Carbon DeFi

Market Making

Carbon DeFi is a next-generation decentralized exchange that enables new on-chain trading strategies involving limit and range orders.

Risk Rating
Average
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Carbon allows users to create automated trading strategies using custom on-chain limit and range orders.
What we like less
Carbon's core contracts are upgradeable by an externally-owned account (EOA) that is controlled by the Bancor team, with plans to move to immutability by year-end.
What it means for you
Offers you brand new ways to trade in DeFi that removes the need for constant monitoring of positions while supporting on-chain, decentralized liquidity.
Information
Exploit/Hacks
None
Info
  • Website
  • Token: BNT
  • Tags: Market Making
Key Metrics
  • TVL: $1.1M (Rank #194)
  • TVL Ranking by Market Making: #0
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $1.09M
Risk Assessment
Average
Protocol Code Quality
  • Code reviewed by several experienced auditors including PeckShield and OpenZeppelin
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Latest protocol version launched in 2023; maturity over nine months reduces technical risk as smart contracts are sufficiently battle-tested
  • Bottom 80% by total value locked increases risk
  • Core contracts can be upgraded with just an EOA wallet
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • Low voting power concentration reduces risk
Protocol Design
  • No death spiral concerns
Things to know about Carbon DeFi

How Carbon works

Carbon is a next-generation decentralized exchange that introduces novel mechanisms for on-chain trading and liquidity provision. The first generation of automated market makers (AMMs) required liquidity providers to buy and sell tokens across an infinite price range. Then, second-generation AMMs like Uniswap V3 introduced the concentrated liquidity model, which allows liquidity providers to set a specific price range where they are willing to buy and sell tokens. Carbon is the first protocol to offer "asymmetric liquidity", whereby users can differentiate between their buy and sell ranges. Users can place ranges above and below a set price based on where they expect a given token to trade. This automates the process of "swing trading" any standard ERC-20 token. Examples of trading strategies users can execute through Carbon include crab trading ETH (buy ETH in a lower range and sell ETH in an upper range), trading a "bullish token unlock" (buys a token's dip leading up to the unlock and selling after when the price starts to rise), and arbitraging pegged assets like DAI/USDC (buys/sells DAI when it depegs/repegs). There are two key participants in Carbon: makers and takers. Makers are similar to liquidity providers in existing AMMs as they support the liquidity of the system. Makers submit automated strategies consisting of on-chain limit or range orders. Takers are the users, such as direct traders on Carbon, arbitragers, or DEX aggregators, who perform spot trades using their liquidity. Makers submit orders with their custom ranges defining the prices at which they're willing to buy or sell their tokens. Orders with more liquidity concentrated at a given price are more likely to get their orders executed when the market moves into that price range. Takers also factor in gas costs when executing spot trade requests, which may result in non-execution if the trade is not economical.

How Carbon makes money

Carbon differentiates itself from existing AMMs in several key ways. Liquidity providers on Carbon (called "makers") can set a specific buy and sell range for their tokens, which establishes a custom fee/spread. This is in contrast to existing AMMs today where all liquidity providers adopt the same fee prescribed by the AMM. Users can create recurring strategies in perpetuity using just a single source of liquidity that automatically rotates between orders. Carbon orders are also irreversible, meaning that trades are in one direction and final upon execution. This eliminates the risk of order reversal for existing AMMs. Strategy updates can be made efficiently without needing to withdraw and re-creating your liquidity position. Lastly, spot trading on Carbon is fully resistant to Maximum Extractable Value (MEV) sandwich attacks.

How you make money on Carbon

Carbon charges fees to users who trade with existing strategies and orders. The trading fee is defined as a percentage of the trade amount. All fees collected by Carbon are protocol-owned and their allocation is determined solely through DAO governance.