# Syscoin Governance Proposal: Lunos – R&D for Compliance-First Edge-Chain on zkSys
Project Name: Lunos Compliance-First Edge Chain (R&D Phase)
Project Manager: Lunos Team
Funding Request: 500,000 SYS/month
Duration: 4 months
Total Budget: 2,000,000 SYS
Voting Deadline: January 15th 2026
Team Wallet: sys1qn2hku2nkjzmn3luculdjxdj0pvu0r30sx2wskh
Voting:
Vote Yes:
gobject_vote_many a996ac1b18a94df332f2795fd215be8ca0a07ae10b97b055fc3bf0ffaedcf261 funding yes
Vote No:
gobject_vote_many a996ac1b18a94df332f2795fd215be8ca0a07ae10b97b055fc3bf0ffaedcf261 funding no
Vote Abstain:
gobject_vote_many a996ac1b18a94df332f2795fd215be8ca0a07ae10b97b055fc3bf0ffaedcf261 funding abstain
INTRO
Lunos has operated for years in institutional Web3, covering over 21M dollars in risk for stablecoin issuers, validators, asset managers, and protocols. Now, we are evolving Lunos into something broader and more impactful: a compliance-first edge-chain built on zkSys, designed for enterprises, fintechs, and governments that require identity, privacy, and regulatory alignment at the protocol level.
This proposal focuses exclusively on the Research & Development phase: a four-month period dedicated to designing, testing, and validating the core architecture that will power the Lunos Chain. No full implementation yet. This is the foundational work required before requesting support for full deployment.
Executive Summary
Lunos aims to deliver one of the first enterprise-grade, compliance-native edge-chains built using zkSys technology and anchored to Syscoin’s Bitcoin-secured settlement layer.
The R&D phase will be completed:
- full architecture and protocol design
- compliance module definitions
- identity and permissioning models
- token-utility mapping
- initial system contracts
- ZK integration plan and early prototypes
- enterprise API specifications
- feasibility testing with PoCs
This work ensures that the final product is technically sound, regulatory-ready, and aligned with the needs of institutions exploring blockchain adoption.
At the end of this R&D phase, the Lunos team will submit a second proposal for full implementation, based on the findings and specifications produced here.
CONTEXT ON LUNOS TODAY
Lunos originally operated as a Web3 insurance provider, offering:
- stablecoin depeg coverage
- smart-contract risk products
- protection for institutional assets
Across four years, we built around underwriting, risk modeling, oracle frameworks, and institutional integrations.
Through this work, we gained a deep understanding of institutional pain points:
- lack of privacy in public networks
- fragmented or weak compliance mechanisms
- no identity enforcement at the protocol level
- limited enterprise-grade execution environments
- constraints around regulatory audits and data isolation
Recent Progress & Ecosystem Milestones
While this proposal focuses on a forward-looking R&D phase, the Lunos team has been actively building and validating core infrastructure over the past months, as part of the previously submitted Syscoin governance proposal.
Most notably, Lunos developed a bridge insurance prototype integrated with our internal asset manager architecture, demonstrating how insurance logic, asset accounting, and cross-chain risk modeling can work together in practice. This prototype was showcased publicly at EigenCloud’s “The Vault” event in Argentina, where it generated strong interest and engagement from the community and ecosystem partners.
The response made it clear that, even without public releases, there is a strong demand to understand what Lunos has been building behind the scenes. This work validated several key assumptions around:
- asset-level risk modeling
- insurance and protection logic at the infrastructure layer
- integration paths between asset management and security mechanisms
This work directly builds on the previously approved governance proposal, which funded the initial exploration of bridge insurance, asset accounting, and protection mechanisms. The bridge insurance prototype presented at EigenCloud’s The Vault was a concrete outcome of that effort, demonstrating how insurance logic can be tightly coupled with asset management and cross-chain risk modeling.
Although the project has since pivoted away from launching bridge insurance as a near-term product, this prototype remains highly valuable. It provides a validated proof of concept that can be reactivated and extended in the future once the new Lunos chain is live. If the Syscoin ecosystem ever decides to introduce native bridge insurance or protection mechanisms on zkSys, this work ensures that such a product would not need to be built from scratch, but instead continue from an already tested and community-reviewed foundation.
In parallel, the Asset Manager developed as part of the same governance cycle will be launched on Ethereum, even while the current R&D phase is ongoing. Importantly, its architecture is fully EVM-compatible, meaning that it can be ported to zkSys with minimal friction. Depending on the maturity of yield and liquidity partners on zkSys, such as Aave forks or PRME-style protocols, the Asset Manager can be deployed directly into the zkSys ecosystem at the appropriate time.
Together, these efforts demonstrate that the outcomes of prior governance funding are not being discarded as part of the current pivot. Instead, they form a growing library of validated, reusable infrastructure that can be activated as the zkSys ecosystem evolves. This approach compounds value over time: research leads to prototypes, prototypes lead to optional products, and future proposals can build on proven work rather than restarting from zero.
Team & Resource Allocation
To ensure transparency around how funds from this R&D proposal are being allocated, the Lunos team is providing clarity on the roles involved in executing this work.
This proposal funds a multidisciplinary team responsible for research, architecture design, cryptography, compliance modeling, and protocol specification:
Team Members:
- David Potolski - Protocol Architecture, zkSys Research & Documentation
- Rohan Nero - Smart Contract & System Design
- Lucas Souza - Backend & API Architecture
- Jason Grewal - Compliance & Identity Systems
This structure ensures that funds are directed toward core research and engineering capacity necessary to deliver a high-quality, implementation-ready design.
