In a thought-provoking Sunday post, Binance founder Changpeng Zhao (CZ) suggested it might be the right time for someone to launch a dark pool perpetual DEX, citing serious concerns over how transparent decentralized exchanges (DEXs) have become, especially for large-scale traders.
CZ expressed his long-standing confusion over a core design of DEXs: “I have always been puzzled with the fact that everyone can see your orders in real-time on a DEX.” According to him, the problem only worsens with perpetual DEXs, where liquidations can become public targets.
He pointed out that in centralized exchanges (CEXs), even though order books are visible, orders aren’t directly tied to individual identities. That’s not the case in DEXs. “If you’re looking to purchase $1 billion worth of a coin, you generally wouldn’t want others to notice your order until it’s completed,” CZ said. “Otherwise, people might try to buy before you, effectively front-running you.”
This issue of front-running and Miner Extractable Value (MEV) attacks, CZ noted, increases slippage, worsens execution prices, and adds higher costs for the trader.
To draw a parallel, CZ referred to the traditional finance (TradFi) world, where dark pools are the go-to solution for large trades. “For this reason, the large traders in TradFi use dark pools, which are often 10 times bigger than the ‘lit pools’ (ie, normal orderbooks).”
The need for privacy is even more critical in perpetual contracts or futures trading, CZ said. “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. This was possibly what we have seen recently.”
While some argue that transparency helps market makers absorb large orders efficiently, CZ kept his stance neutral. “I won’t get into an argument on which is right or wrong. Different traders may prefer different types of markets.”
He then proposed a new direction that combines on-chain privacy with perpetual trading. “Now might be a good opportunity for someone to launch an on-chain dark pool style DEX + perps, either by not showing the orderbook, or even better not showing deposits into smart contracts at all, or until much later. This should be doable with ZK or similar encryptions.”
He closed the post with an open call to builders and innovators in the space: “Just a Sunday idea. If you are building such a project, feel free to reach me. No guarantees I will invest, or even reply.”
Why it matters
CZ’s comments come at a time when transparency on DEXs is both a strength and a weakness. While open order books align with the spirit of decentralization, they also leave whales and institutional traders vulnerable to MEV attacks and manipulation.
A dark pool perpetual DEX could offer a solution that blends the privacy of TradFi with the trustless architecture of DeFi, especially if powered by zero-knowledge (ZK) tech.
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