Part 2: A Carbon Comparison to Traditional Limit Orders
Part 2: A Carbon Comparison to Traditional Limit Orders
Part 2: A Carbon Comparison to Traditional Limit Orders
Jen Albert
Jen Albert
Jen Albert
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•
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Dec 28, 2022
Dec 28, 2022
Dec 28, 2022
Popular Trading Strategies Using Carbon
This article is the second of a two part series following Part 1: Limit Orders, Order books, and Carbon
It’s important to note all strategies are supported natively on Carbon — i.e., execution requires no third-party oracles or keepers. For technical users, the below strategies are simulated in the Carbon Simulator.
Limit orders on Carbon are defined as they are in traditional order book systems with the exception that all strategies consist of two orders at the smart contract-level. Consider a trivial example; a trader may place a limit order with 5000 USDC to purchase 3 ⅓ ETH at a rate of 1500 USDC per ETH. To enact this strategy in the absence of a sell order for the ETH being acquired, the associated ABC is simply deactivated. Therefore, while both buy and sell orders exist as objects, there is no requirement that both be in use.
Scaling In/Scaling Out on Carbon functions differently than traditional order book systems due to Carbon’s ability to support discrete ranges. The following is an example of a Scaling in (Buy) strategy on Carbon. The image depicts a strategy using 5000 USDC to purchase a total of 3.227486 ETH (deterministic). The strategy consists of a buy range of 1600 to 1500 USDC per ETH, in which their first wei of ETH will be purchased at 1600 USDC per ETH and their last wei of ETH for 1500 USDC per ETH, with a square root profile between these two extremes.
A Discrete Fading Strategy consists of two limit orders with constant execution rates. In a traditional order book system, this would first require the creation of a sole buy order. Using the example below, a trader funds the buy order with 5000 USDC. After the order is taken (i.e. filled), the trader must wait for the ETH to arrive in their account before creating and funding a second order, in this case a sell order at 1800 USDC per ETH. On a conventional order book, once an order is filled, it is no longer active. If a trader wishes to continue with this same strategy, so as to trade the proverbial bottom and top of the channel they have identified, they are required to continuously create new buy and sell orders, each time waiting for the individual orders to be filled.
This process is automatic on Carbon. Using the same example (below), a trader chooses a specific price per order, one to buy a token (rate = 1500 ETH per USDC) and one to sell it (rate = 1800 ETH per USDC), and creates a strategy consisting of both. This strategy is funded with the same 5000 USDC as above, and thereafter a major advantage of Carbon is revealed. After the buy order is taken, and a counterparty begins exchanging ETH at a rate of 1500 USDC per ETH, the same ETH tokens immediately fund the sell order in the strategy. The opposite is also true. After the sell order is taken, and a counterparty begins to exchange USDC for ETH at a rate of 1800 USDC per ETH, the same USDC tokens automatically fund the buy order at its own asking price. Therefore, liquidity continuously rotates between orders. Carbon eliminates the need to endlessly create limit orders, along with the need to fund each individual order as it’s created. The design is intended as the natural expression of the trader’s ambitions.
Scaling Fading Strategies are the simplest articulation of the purpose of Carbon’s ABCs and asymmetric liquidity. Fittingly, this manner of market participation is less complex and more efficient on Carbon than its centralized limit order book counterparts. Execution of a fading strategy across a range of possible price targets on a conventional order book is dependent on a collection of similar orders, each with varying exchange quantities and rates, and requiring frequent updates as orders are filled, to re-use the capital and maintain constant funding for the strategy. Correct management of an active fading strategy across two opposing price ranges is a formidable task.
Carbon simplifies the process. The image below depicts a strategy funded with 5000 USDC, which will buy its first wei of ETH at a rate of 1600 USDC per ETH, and its last wei of ETH at 1500 USDC per ETH, accumulating a maximum of 3.227486 ETH to the downside. The strategy also defines a take-profit schedule to the upside. The strategy sells the first wei of ETH at 2000 USDC per ETH and its last wei of ETH at 2500 USDC per ETH. As the strategy evolves, the maximum token amounts purchasable and sellable dynamically adjusts with its success. Since the entirety of the strategy is governed by only a small number of variables in the smart contract, its behavior can be readily modified without recourse to managing a large collection of entries in the order book.
