The Best of DeFi and CeFi with C3 | Interview

In the ever-evolving world of decentralized finance (DeFi), innovation continues to reshape the landscape. Today, we're thrilled to introduce C3, a self-custodial exchange that bridges the gap between centralized (CEXs) and decentralized exchanges (DEXs).

While DeFi has seen remarkable growth, users have grappled with the trade-offs between CEXs and DEXs. Centralized exchanges offer liquidity and speed but come with the need to trust third parties with custody. Decentralized exchanges, on the other hand, offer trustless trading but often face issues of liquidity, performance, and user-friendliness. C3 aims to transcend these limitations by providing a unique blend of features that combine the best of both worlds.

“It's about trust without compromise. That is why we're re-imagining DeFi to optimize for what actually matters: giving people full control of their assets without sacrificing performance.”

We’re joined today by the C3 team for an interview on their approach to building a cross-chain, self-custodial exchange and how Pyth Price Feeds allow them to deliver “trust without compromise”.

Questions

What is C3 and what makes it different from other exchanges?

C3 is a next-generation self-custodial exchange that separates custody from trading. It is different from other exchanges in that it allows users to trade cryptocurrencies on a world-class platform, knowing that they have full control over how they custody their funds without having to rely on the exchange to hold and secure them. This makes it resistant to insolvency risks and gives users more flexibility.

Moreover, despite its decentralized nature, C3 has no trade-offs. It offers all of the functionality of traditional exchanges, including instant execution, high throughput, REST APIs, Websocket connectivity, advanced order types, and support for all networks while remaining completely trustless.

What are the benefits of using a self-custodial exchange over a custodial one?

Self-custodial exchanges offer a number of benefits over custodial exchanges, including:

• Control of your own funds: With a self-custodial exchange, you are in full control of your own private keys, which means that you are the only one who can access your funds. This is in contrast to custodial exchanges, which hold your private keys on your behalf.
• Flexibility and optionality: By being self-custodial, users have the freedom to choose the best solution for their needs, regardless of the nature of their trading. They can use any of their favorite wallet providers, a regulated custodian, or their own proprietary solution.
• Reduced risk of hacks and fraud: Self-custodial exchanges are generally less vulnerable to hacks and fraud than custodial exchanges, as they do not store your funds on their servers.
• Increased privacy: Self-custodial exchanges typically do not require you to provide any personal information to create an account, which protects your privacy.

In addition to these benefits, I believe that self-custodial exchanges are essential to the long-term success of the cryptocurrency industry. By giving users full control over their own funds, self-custodial exchanges actually leverage the innovations and promote the values of this technology.

How does C3.io support multiple blockchains and wallets?

C3 is designed so that users can smoothly deposit assets and trade from any blockchain network. This is done by consolidating asset balances from all supported blockchains into a unified layer, facilitated by C3’s on-chain component built on the Algorand blockchain. This unified settlement layer affords C3 a coherent view of all assets, enabling efficient balance management and transparent trade settlement.

This is made possible through the integration of Wormhole, a cross-chain interoperability protocol, which processes deposits and withdrawals to and from C3's smart contracts.

Lastly, the on-chain component of C3 supports multiple signing algorithms such as ECDSA and EdDSA. This ensures that the C3’s smart contracts can verify signatures from virtually any wallet and network, allowing users to access and use C3 from any blockchain and wallet of choice.

C3 offers margin trading and funding. Can you comment more on how the platform delivers this safely and what the general users are for this feature?

As mentioned, C3 offers spot-margined trading for traders looking to short or trade with leverage. The funds for margin trading on C3 are sourced from other users who lend their assets via C3's Earn offering and earn a yield in return.

To do this, C3’s risk management infrastructure employs a two-tiered verification process, significantly enhancing the security and reliability in margin trading operations. Initially, the off-chain risk engine, residing in C3's server, serves as the first layer of validation. It calculates the health of user portfolios and pre-approves trades based on the assets held. This proactive analysis ensures that the trades are within the acceptable risk parameters without sacrificing performance.

Following this, the on-chain component provides a secondary layer of verification using Pyth’s price oracle to independently re-evaluate the health of margined operations. This on-chain validation powered by Pyth ensures that the verification is conducted in a decentralized and trustless manner, independent of the server. This design significantly enhances the security framework of C3, as it ensures that the risk assessment and trade approvals are not solely dependent on a server, but are further validated on the blockchain in a transparent and trustless way.

How does C3 handle liquidity and order matching?

