Why Decentralised Prime brokerage?
In the traditional financial world, the need for a prime brokerage has been well established over the decades. However, in the cryptocurrency industry, trading has emerged as a dominant use case, with a current market capitalization of over $1 trillion and projected to grow to over $15 trillion by 2030, according to a report by Delphi Digital.
Typically, the custody of liquidity used by prime brokerage protocols is held by the prime brokerages themselves, either in their wallets or bank accounts. This arrangement can lead to the misuse of reserves that were originally intended for enabling token swaps. To address this issue, a decentralized prime brokerage offers two unique aspects that make it a natural progression over traditional prime brokerages:
A decentralized prime brokerage is non-custodial, which means that custody of the assets remains with the liquidity providers. This eliminates the risk of misusing reserves and provides greater transparency and security for all parties involved.
The governance of the protocol and collateralization mechanisms is decentralized, based on governance tokens. This ensures that decisions are made in a fair and democratic manner and aligns the interests of all stakeholders involved in the protocol.