A combination of a discrete and scaling components of a Fading Strategy is also possible on Carbon. For example, and referring to the image below a strategy is funded with 5000 USDC. Rather than a price range, the strategy will trade all available USDC for ETH at a constant exchange rate of $1200 USDC per ETH (discrete). To the upside, the strategy will sell ETH in the range of 1600–1800 ETH per USDC; the first wei of ETH at $1600 USDC per ETH and the last wei of ETH at $1800 USDC per ETH (scaling). As all multi-order strategies on Carbon, this strategy is recurring; tokens received from an order representing one side of the strategy are continuously rotated back to the opposing order, and their execution prices are independent of each other.
For more examples of Trading Strategies on Carbon, complete with slideshow presentations and comparisons to popular YouTube traders’ strategy execution, visit the Bancor YouTube.
The DEX technology that underpins DeFi is growing out of its infancy. In the time since AMMs were first introduced by Bancor, and popularized by Uniswap, the state of the blockchain economy has changed dramatically. It feels as though entire crypto dynasties have risen to prominence, and faded to obscurity, in only a few years — as though DeFi ages hours for every second passing in the “real world”.
Carbon is a profound shift in perspective for Bancor — it is the first AMM/Order Book product specifically designed to support an expressive market governed by active traders, rather than de facto liquidity. The pivot supports an optimistic view of the developing state of DeFi, where infrastructure is being prepared to support a level of sophistication and maturity that was, quite frankly, inconceivable not long ago. Innovators in the DEX space have survived prior bear markets, and they will survive this one.
Popular Trading Strategies Using Carbon
This article is the second of a two part series following Part 1: Limit Orders, Order books, and Carbon
It’s important to note all strategies are supported natively on Carbon — i.e., execution requires no third-party oracles or keepers. For technical users, the below strategies are simulated in the Carbon Simulator.
Limit orders on Carbon are defined as they are in traditional order book systems with the exception that all strategies consist of two orders at the smart contract-level. Consider a trivial example; a trader may place a limit order with 5000 USDC to purchase 3 ⅓ ETH at a rate of 1500 USDC per ETH. To enact this strategy in the absence of a sell order for the ETH being acquired, the associated ABC is simply deactivated. Therefore, while both buy and sell orders exist as objects, there is no requirement that both be in use.
Scaling In/Scaling Out on Carbon functions differently than traditional order book systems due to Carbon’s ability to support discrete ranges. The following is an example of a Scaling in (Buy) strategy on Carbon. The image depicts a strategy using 5000 USDC to purchase a total of 3.227486 ETH (deterministic). The strategy consists of a buy range of 1600 to 1500 USDC per ETH, in which their first wei of ETH will be purchased at 1600 USDC per ETH and their last wei of ETH for 1500 USDC per ETH, with a square root profile between these two extremes.
A Discrete Fading Strategy consists of two limit orders with constant execution rates. In a traditional order book system, this would first require the creation of a sole buy order. Using the example below, a trader funds the buy order with 5000 USDC. After the order is taken (i.e. filled), the trader must wait for the ETH to arrive in their account before creating and funding a second order, in this case a sell order at 1800 USDC per ETH. On a conventional order book, once an order is filled, it is no longer active. If a trader wishes to continue with this same strategy, so as to trade the proverbial bottom and top of the channel they have identified, they are required to continuously create new buy and sell orders, each time waiting for the individual orders to be filled.
This process is automatic on Carbon. Using the same example (below), a trader chooses a specific price per order, one to buy a token (rate = 1500 ETH per USDC) and one to sell it (rate = 1800 ETH per USDC), and creates a strategy consisting of both. This strategy is funded with the same 5000 USDC as above, and thereafter a major advantage of Carbon is revealed. After the buy order is taken, and a counterparty begins exchanging ETH at a rate of 1500 USDC per ETH, the same ETH tokens immediately fund the sell order in the strategy. The opposite is also true. After the sell order is taken, and a counterparty begins to exchange USDC for ETH at a rate of 1800 USDC per ETH, the same USDC tokens automatically fund the buy order at its own asking price. Therefore, liquidity continuously rotates between orders. Carbon eliminates the need to endlessly create limit orders, along with the need to fund each individual order as it’s created. The design is intended as the natural expression of the trader’s ambitions.