Unlike most Decentralized Exchanges that employ Automated Market Makers (AMMS), C3 uses a traditional Central Limit Order Book (CLOB) for its spot markets and leverages a hybrid architecture combining off-chain and on-chain components for maximum performance and security. The off-chain component handles instant trade processing and order matching, while the on-chain component handles trustless trade settlement.

The off-chain component hosts the CLOB and serves as the trading hub where trade operations are received, approved, and matched by the risk engine and matching engine, respectively. All trades are recorded in a database, while matched trades are sent to the blockchain for settlement.

The on-chain component of C3 verifies every single matched trade by validating the signatures of both buyer and seller and the health of their accounts before allowing settlement to take place and transferring ownership of the traded assets. These settlements are all processed in a trustless and transparent manner by the C3 smart contracts on-chain..

What are some of the features and advantages of its hybrid exchange model?

This hybrid exchange model offers a number of advantages, including:

• Performance: The off-chain component can process trades much faster than on-chain order books, resulting in faster trade execution and lower latency.
• Scalability: The off-chain component can handle a much larger volume of trades than on-chain order books, making it ideal for high-volume trading markets and programmatic traders.
• Gasless: All trade operations are completely gasless as they do not require users to pay on-chain transactions or gas fees for every single posted and canceled order, making C3 more cost-effective for users.
• Privacy: Off-chain order books keep trade activity private, allowing traders to keep their open trades confidential.
• Features: Off-chain servers can be leveraged to implement sophisticated features such as advanced order types including TWAP, VWAP, and conditional orders.
• Security: The on-chain component verifies every single matched trade before allowing settlement to take place, ensuring that all trades are valid and that users have sufficient funds.
• Trustless: All trades are settled directly in the blockchain by smart contracts that operate autonomously and in a completely trustless and transparent manner.

Overall, C3's hybrid exchange model is designed to offer users the benefits of both centralized and decentralized exchanges, offering performance and accessibility while remaining trustless and non-custodial at all times.

What are the reasons behind C3’s decision to go with the Pyth Network and its oracles solutions?

C3 chose Pyth as its price oracle solution because of its accuracy, real-time data, decentralization, and transparency. Pyth's data is sourced from a diverse set of professional market makers and exchanges and is aggregated and validated using a sophisticated algorithm. This ensures that Pyth's data feed is the most accurate and reliable out there. Pyth also provides real-time price data, which is essential for hybrid exchanges like C3 that need to make decisions quickly. Additionally, Pyth is a decentralized oracle network, which means that it is not controlled by any single entity. This makes Pyth more resistant to censorship and manipulation. Finally, Pyth's data is transparent and publicly accessible. This allows users to verify the accuracy of the data and to understand how it is calculated.

Overall, C3 believes that Pyth is the best-priced oracle solution and the golden standard in the industry. Its accurate, real-time, decentralized, and transparent price feed is essential for C3 to provide its users with secure and trustless trade settlements.

What’s next on the roadmap for C3?

C3's roadmap for the near future includes:

• Public Mainnet: The event we've all been waiting for. The real thing with real money.
• Launching on more blockchains: C3 is committed to becoming the most accessible and user-friendly DeFi exchange, and that means supporting as many blockchains as possible. C3 is planning to launch on a number of new blockchains in the coming months, including Solana, Avalanche, and Polygon.
• Adding more trading pairs: C3 is also committed to offering its users the widest possible range of trading pairs. C3 is planning to add a number of new trading pairs in the coming months, including pairs for popular altcoins and stablecoins.
• Improving the trading experience: C3 is constantly working to improve the trading experience for its users. C3 is planning to add new features and functionality in the coming months, such as advanced order types and charting tools.
• Integrating more assets using Pyth price oracles: C3 is committed to using Pyth price oracles to provide its users with the most accurate and reliable price data possible. C3 is planning to integrate more assets using Pyth price oracles in the coming months.

Overall, C3 is focused on expanding its reach, improving its trading experience, and providing its users with the best possible trading experience.

How can users get started?

Check out C3’s testnet here, connect your favorite wallet from the blockchain of your choice, and start trading. Funds can be deposited from different blockchains using multiple wallets.

To keep in touch, get announcements before everyone else, and participate in our community events, join our Twitter and Discord.

We can’t wait to hear what you think! Feel free to join the Pyth Discord and Telegram, follow Pyth on X, and be the first to hear about what’s new in the Pyth ecosystem through our newsletter. You can also learn more about Pyth here.