Bancor, a decentralized ecosystem centered around on-chain trading and liquidity, launched an on-chain protocol that aims to make automated trading on decentralized exchanges easier and more profitable.
Called Carbon, the new tool lets users perform automated trading strategies via custom on-chain limit and range orders, Bancor said in a statement. Because they take place on-chain, orders are irreversible once executed. However, they can be adjusted on-chain.
Bancor also claims Carbon is "resistant to MEV [maximal extractable value] sandwich attacks." Sandwich attacks are when a bot identifies a pending user transaction and submits a transaction with a higher gas price to buy or sell the same cryptocurrency just before the user's transaction, causing a price change. The bot then executes another quick transaction to buy or sell the cryptocurrency — effectively taking advantage of the change.
Bancor's Carbon vs. Uniswap V3
Juxtaposed against Uniswap V3 — the latest and most-efficient iteration of the leading decentralized exchange — Carbon allows users to create a single concentrated liquidity position that buys and sells exclusively in specific price ranges.
With Carbon, trading ranges for purchasing and selling can be established above and below a specified price, depending on a user's prediction of where a particular token will be traded. This automates the "swing trading" procedure for any conventional ERC20 token.
For instance, if a trader anticipates that ether will hover between $2,000 and $2,300 in the near term, they can create a Carbon strategy to automatically buy ether within the $2,000-$2,100 range and sell it within the $2,200-$2,300 range.
Backtesting has demonstrated a 2-3.4 times profit enhancement compared to traditional concentrated liquidity provision methods, according to Bancor.
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