Our Investment in Tristero

Zero-Knowledge Cryptography Enables Truly “Dark” Dark Pool Exchanges 
May 9, 2023
min read

Our Crypto and Fintech team at General Catalyst is always in search of innovative technologies and disruptive business models that have the potential to change the structure of financial markets. We are thrilled to announce our seed investment in Tristero, which is looking to build a truly “dark” dark pool exchange.

First, let's define what a dark pool and DEX are and why these two concepts matter. A dark pool is a private market where buyers and sellers can trade assets without revealing their identity or the details of their transactions to the public. A decentralized exchange is a platform that operates on a blockchain, allowing users to trade assets directly with each other without the need for intermediaries like brokers or clearinghouses.

By combining these two concepts with zero-knowledge technology, a dark pool decentralized exchange creates a secure and private environment for trading that is resistant to censorship and manipulation. 

Currently, financial markets are optimized around moving individual shares. Large trades will always get front run as markets will move in response to traders intentions. Dark pools try to solve this by "hiding" the orderbook. However, historically dark pools have not been dark to dark pool operators (i.e. relied on trust). Tristero is working on building a truly “dark” dark pool by using cryptography to make it impossible for even operators to see inside. If they succeed, they will be seeking to redistribute wealth from middlemen back to people building companies and long term investors.

Here are some of the reasons why we believe this model is so promising:

  1. Transparency and Fairness - In traditional exchanges, traders often face a number of challenges that can lead to unfair advantages for certain participants. These include front-running, spoofing, and other forms of market manipulation. With Tristero, however, all trades are executed according to a set of transparent and immutable rules that are enforced by the blockchain. This means that all traders, regardless of their size or experience, have equal access to the market and can trade with confidence.
  2. Security and Privacy - Zero-Knowledge cryptography seeks to enable truly “dark” dark pools.
  3. Lower Costs - Tristero aims to have lower overhead costs than centralized entities and can pass those savings on to its users. This means that traders have the potential to  enjoy lower trading fees and higher returns on their investments.
  4. Global Accessibility - Because Tristero operates on a blockchain (permissionless, censorship-resistance infrastructure), it is accessible to anyone with an internet connection. This means that traders from all over the world can participate in the market.

Building these businesses and making net new strides in this field is hard. Teams need to have expertise across computer science, liquidity (markets), and the sector itself. We’ve known Sam and the team for some time and we believe they have compelling expertise across these topics: crypto-native, highly technical, with above average understanding of markets. We’re excited to partner with them on this journey.