Introducing Carbon: An update to the Bancor DAO and Community
Since the emergency shutdown of BNT Distribution in June, the number-one priority of contributors has been to increase protocol fees in order to lower the protocol deficit and help restore reserves on Bancor v2.1 and v3.
This post is intended to give the Bancor DAO a high-level update on the recent announcement of Carbon and the role it can play in the continued recovery of Bancor v2.1/v3 reserves, while charting a promising path forward for the Bancor DAO.
First, a little background on how Carbon came to be. While researching a possible dynamic fee structure to apply to Bancor v3, a novel discovery was made. In short, all AMMs today are implemented using a single “bonding curve” that defines the buying and selling of an asset in both directions. In recent months, we uncovered a new way to implement on-chain liquidity where individual liquidity positions can be simultaneously governed by two distinct bonding curves, one for buying and one for selling. Each curve executes orders irreversibly at a fixed price or within a given price range, and can be updated in a highly gas-efficient manner. This “asymmetric” and adjustable concentrated liquidity structure gives users an unprecedented level of precision to personalize on-chain trading and market-making strategies. It also fundamentally changes the status quo in existing AMMs: There is no impermanent loss in Carbon, in the sense that each strategy is not a buy-and-hold liquidity position, but rather the expression of a particular trading view.
Carbon is the first proposed implementation of Asymmetric Liquidity with Adjustable Bonding Curves (“ABCs”). The protocol gets its namesake from the fact that carbon atoms create most of the asymmetry in the natural world, and interact with other atoms via a plethora of different bonding mechanisms.
While Carbon is functionally separate from previous versions of Bancor protocol, the protocol will be governed by the Bancor DAO and utilize the BNT token. Unlike previous Bancor versions, Carbon requires no BNT minting to achieve its novel features. Pending DAO approval, Carbon will generate protocol-earned fees that can be used to lower the deficit on Bancor v2.1 and v3, for example via BNT buybacks and burning. Personally, I will be advocating for the majority (if not all) of Carbon’s protocol-earned fees to be used to restore reserves in Bancor v2.1 and v3.
In general, Carbon is just one of a number of efforts aimed at lowering the deficit, including Almanak’s ongoing fee recommendations, the recent migration of POL and the “Fast Lane” arbitrage proof of concept.
They say “necessity is the mother of invention” and recent months have proven that. In the aftermath of June’s vulnerability and amid a grueling bear market, Carbon was born. I strongly believe it has the potential to not only restore reserves in Bancor v2.1 and v3, but transform DeFi by attracting vastly more liquidity and trading on-chain. Carbon also comes amid a resurgence of interest in fully transparent, on-chain DEXs following the collapse of numerous CeFi platforms.
While no specific timeline has been set, coding on the Carbon contracts, SDK and a user interface are well underway, and the MVP is expected to be developed and deployed significantly faster than previous Bancor versions.
Read the resources below to learn more about Asymmetric Liquidity, Adjustable Bonding Curves and Carbon, the first of many products under the Bancor community’s umbrella. And stay tuned for the first of many live DAO Discussions on Carbon, which will be conducted regularly in Discord. Creating a fully realized engine for flexible on-chain strategies will require many iterations and a diverse group of contributors. To that end, I look forward to working with everyone in the community on this exciting next phase.
- Carbon Medium: Introducing Carbon - Automated Flexible Trading Strategies
- Carbon Litepaper
- Carbon Whitepaper
- Carbon Simulator
- Carbon Website
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