Scaling Fading Strategies are the simplest articulation of the purpose of Carbon’s ABCs and asymmetric liquidity. Fittingly, this manner of market participation is less complex and more efficient on Carbon than its centralized limit order book counterparts. Execution of a fading strategy across a range of possible price targets on a conventional order book is dependent on a collection of similar orders, each with varying exchange quantities and rates, and requiring frequent updates as orders are filled, to re-use the capital and maintain constant funding for the strategy. Correct management of an active fading strategy across two opposing price ranges is a formidable task.
Carbon simplifies the process. The image below depicts a strategy funded with 5000 USDC, which will buy its first wei of ETH at a rate of 1600 USDC per ETH, and its last wei of ETH at 1500 USDC per ETH, accumulating a maximum of 3.227486 ETH to the downside. The strategy also defines a take-profit schedule to the upside. The strategy sells the first wei of ETH at 2000 USDC per ETH and its last wei of ETH at 2500 USDC per ETH. As the strategy evolves, the maximum token amounts purchasable and sellable dynamically adjusts with its success. Since the entirety of the strategy is governed by only a small number of variables in the smart contract, its behavior can be readily modified without recourse to managing a large collection of entries in the order book.
A combination of a discrete and scaling components of a Fading Strategy is also possible on Carbon. For example, and referring to the image below a strategy is funded with 5000 USDC. Rather than a price range, the strategy will trade all available USDC for ETH at a constant exchange rate of $1200 USDC per ETH (discrete). To the upside, the strategy will sell ETH in the range of 1600–1800 ETH per USDC; the first wei of ETH at $1600 USDC per ETH and the last wei of ETH at $1800 USDC per ETH (scaling). As all multi-order strategies on Carbon, this strategy is recurring; tokens received from an order representing one side of the strategy are continuously rotated back to the opposing order, and their execution prices are independent of each other.
For more examples of Trading Strategies on Carbon, complete with slideshow presentations and comparisons to popular YouTube traders’ strategy execution, visit the Bancor YouTube.
The DEX technology that underpins DeFi is growing out of its infancy. In the time since AMMs were first introduced by Bancor, and popularized by Uniswap, the state of the blockchain economy has changed dramatically. It feels as though entire crypto dynasties have risen to prominence, and faded to obscurity, in only a few years — as though DeFi ages hours for every second passing in the “real world”.
Carbon is a profound shift in perspective for Bancor — it is the first AMM/Order Book product specifically designed to support an expressive market governed by active traders, rather than de facto liquidity. The pivot supports an optimistic view of the developing state of DeFi, where infrastructure is being prepared to support a level of sophistication and maturity that was, quite frankly, inconceivable not long ago. Innovators in the DEX space have survived prior bear markets, and they will survive this one.
Popular Trading Strategies Using Carbon
This article is the second of a two part series following Part 1: Limit Orders, Order books, and Carbon
It’s important to note all strategies are supported natively on Carbon — i.e., execution requires no third-party oracles or keepers. For technical users, the below strategies are simulated in the Carbon Simulator.
Limit orders on Carbon are defined as they are in traditional order book systems with the exception that all strategies consist of two orders at the smart contract-level. Consider a trivial example; a trader may place a limit order with 5000 USDC to purchase 3 ⅓ ETH at a rate of 1500 USDC per ETH. To enact this strategy in the absence of a sell order for the ETH being acquired, the associated ABC is simply deactivated. Therefore, while both buy and sell orders exist as objects, there is no requirement that both be in use.
Scaling In/Scaling Out on Carbon functions differently than traditional order book systems due to Carbon’s ability to support discrete ranges. The following is an example of a Scaling in (Buy) strategy on Carbon. The image depicts a strategy using 5000 USDC to purchase a total of 3.227486 ETH (deterministic). The strategy consists of a buy range of 1600 to 1500 USDC per ETH, in which their first wei of ETH will be purchased at 1600 USDC per ETH and their last wei of ETH for 1500 USDC per ETH, with a square root profile between these two extremes.
