The Carbon DEX is built on-top of Project Serum on-chain central limit order book (CLOB).

Carbon DEX

The Carbon decentralized exchange (DEX) will be built on Project Serum's underlying infrastructures, which support full limit order books, swift order placement, cancellation, and fund management. Our vision is to bring a centralized exchange like-experience while remaining fully trustless, transparent, and decentralized. Ultimately, the Carbon DEX will be powered by an on-chain order book and matching engine enabling a low latency and high throughput Carbon market to operate efficiently.

Users can create an account instantly on the carbon DEX by simply connecting their Solana wallet on our dApp. Index carbon tokens can be bought or sold instantly on the DEX by trading with or against a trading pair such as BCC/SOL or BCC/USDT. Furthermore, building on Project Serum will bring a centralized exchange-like experience by enabling market and limit orders on a DEX. It is also important to mention that an orderbook-backed DEX is better suited to handle large transactions as the risk of slippage is low when compared to an automatic market maker (AMM) trading model.

Central Limit Order Book (CLOB)

Order books serve as the engine that powers financial markets. It's the model used by the New York Stock Exchange (NYSE) and other financial institutions to track and transact the bids and asks of the traders. On the other hand, an on-chain order book compiles the list of all the bids and asks, as well as the fill orders as the asset price moves. The CLOB has a matching engine, which simply is a mechanism for connecting buyers and sellers. Moreover, the asset price is determined by computing the price convergence between the lowest bid and highest ask, also known as the bid-ask spread. Furthermore, the smaller the spread, the greater the liquidity of the given asset. An order book is an important tool for traders as it enables them to view all market activity for a particular asset, which will help them make more informed decisions about their trades, and as a result, increase their chances of success. From a value add perspective, an orderbook-backed DEX is designed to promote transparency, stream real-time market activity, and power a trustless VCM.

Orderbook vs Automatic Market Maker

Order books and AMMs are two of the most popular trading models in DeFi. They mainly differ in their structure and underlying principles. In the simplest terms, an order book organizes the list of traders who submitted buy or sell orders and subsequently stores them on a database. However, in the case of a CLOB, the list of bids and asks is stored on the Solana blockchain.

On the other hand, AMM is an automated trading model that employs two-sided liquidity pools, while in an order book, both buyers and sellers serve as the liquidity custodian. The structure of an order book appeals to centralized exchanges as it enables intermediary intervention and control of manual components.

In terms of working principles, an order book is only initiated when there are overlapping orders regarding the same value and quantity of a traded asset. In that case, the matching engine connects buyers by matching them first by price and then prioritizing orders that came first.

Advantages - CLOB

Overview of the advantages of using CLOB to power the Carbon DEX:

  • Users have the option to specify the price, quantity, and direction of their transactions. As a result providing deep liquidity by matching orders based on price, time, and priority.

  • The Carbon DEX will have true composability, meaning that other Defi protocols can interact with Carbovalent by providing services such as matching orders and bootstrapping liquidity.

  • The fast throughput and low transaction costs of Solana are essential for minimizing capital inefficiencies and liquidity segmentation.

  • Cross-chain asset swaps are supported on the Carbon DEX, meaning that users can trade assets built on Ethereum or Polkadot. The Carbovalent protocol will essentially facilitate a multi-chain carbon market in order to aggregate liquidity from other blockchain protocols.

  • The Carbon DEX will feature a derivatives market for carbon assets. The DEX will support various option/future contracts for tokenized carbon assets (index tokens).

  • Fully non-custodial: tokenized carbon assets are only transferred between user wallets and on-chain programs which behave deterministically.

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