A YEAR OF DECENTRALIZATION
In November 2022, the collapse of the centralized FTX exchange sent shockwaves throughout the crypto ecosystem. While many saw this as a failure of crypto broadly, it was actually the centralization of FTX that reduced transparency and contributed to its collapse. In our final two Blockchain Letters of 2022, the theme of decentralization was more apparent than ever – the scary “DeFi” protocols that the government has increasingly tried to regulate proved to be objectively more trustworthy.
As described in our December 2022 Blockchain Letter:
“If FTX were instead a decentralized exchange composed of smart contracting protocols a la DeFi, the exchange’s activities may have been fully transparent, auditable, and verifiable. In addition, user funds could have been self-custodialized. These features of some DeFi protocols preclude many potential avenues for fraud, money mismanagement, halting withdrawals, etc. — centralization risks.”
While crypto markets are still overall down and trading volumes are lower from 2021 peaks, Pantera continues to be bullish on the future of decentralized platforms that increase transparency and accountability. One clear application of this philosophy is the creation of decentralized exchanges. While decentralized exchanges make up only around 15% of total trading volume today, we believe that this market share has potential to rise following product innovations that make a decentralized offering more attractive particularly to crypto hedge funds and other high-volume traders. And changes are already in the works – comparing August 2023 to 2022, there was a nearly 35% year-over-year increase in DEX volume as a share of centralized exchange volume.
WHY WE’RE INVESTING IN BRINE
While there exist hundreds of decentralized exchanges competing in this growing market, Brine set out to make a better product, one that could compete with large existing centralized exchanges – and both institutional and retail traders are noticing. It is an orderbook exchange, meaning that it directly connects buyers and sellers based on price and quantity rather than interacting with a liquidity pool. This minimizes price slippage and also makes it easier for institutions to transition from orderbook style centralized exchanges.
Brine is powered by StarkWare, an Ethereum scaling solution that uses zero-knowledge proof technology that allows Brine to keep trades private until executed, preventing frontrunning. Other features include gasless trading with low fees and rapid execution and plans to add additional features such a pro dashboard, cross-chain APIs, and their own wallet and payment platform SafeGate. While previously only available to select institutions during beta testing, Brine is now live on mainnet, allowing over 100,000 people onto the platform from their waitlist.
We are proud to lead Brine’s Series A and back Shaaran Lakshminarayanan, Bhavesh Praveen, Ritumbhara Bhatnagar and their team consisting of former executives from Coinbase, PayPal, Venmo, FlipKart, Harvard and MIT. Thank you to Elevation Capital, Goodwater Capital and others for also supporting Brine in building the decentralized exchange of the future.
Explore open positions at Brine here and find opportunities across the entire Pantera network here.