Bancor plans a comeback with Carbon, a decentralized protocol for asymmetric liquidity and trading

A proposal authorizing the launch of Carbon was approved by Bancor DAO on Wednesday. The new DeFi product will function as a decentralized protocol for asymmetric liquidity and trading on the Ethereum mainnet.

It is worth mentioning that the ratified proposal is merely the first of seven associated with Carbon’s launch, initial settings, and policies. The Bancor community is hopeful that Carbon will become the network’s flagship product and first protocol to offer fully on-chain limit orders.

As a backstory, Bancor’s woes came to light on June 19, 2022, after the decentralized AMM temporarily paused its impermanent loss protection feature, sparking rumors of a liquidity crisis. Although the firm gave a detailed explanation of what transpired, the damage had already been done along with the disabling of BNT minting.

The idea for Carbon trailed the emergency shutdown of BNT distribution in June 2022. Since then, Bancor DAO contributors have focused on generating protocol fees that can be used to restore reserves and lower the protocol deficit in Bancor v2.1 and v3, leading to the proposal to create Carbon.

According to its litepaper, Carbon seeks to connect centralized finance (CeFi) liquidity with decentralized finance (DeFi) by enabling active market-making strategies that have only been accessible in CeFi.

One of the key features of the product is its use of asymmetric liquidity, a new form of on-
chain liquidity that allows simultaneous “trading and active market-making strategies defined by
multiple bonding curves.”

Speaking of fees, the DAO approved a proposal in February to use 100% of fees earned by the Carbon protocol to buy and burn the Bancor Network Token, BNT.