.
• Post-delivery (until full repayment)
  • Cadence: Quarterly, within 30 days of quarter-end
  • Scope: Revenue by source, EBITDA, credit market / bridge / yield KPIs, and the transaction hash of each treasury return payment.
• Perpetual (after full repayment)
  • Cadence: Annually, within 60 days of fiscal year-end
  • Scope: Revenue summary, perpetual return payments, and ecosystem KPIs.

8.2 Report Contents

Formal quarterly and annual reports will include the following metrics, organised by product vertical:

• Fund Usage & Reconciliation (delivery phase only): Actual vs. budgeted expenditure per category (section 6.2), remaining undisbursed funds balance, and a summary of administrator-verified disbursement transactions.
• Credit Market: Total Value Locked (TVL), borrowed capital outstanding, number of active loans, average time-to-match, and default rate.
• Yield DApp: Assets Under Management (AUM), average APY across active strategies, and number of active yield strategies.
• Bridge: Total BTC locked, bridge volume (monthly and cumulative), and number of active 1-of-N operators.
• Ecosystem: BTC trading volume on Cardano DEXs, total BTC locked on Cardano, and third-party DApp integrations using bridged Bitcoin.

8.3 Publication and Verification

• Immutability: All formal reports are published on the Pogun website. An IPFS-pinned copy of each report is referenced in the on-chain treasury return transaction metadata, ensuring permanent, auditable records.
• On-chain transparency: Protocol revenue — credit market fees, bridge fees, and yield DApp fees — is independently verifiable by any community member at any time through public Cardano ledger data.