A Discrete Fading Strategy consists of two limit orders with constant execution rates. In a traditional order book system, this would first require the creation of a sole buy order. Using the example below, a trader funds the buy order with 5000 USDC. After the order is taken (i.e. filled), the trader must wait for the ETH to arrive in their account before creating and funding a second order, in this case a sell order at 1800 USDC per ETH. On a conventional order book, once an order is filled, it is no longer active. If a trader wishes to continue with this same strategy, so as to trade the proverbial bottom and top of the channel they have identified, they are required to continuously create new buy and sell orders, each time waiting for the individual orders to be filled.
This process is automatic on Carbon. Using the same example (below), a trader chooses a specific price per order, one to buy a token (rate = 1500 ETH per USDC) and one to sell it (rate = 1800 ETH per USDC), and creates a strategy consisting of both. This strategy is funded with the same 5000 USDC as above, and thereafter a major advantage of Carbon is revealed. After the buy order is taken, and a counterparty begins exchanging ETH at a rate of 1500 USDC per ETH, the same ETH tokens immediately fund the sell order in the strategy. The opposite is also true. After the sell order is taken, and a counterparty begins to exchange USDC for ETH at a rate of 1800 USDC per ETH, the same USDC tokens automatically fund the buy order at its own asking price. Therefore, liquidity continuously rotates between orders. Carbon eliminates the need to endlessly create limit orders, along with the need to fund each individual order as it’s created. The design is intended as the natural expression of the trader’s ambitions.
Scaling Fading Strategies are the simplest articulation of the purpose of Carbon’s ABCs and asymmetric liquidity. Fittingly, this manner of market participation is less complex and more efficient on Carbon than its centralized limit order book counterparts. Execution of a fading strategy across a range of possible price targets on a conventional order book is dependent on a collection of similar orders, each with varying exchange quantities and rates, and requiring frequent updates as orders are filled, to re-use the capital and maintain constant funding for the strategy. Correct management of an active fading strategy across two opposing price ranges is a formidable task.
Carbon simplifies the process. The image below depicts a strategy funded with 5000 USDC, which will buy its first wei of ETH at a rate of 1600 USDC per ETH, and its last wei of ETH at 1500 USDC per ETH, accumulating a maximum of 3.227486 ETH to the downside. The strategy also defines a take-profit schedule to the upside. The strategy sells the first wei of ETH at 2000 USDC per ETH and its last wei of ETH at 2500 USDC per ETH. As the strategy evolves, the maximum token amounts purchasable and sellable dynamically adjusts with its success. Since the entirety of the strategy is governed by only a small number of variables in the smart contract, its behavior can be readily modified without recourse to managing a large collection of entries in the order book.
A combination of a discrete and scaling components of a Fading Strategy is also possible on Carbon. For example, and referring to the image below a strategy is funded with 5000 USDC. Rather than a price range, the strategy will trade all available USDC for ETH at a constant exchange rate of $1200 USDC per ETH (discrete). To the upside, the strategy will sell ETH in the range of 1600–1800 ETH per USDC; the first wei of ETH at $1600 USDC per ETH and the last wei of ETH at $1800 USDC per ETH (scaling). As all multi-order strategies on Carbon, this strategy is recurring; tokens received from an order representing one side of the strategy are continuously rotated back to the opposing order, and their execution prices are independent of each other.
For more examples of Trading Strategies on Carbon, complete with slideshow presentations and comparisons to popular YouTube traders’ strategy execution, visit the Bancor YouTube.
The DEX technology that underpins DeFi is growing out of its infancy. In the time since AMMs were first introduced by Bancor, and popularized by Uniswap, the state of the blockchain economy has changed dramatically. It feels as though entire crypto dynasties have risen to prominence, and faded to obscurity, in only a few years — as though DeFi ages hours for every second passing in the “real world”.
Carbon is a profound shift in perspective for Bancor — it is the first AMM/Order Book product specifically designed to support an expressive market governed by active traders, rather than de facto liquidity. The pivot supports an optimistic view of the developing state of DeFi, where infrastructure is being prepared to support a level of sophistication and maturity that was, quite frankly, inconceivable not long ago. Innovators in the DEX space have survived prior bear markets, and they will survive this one.
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Create an automated trading strategy with WBTC, ETH, USDC, MATIC and all standard ERC-20 tokens*
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