Binance founder Changpeng Zhao, better known as CZ, has floated the idea of a decentralized exchange (DEX) where order books and user positions are hidden to mitigate front-running and liquidation risks.
The call comes amid renewed attention to Maximal Extractable Value (MEV), the practice of manipulating transaction ordering for profit.
The Dark Pool Argument
In a June 1 post on X, CZ questioned why DEXs continue to expose user orders in real-time, noting that such transparency often invites predatory tactics like front-running and liquidation targeting, particularly in the perpetual futures markets.
“For perps (or futures), it is even more important to not let others know/see your orders,” CZ wrote. “If others can see your liquidation point, they could try to push the market to liquidate you. Even if you got a billion dollars, others can gang up on you.”
The former crypto executive drew a direct parallel to traditional finance (TradFi), where large institutional traders routinely use so-called “dark pools,” private exchanges that hide order books. He claimed such services are often “10 times bigger” than normal order books.
To that end, Zhao proposed that on-chain platforms could use zero-knowledge (ZK) cryptography or similar encryption technologies to obscure trade data, including orders and deposits, until they are executed. In his opinion, this would create a trading experience that shields participants, especially whales, from MEV attacks and coordinated manipulation.
CZ’s suggestion comes after a series of dramatic bets by crypto trader James Wynn, who staked over $1 billion on BTC before being liquidated across four different positions, totaling more than $100 million. Following the event, Wynn tweeted that his experience had exposed the corruption in the crypto market, and he advised traders to buy and hold BTC instead of using it for high leverage.
Emerging Solutions
Several projects jumped on CZ’s post to announce they were actively working in the privacy space. Sam, from Tristero, revealed that for the last two years, his team has been developing a concept similar to what the ex-Binance CEO had outlined.
Others like 0x0 and SKALE are also tackling the challenge. 0x0 teased its upcoming Spectre platform, which enables privacy-preserving spot and leverage trading, while SKALE recently launched its BITE Protocol, a consensus-layer encryption tool designed to eliminate MEV entirely by preventing transaction visibility before block finalization. “Rather than applying band-aids, BITE addresses MEV at its root,” said SKALE CEO Jack O’Holleran.
However, not everyone is singing from the same hymn book. X User Cedric Beau countered CZ’s proposal, arguing that dark pools fundamentally contradict the ethos of crypto:
“Dark pools in crypto? That’s exactly the stuff we came here to avoid,” stated the decentralization enthusiast. “The moment you hide the order book, you recreate insider games.”
He further warned that importing TradFi’s “shadowy tricks” risks losing DeFi’s core value proposition of openness. “Transparency’s messy, but at least everyone plays on the same field.”
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Binance founder Changpeng Zhao, better known as CZ, has floated the idea of a decentralized exchange (DEX) where order books and user positions are hidden to mitigate front-running and liquidation risks.
The call comes amid renewed attention to Maximal Extractable Value (MEV), the practice of manipulating transaction ordering for profit.
The Dark Pool Argument
In a June 1 post on X, CZ questioned why DEXs continue to expose user orders in real-time, noting that such transparency often invites predatory tactics like front-running and liquidation targeting, particularly in the perpetual futures markets.
“For perps (or futures), it is even more important to not let others know/see your orders,” CZ wrote. “If others can see your liquidation point, they could try to push the market to liquidate you. Even if you got a billion dollars, others can gang up on you.”
The former crypto executive drew a direct parallel to traditional finance (TradFi), where large institutional traders routinely use so-called “dark pools,” private exchanges that hide order books. He claimed such services are often “10 times bigger” than normal order books.
To that end, Zhao proposed that on-chain platforms could use zero-knowledge (ZK) cryptography or similar encryption technologies to obscure trade data, including orders and deposits, until they are executed. In his opinion, this would create a trading experience that shields participants, especially whales, from MEV attacks and coordinated manipulation.
CZ’s suggestion comes after a series of dramatic bets by crypto trader James Wynn, who staked over $1 billion on BTC before being liquidated across four different positions, totaling more than $100 million. Following the event, Wynn tweeted that his experience had exposed the corruption in the crypto market, and he advised traders to buy and hold BTC instead of using it for high leverage.
Emerging Solutions
Several projects jumped on CZ’s post to announce they were actively working in the privacy space. Sam, from Tristero, revealed that for the last two years, his team has been developing a concept similar to what the ex-Binance CEO had outlined.
Others like 0x0 and SKALE are also tackling the challenge. 0x0 teased its upcoming Spectre platform, which enables privacy-preserving spot and leverage trading, while SKALE recently launched its BITE Protocol, a consensus-layer encryption tool designed to eliminate MEV entirely by preventing transaction visibility before block finalization. “Rather than applying band-aids, BITE addresses MEV at its root,” said SKALE CEO Jack O’Holleran.
However, not everyone is singing from the same hymn book. X User Cedric Beau countered CZ’s proposal, arguing that dark pools fundamentally contradict the ethos of crypto:
“Dark pools in crypto? That’s exactly the stuff we came here to avoid,” stated the decentralization enthusiast. “The moment you hide the order book, you recreate insider games.”
He further warned that importing TradFi’s “shadowy tricks” risks losing DeFi’s core value proposition of openness. “Transparency’s messy, but at least everyone plays on the same field.”
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LIMITED OFFER for CryptoPotato readers at Bybit: Use this link to register and open a $500 FREE position on any coin!