MARKET CONTEXT
The next wave of blockchain adoption is being shaped by regulation, compliance, and privacy requirements.
Global signals
- Over 130 countries exploring CBDCs
- Brazil’s DREX focusing on privacy + compliance
- Europe’s AML6 + MiCA mandating identity-aware digital assets
- Institutions adopting tokenization and RWA rails
- Governments exploring private and permissioned execution layers
Industry direction
- zkSync’s Prividium demonstrates enterprise interest in ZK-based privacy chains
- Ethereum researchers point to privacy + compliance as the natural next step
- Enterprises require private execution with public auditability
This growing demand aligns perfectly with what Syscoin and zkSys can offer:
privacy, compliance, scalability, and Bitcoin-anchored finality.
WHAT LUNOS WILL BECOME
Lunos Chain is being designed as a compliance-native edge-chain built on zkSys, enabling regulated applications to operate with privacy and identity enforcement.
Key capabilities (to be developed after R&D):
- identity-enforced execution
- wallet-level permissions
- jurisdiction-aware compliance rules
- private transactions using ZK proofs
- enterprise-grade private RPC endpoints
- institutional-ready smart-contract environment
- Bitcoin-settled finality inherited via Syscoin
This makes Lunos ideal for:
- fintech rails
- tokenized assets (RWA)
- compliant launchpads
- private institutional applications
- government and regulated systems
The chain remains open and interoperable, but with compliance at its core.
WHY THIS R&D PHASE MATTERS
This four-month R&D phase is critical because it establishes the technical and regulatory foundation before building the chain itself. It ensures we avoid misalignment, under-specification, or costly redesigns later.
This phase will:
- define core architecture using zkSys primitives
- fully map compliance logic (KYC/KYB/AML/jurisdiction)
- design identity-enforced execution flows
- validate feasibility with real ZK prototypes
- design enterprise APIs and permissioning models
- specify governance, fee structures, and token utility
- prepare developer documentation and technical diagrams
- identify all components needed for the implementation proposal
Only after this research phase will we present the full implementation plan.
BREAKDOWN OF DELIVERIES AND BUDGET (4 MONTHS)
Month 1 – Architecture & Specification
- finalize Lunos Chain architecture on zkSys
- complete compliance module specification (KYC, KYB, AML, jurisdiction logic)*
- define token utility, fee framework, and execution flow
- draft preliminary technical documentation
- map zkSys primitives and ZK stack requirements
Month 2 – Core R&D Foundations
- build identity-enforced execution prototype
- design compliance API specifications
- validate zkSys integration pathways
- create enterprise node (private RPC) requirements
- begin specification of system contracts (DID, compliance manager, fee manager)
Month 3 – System Contracts & ZK Research
- implement early system-contract prototypes (non-production)
- begin ZK circuit design for compliance and privacy functions
- evaluate ZK proving costs, performance, and feasibility
- internal testing of identity and permissioning models
- define governance and centralized control mechanics for regulated environments
Month 4 – Integration Planning & Final R&D Outputs
- finalize compliance-as-a-service architecture
- produce enterprise SDK specification
- write full technical documentation suite
- deliver architectural diagrams, flows, and design documents
- publish R&D report summarizing findings and implementation requirements
- prepare the follow-up “Implementation Phase” proposal
Budget Allocation & Prior Cost Coverage
This R&D proposal primarily funds ongoing research, engineering, and specification work over the four-month period. In addition, a portion of the requested budget will be used to offset previously incurred operational expenses directly related to earlier approved governance work.
Under the original governance approval, Lunos was funded at 200,000 SYS per month, which at the time corresponded to approximately 8,000 USD. Over the following months, significant market price changes resulted in those same 200,000 SYS equating to approximately 3,500 USD, creating a funding gap that was not attributable to scope expansion or mismanagement, but purely to exchange rate changes.
To maintain delivery continuity, Lunos covered these shortfalls internally, resulting in accumulated operational debt related to prior Syscoin-approved development efforts.
As part of this R&D proposal:
- A portion of the funds will be allocated to normalize these previously incurred costs
- The remaining funds will be dedicated to the current 4-month R&D scope
- No additional retroactive funding is being requested beyond what is required to maintain operational stability
This approach ensures:
- Financial continuity for the team executing the research
- No interruption to Syscoin-aligned development efforts
- Clear separation between past obligations and future implementation funding
All findings, specifications, and outputs from this R&D phase will be used to inform a separate, future governance proposal focused exclusively on implementation.
BENEFITS TO SYSCOIN
- first enterprise-grade compliance chain built on zkSys
- new gateway for governments, banks, fintechs, and asset issuers
- leverages Syscoin’s Bitcoin-secured settlement layer
- drives institutional adoption through identity + privacy infrastructure
- showcases zkSys capabilities for enterprise and regulatory markets
- increases meaningful activity, transactions, and integrations in the Syscoin ecosystem
This positions Syscoin as a leading option for institutional blockchain deployment.
DELIVERABLES
At the end of the 4-month R&D phase, Lunos will deliver:
- Full technical architecture of Lunos Chain
- Compliance module specifications (KYC, KYB, AML, jurisdiction logic)*
- System contract prototypes (non-production)
- Identity and permissioning flow designs
- ZK circuit feasibility studies + performance benchmarks
- Enterprise API + private RPC specifications
- Governance, token utility, and fee-structure blueprint
- Developer documentation and diagrams
- R&D final report
- A complete implementation proposal for the next governance cycle
- Compliance module specifications will be made with UE in mind. Different jurisdictions will be researched later on.