Solver Network Explained
Solvers are the backbone of Carbon. They source liquidity, stream live quotes, hedge filled trades, and provide the on-chain margin that makes the bilateral agreement model work.
This page covers the third-party solver network that powers Carbon's crypto perpetual track. The Carbon Solver, which powers the CFD track, follows similar mechanics but operates as a single proprietary solver funded by the CLP vault.
The lifecycle below shows one possible operating profile. The system is designed for flexibility: solvers can hedge, quote, and manage risk in many ways.
1. The Solver Deposits Collateral On- and Off-Chain
To participate, a solver begins by depositing collateral both on-chain and off-chain:
On-Chain: A portion of the solver’s collateral is held in Carbon’s on-chain contracts as a guarantee for execution.
Off-Chain: The remaining collateral is deployed at the solver’s hedging venues of choice, which may include centralized exchanges, OTC desks, TradFi brokers, or other venues.
This structure gives solvers the ability to execute trades on behalf of Carbon users while keeping on-chain settlement secure and transparent.
2. The Solver Configures Their Market Making Infrastructure
Once collateral is placed, the solver sets up their market-making software. This infrastructure must be able to:
Query and execute trades at off-chain hedging venues
Interact with Carbon’s on-chain execution engine contracts
Stream quotes to Carbon’s front-end via APIs and WebSockets
3. Solvers Stream Pricing Data to Carbon
Solvers continuously source pricing data from their chosen hedging venues. They then stream live quotes to the Carbon front-end with their desired spread (for example, +/– X bps vs. the off-chain order book). This constant loop of sensing and quoting ensures Carbon users always see real-time, competitive pricing.
4. A Trader Inputs Intent and Accepts a Quote
From the Carbon WebApp, a trader inputs their trade intent — size, order type, leverage, and asset. Solvers compete to quote the best price.
Carbon’s proprietary matching system ensures the best available quote per the trader’s intent. If the trader accepts, they sign a “request for trade” and deposit their required margin into Carbon’s on-chain execution engine.
5. The Solver Executes and Opens the Trade
Once the request for trade is submitted, the solver receives it and executes the hedge off-chain (if they choose to remain delta-neutral) before filling the on-chain position.
The solver then deposits their own required margin into the on-chain perpetual contract. The position is now open.
Note: Solvers are not required to hedge. They may choose to take directional risk or hedge using other methods such as spot positions. This example simply illustrates one possible approach.
6. Both Parties Monitor Margin, Rebalance, or Close
Both trader and solver are responsible for maintaining their margin:
Traders: Must monitor and rebalance their on-chain cross-margin account or risk liquidation. They may also request to close their position at any time, settling PnL back into their account.
Solvers: Must maintain margin both on- and off-chain. If the trader requests to close, the solver can preemptively close their off-chain hedge, then accept the on-chain close request.
Third-party liquidators monitor all open positions using oracle price feeds. If margin falls below requirements, either party can be liquidated.
On-Chain and Off-Chain Orchestration
Carbon’s solver architecture brings true hybrid execution to DeFi. The intent-based system allows:
For Traders:
Optimal price execution by accessing off-chain liquidity on-chain
A streamlined RFQ process with fill times under five seconds
Exposure to crypto and TradFi derivatives products that may not exist natively on-chain
Permissionless, self-custodial, and trustless on-chain settlement
Large orders filled by multiple solvers acting as liquidity aggregators
For Solvers:
Ability to maintain delta-neutral positions with proactive hedging
Freedom to source liquidity from any venue - CEX, DEX, OTC, TradFi brokers, CME options, etc.
Advanced infrastructure such as netting (future product) to offset exposures between solvers at low or zero cost
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