Carbon is a new groundbreaking approach to on-chain trading and liquidity. It was created by the inventors of the AMM (Bancor), who have been building in DeFi since 2017. Carbon is currently in Beta, with hundreds of automated trading strategies already live.
In the words of one crypto researcher — “the upside potential here is the biggest I’ve seen from a new DEX.”
From a user’s perspective, what makes Carbon unique is it brings automated trading strategies that are popular in CEXs — but have until now been unavailable or prohibitively costly in DeFi — to a fully on-chain, permissionless protocol. These strategies include:
- Onchain Limit and Range Orders: Execute one-time, irreversible trades at specific prices (limit order) or within a specific range of prices (range order).
- Momentum Trading: Buy into a rising asset and gradually sell as the token continues to rise.
- Grid Trading (“buy low, sell high”): Buy in one price range and sell in a higher price range. Use a single liquidity position and avoid having to manage multiple orders. For example, an ETH strategy that buys ETH between $1800–1900 and sells ETH between $2100–2200.
- Arb Pegged Assets: For example, an ETH/rETH strategy that buys ETH when it de-pegs below the price of rETH, and sells the ETH when it re-pegs to the price of rETH. Or, a DAI/USDC strategy that buys and sells DAI when it de-pegs and re-pegs.
Features
What makes these types of strategies possible — and what distinguishes Carbon from existing AMMs and DEXs — are the following features:
- Custom Spread: While existing AMMs force their liquidity providers to adopt the fee of the AMM they’re providing liquidity to, Carbon lets LPs set their own personalized fee (or spread) by selecting the specific prices where they’d like to buy and sell their tokens.
- Rotating Liquidity: Liquidity is automatically moved between the maker’s selected buy and sell ranges as orders are executed.
- Irreversible Orders: User liquidity trades in one direction, irreversibly, eliminating the need to monitor your order and withdraw liquidity at the right time.
- MEV Resistance: Spot trading is protected from MEV sandwich attacks (more info).
- Zero Gas/Trading Fees: Makers pay zero gas fees and zero trading fees on trades executed by their strategy, only a small gas fee to open/close their strategy.
- On-Chain Adjustability: Once a strategy is in place, it can be adjusted without needing to remove and recreate the position, enabling hyper gas-efficient updates.
For more details on these features, please see the following explainer video:
https://medium.com/media/1cd5640e6f1b1de04a708335ce6954c6/href
From X*Y=K to Asymmetry: A Brief History of On-Chain Liquidity
Carbon marks a new era for on-chain trading and liquidity.
The first generation of on-chain liquidity — supported by constant-product AMMs — required liquidity providers to buy and sell tokens across an infinite number of prices.
The introduction of concentrated liquidity gave liquidity providers the ability to set a specific range of prices where they offer to buy and sell tokens.
Carbon is the first protocol to offer “asymmetric liquidity”, whereby users can distinguish between their buy and sell ranges. Ranges can be placed above and below a set price based on where a user expects a given token will trade — and liquidity automatically moves into range as markets shift.
More resources:
Try Carbon Today: https://www.carbondefi.xyz/
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A Primer on Bancor’s New Trading Protocol, Carbon was originally published in Bancor on Medium, where people are continuing the conversation by highlighting and responding to this story.