In our previous post, we briefly explored the concept of trader funding firms, the limitations of traditional infrastructure, and introduced you to how we at carrotfunding.io are pioneering a fully on-chain, Web3-powered funding firm to set a new standard for openness and fairness in the industry.

We've seen how this industry has rapidly evolved. As it matured, many new operators entered the space, margins were squeezed, prices came down slightly, and conditions had to be a bit more accommodating for traders. This dynamic amplified existing conflicts of interest and led to one too many unfortunate events where safeguarding clients' interests came second, often due to the factors covered in our previous post.

The result? Eroded trust in the industry as a whole.

carrotfunding.io was created to change that. It's an experiment providing you with a peek behind the closed doors of trader funding: the numbers and the mechanics. With sensible and consistent rules, this approach ensures that all parties involved can succeed in the long term. We believe transparency is more than just a nice-to-have—it's the foundation of trust and credibility, for both the firm and the funded traders.

While the model works in theory, in practice, many firms operate without sufficient transparency, fairness, or risk controls. The trader funding industry has matured quickly, margins are shrinking, and when paired with inexperience, this has led to fragile business models, poor user experience, and growing skepticism in the community.

Most trader funding firms are black boxes. You’re asked to trust their software, their rules, and their handling of your trades, without ever being able to verify what’s happening behind the scenes.

• Unclear trading conditions: You have no way to independently verify trading conditions.

• Unclear payout processes: Some firms delay or avoid payouts altogether. In extreme cases, firms have collapsed mid-process, leaving successful traders unpaid.

• No capital transparency: There's no proof the funds for your payout even exist. Firms don’t show where the money goes or how it’s used.

This lack of visibility leads to one dangerous assumption after another… and ultimately erodes trust. While some in the community now track wallet activity as a form of verification, even that can be gamed. It's possible to cycle funds between wallets to simulate payouts, not prove them. Yet this is the current standard for "transparency."

We’re taking a fundamentally different approach: instead of asking for trust, we’re building a system where verification is built in. Everything, from capital flow to execution logic, is anchored in transparent, open infrastructure.

I. On-Chain Vaults: Follow the Capital

At Carrot, 50% of every evaluation fee is allocated directly to an on-chain vault. This vault, visible at all times on the blockchain, is what backs trader payouts. There’s no guesswork, you can verify it yourself.

This is more than just optics. It’s financial integrity. The vault is secured through smart contracts and protected by multisig wallets, meaning no single actor can misappropriate funds. This ensures liquidity is available when it’s time to pay out, without ambiguity.

You can find full visibility into the wallets, smart contracts, and fund flows that power our protocol here.

II. Real Market Conditions, no interference

Carrot integrates with decentralized trading protocols to reflect live market conditions, with no markup on spreads, no commission manipulation, and no interference in price feeds. We’ve anchored our platform in real DeFi venues. What you see is what’s happening in the open market.

III. Transparent Risk Management

One of the biggest areas of hidden risk in traditional firms is how trades are managed after the challenge is completed. With traditional infrastructure, you never know if funded trades are being hedged or simply internalized.

Carrot’s model is visible to users. When trades are linked to our on-chain investment vault (OIV), you’ll know whether they are hedged or not, and you can trace that logic on-chain. The mechanics of trade flow, counterparty behavior, and exposure management are all accessible.

This isn’t just transparency for transparency’s sake, it's operational clarity that builds confidence in our long-term sustainability.

IV. Aligned incentives

Unlike many firms built for fast growth at the cost of long-term risk, Carrot was designed with structure and alignment in mind. More critically, our business model isn’t reliant on keeping good traders from succeeding. In fact, we’re incentivized to back them and help them scale their strategies. Funded accounts that generate real alpha benefit both the trader and the protocol. We win together.

Transparency isn’t just a value. It’s the mechanism that makes your trading journey safe, fair, and worth the effort. At carrotfunding.io, we don’t want you to worry about whether the payout is real—we want you to focus on trading well. From the moment you pay for an evaluation to the day you earn your first funded payout, every step is on-chain, auditable, and verifiable.

We’ve rebuilt the trader funding model from the ground up, with Web3-native principles, real accountability, and an open community at the center.

If you're a trader who values integrity, capital access, and a level playing field, carrotfunding.io was built for you.

We hope this discussion has made it clear why transparency matters so much in this industry, and how CarrotFunding.io is fundamentally different by being the first on-chain trader funding firm. If you've felt the pain of opaque prop trading programs or you simply believe in the ethos of transparency, we invite you to become part of our journey. You can join our closed alpha and hop into our Discord community.

We’re just getting started, and we’re excited to do things differently.