13. Case Study in Bonding Function Design: Bancor Carbon

This chapter delves into the bonding function design of Bancor Carbon, a decentralized exchange (DEX) protocol within the Bancor ecosystem. It examines how Bancor Carbon enables market making, directional trading, and liquidity provision through its innovative bonding function. The text explores the protocol's ability to replicate traditional finance paradigms, such as market making in quote-driven markets and exchange trading through various order types. Additionally, it discusses the implementation of a generic parametrizable bonding function and its features, analyzing its design through theoretical concepts. The chapter also interprets the probable design calibration in the context of Bancor Carbon's market design and demonstrates how the bonding function design principles align with current crypto-industry market practices. The case study concludes by showing how the bonding function design can be used for both analysis and design purposes in blockchain-based token ecosystems.