Comment on page
Carbon Grouped Tokens 🆕
Managing tokens in groups for enhanced liquidity
Carbon Grouped Tokens is a feature whereby distinct tokens that always have the same underlying price or value are grouped into a single basket, and then represented with a single token.
Users bridging any of these underlying assets to Carbon will be credited 1:1 with the corresponding Grouped Token.
This gives allows:
- An improved user experience (by dealing with a single asset instead of dealing with multiple versions of it)
- Improved liquidity by consolidating liquidity into a single quote asset (e.g. BTC/USDⒼ instead of BTC/axlUSDC + BTC/USDC)
Using Carbon Grouped USD token as an example, this means that a selection of U.S. dollar (USD) pegged stablecoins (e.g. USDC from ETH, axlUSDC from Axelar) that are fully backed can be minted into a single “USDⒼ” token.
How Grouped Tokens work using USDⒼ as an example
This system can be extended to other fully-backed, pegged assets as well (e.g. BTC, ETH).
A “Grouped Token” refers to a set of tokens pegged to the same asset. This means that every underlying token must always have the same notional value and must be free from possible arbitrage (i.e. is always tradable at a 1:1 rate).
Tokens on Carbon should therefore only be added as an underlying asset to a "Grouped Token" if it:
- Is redeemable at a 1:1 rate for the underlying (e.g. USDⒼ, ETH)
- directly from the issuer's platform (e.g. Circle for USDC)
- without a percentage-based fee
- with delivery within T+3 days
- is fully backed with the collateral having the same underlying
- has a market cap of >$100m
- has an overall market liquidity of >$10m
Users may withdraw a specific asset from a Grouped Token on Carbon by selecting the preferred asset and network to withdraw to.
The amount of each asset that can be withdrawn in a group will depend on the liquidity available. If there is insufficient liquidity for a particular asset, the user will have to wait for the group to be rebalanced by other users.
Anyone can help to rebalance Grouped Tokens. The Carbon team has implemented an alert system that notifies them whenever a particular asset is running low on supply, enabling them to assist in replenishing the pool in a timely manner.
Using Carbon grouped USD token as an example,
- When there are numerous withdrawals of USDC (ETH), the balance of USDC (ETH) may become depleted or run low.
- To replenish the balance, anyone can deposit USDC (ETH) to Carbon.
- Alternatively, users can also withdraw and transfer USDC from another chain with more supply such as BNB Smart Chain (BSC) to Ethereum.
- Repeat the process until the assets in the Group are balanced.
Moving forward, Carbon may implement incentives and fees to motivate the community to rebalance assets within each group.
The fees for rebalancing will vary based on whether the action improves the balance of assets or reduces it. For example, if the group has a large percentage of USDC (ETH) and a small percentage of axlUSD (Axelar), actions which further increase the amount of USDC (ETH) the Group has will have a high fee while actions which reduces the amount of USDC (ETH) the group has will have a low fee.
To account for stablecoin depegging events, certain protocol safety measures have been in place.
As soon as Carbon oracles identify that a token's value is deviating from its declared peg (e.g. 1 USDⒼ for stablecoins like USDC), the Carbon Grouped Token module automatically suspends the acceptance of deposits for that particular token.
Users depositing that token will be credited in the underlying token instead of being auto-converted, disallowing free arbitrage of a depegged token.
In the coming days, a rate-limiting capability may be implemented, which would temporarily pause withdrawals if a significant sum is being withdrawn, allowing validators to manually confirm that everything is in order.
Additional safety features and security measures will be incorporated as this feature is refined.