Asymmetric Liquidity

At the core of Carbon's innovation is its asymmetric liquidity model, which is the most important innovation in Carbon. Unlike conventional AMMs where liquidity is provided across an infinite range of prices , Carbon’s underlying curves trade in a single direction: one curve – or “order” – is either used for buying or for selling, but never for both. This is a very important point that we want to drive home:

Carbon can essentially do everything other major AMMs can do, notably effectively-symmetric liquidity provision either across the whole curve, or within a range of any size, or even concentrated in a single point. But the main strengths of Carbon lie elsewhere, because it is fundamentally designed to support trading and market-making strategies composed of independent and irreversible buy and sell patterns.

Carbon offers two new primitives, and a number of others that are still under research. The first and most fundamental primitive is that of an order that consists of a single parametrically adjustable, concentrated, and asymmetric curve.

Parametrically Adjustable

Carbon's bonding curves can be adjusted parametrically, allowing a wide range of configurations from constant-product to constant-price and everything in between. This flexibility means that liquidity can be tailored to specific market conditions and trading strategies, enhancing the overall efficiency and effectiveness of the protocol.The parametric nature of curves or orders means every user position is individually parameterized by three parameters (i.e starting price, ending price and capacity) as well as one state variable (tokens held).

A curve could be set to “buy ETH for USDC between 1500 and 1000, with a total budget of USDC 100k”, or the zero-width limit order “sell 10 ETH for USDC at 3,000”. Those parameters can be adjusted on the fly without closing and recreating the order, and in a non-arbitrageable manner, allowing for an easy and gas-efficient means of reacting to changes in market conditions.

Linked curves (“strategies”): Linked curves or strategies, means that multiple curves share a single collateral pool where collateral acquired on one curve is available for sale on another one; this allows for the design of advanced strategies like “buy ETH against USDC at 1000, sell at 2000; start with USDC 10k”

Carbon orders and strategies can be created permissionlessly by everyone, for every possible pairs of standard ERC20 tokens. This effectively creates a fully decentralized order book on-chain, against which everyone can trade. Because of the unidirectional nature of Carbon trades, they are not susceptible to key MEV attack vectors. Also there is no Impermanent Loss, in the sense that Carbon positions and strategies are not buy-and-hold liquidity positions but the expression of a particular trading view