CZ Proposes Dark Pool Perpetual DEX to Combat Crypto Market Manipulation
CZ Proposes Dark Pool Perpetual DEX to Neutralize Crypto Market Manipulation
Binance co-founder Changpeng “CZ” Zhao recently urged the creation of a decentralized perpetual exchange (perp DEX) that will be built as a dark pool in an effort to protect large traders from front-running, slippage, and MEV (maximum extractable value) attacks.
On June 1, Zhao made a post on X saying he’s always wondered about the total transparency of decentralized exchanges, specifically with perpetual contracts where liquidation risk is high.
The Case for Privacy in Onchain Trading
Zhao explained that showing large orders in real-time can lead to front-running and bot abuse. “If you want to buy $1 billion of a coin, you really don’t want other people to see your order until it’s complete,” he said.
His suggestion follows a closely-contested incident on the liquidation of a $100 million Bitcoin long position at Hyperliquid, which is believed to be an account owned by trader James Wynn. The action sowed suspicion that players colluded and forced the price below the levels to prompt the liquidation.
What Are Dark Pools and Why Do They Matter?
Dark pools are common in traditional finance (TradFi) and represent proprietary trading venues where order data are hidden until trades settle. Zhao explains that pools enable large traders to avoid market slippage and price manipulation—issues that have plagued open transparent DeFi platforms.
He suggests extending similar protections to crypto derivatives trading, but would require technologies like zero-knowledge proofs (ZK-proofs), encrypted order matching, and possibly delayed settlement.
Technical and Regulatory Challenges Remain
StealthEX instant exchange CEO Maria Carola pointed out that “both privacy and verifiability” is the hardest thing to accomplish for such a platform. She cited ZK-proofs and encrypted methods as promising solutions but warned of regulatory complexity in adopting dark pool DEXs onchain.
Carola also highlighted that opacity, though reducing front-running, might hide manipulative behavior unless adequately regulated. She recommends the adoption of “adaptive risk engines and behavioral anomaly detection” complemented by cryptographic tools.
A Call for Innovation in Decentralized Derivatives
Zhao recognizes that varying market structures are preferred by different traders, and transparent order books facilitate market makers to take up big trades. Nevertheless, he insists that privacy is vital in safeguarding traders against coordinated liquidation attacks and predatorial activities.
He invited developers to experiment with models concealing order books or even delay deposit visibility, creating a new generation of dark pool perp DEXs that balance privacy, security, and accountability within DeFi.
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CZ Proposes Dark Pool Perpetual DEX to Combat Crypto Market Manipulation
CZ Proposes Dark Pool Perpetual DEX to Neutralize Crypto Market Manipulation
Binance co-founder Changpeng “CZ” Zhao recently urged the creation of a decentralized perpetual exchange (perp DEX) that will be built as a dark pool in an effort to protect large traders from front-running, slippage, and MEV (maximum extractable value) attacks.
On June 1, Zhao made a post on X saying he’s always wondered about the total transparency of decentralized exchanges, specifically with perpetual contracts where liquidation risk is high.
The Case for Privacy in Onchain Trading
Zhao explained that showing large orders in real-time can lead to front-running and bot abuse. “If you want to buy $1 billion of a coin, you really don’t want other people to see your order until it’s complete,” he said.
His suggestion follows a closely-contested incident on the liquidation of a $100 million Bitcoin long position at Hyperliquid, which is believed to be an account owned by trader James Wynn. The action sowed suspicion that players colluded and forced the price below the levels to prompt the liquidation.
What Are Dark Pools and Why Do They Matter?
Dark pools are common in traditional finance (TradFi) and represent proprietary trading venues where order data are hidden until trades settle. Zhao explains that pools enable large traders to avoid market slippage and price manipulation—issues that have plagued open transparent DeFi platforms.
He suggests extending similar protections to crypto derivatives trading, but would require technologies like zero-knowledge proofs (ZK-proofs), encrypted order matching, and possibly delayed settlement.
Technical and Regulatory Challenges Remain
StealthEX instant exchange CEO Maria Carola pointed out that “both privacy and verifiability” is the hardest thing to accomplish for such a platform. She cited ZK-proofs and encrypted methods as promising solutions but warned of regulatory complexity in adopting dark pool DEXs onchain.
Carola also highlighted that opacity, though reducing front-running, might hide manipulative behavior unless adequately regulated. She recommends the adoption of “adaptive risk engines and behavioral anomaly detection” complemented by cryptographic tools.
A Call for Innovation in Decentralized Derivatives
Zhao recognizes that varying market structures are preferred by different traders, and transparent order books facilitate market makers to take up big trades. Nevertheless, he insists that privacy is vital in safeguarding traders against coordinated liquidation attacks and predatorial activities.
He invited developers to experiment with models concealing order books or even delay deposit visibility, creating a new generation of dark pool perp DEXs that balance privacy, security, and accountability within DeFi.
Read More
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