Binance co-founder Changpeng Zhao has suggested a new direction for decentralized trading. He proposed the idea of a dark pool perpetual swap DEX. His reason is simple. Public order visibility on DEXs gives rise to manipulation. In his view, it leaves traders exposed.
Zhao shared his thoughts through social media. He pointed out one crucial aspect: live orders are visible on DEX platforms. That greatly complicates big trades. When a person wants to buy a huge amount of a token, other people can intervene first. This front-running increases the costs for the initial buyer.
In such decentralized systems, this opens up a possibility for MEV attacks too. These attacks lead to worse execution and greater slippage. He emphasized the risk even more in perpetual trading. In those markets, traders are liquidated if the market moves against them.
Binance and the Case for Hidden Orders
If one can see positions and liquidation points, one can take advantage of that. Zhao suggested this could explain some of the recent market behavior. For large players, losing a position is precisely when others can see and target their trades. Dark pools exist in traditional finance to address that issue.
These private chats hide the trades until they are filled. Institutions use them to avoid revealing their intentions. Zhao believes that crypto needs a similar tool, especially for perpetual contracts. He argues that order books need to be kept confidential and deposits on smart contracts should be protected until later stages.
He pointed out that others argue transparency is helpful to market makers. That argument does believe that large orders are better absorbed. However, Zhao did not take a position for either side. He simply acknowledged that traders prefer different systems. Some want privacy, while others want open books.
Zero-Knowledge for Fairer Trading
His concept was based on zero-knowledge or similar cryptographic tools. With these, the DEX could hide orders and deposits, thus lowering the risk of manipulation.
He termed it a Sunday thought, not a concrete plan. Nonetheless, he encouraged builders to get in touch. He did not promise to fund or even reply. But the door is open. The cryptocurrency market has developed very rapidly.
Zhao’s tweet points out essential challenges that are still relevant in the baseline DEX architecture. Traders always look for security, price fairness, and protection against manipulation. His proposal introduces a potentially new approach. Implementing it may revolutionize crypto trading once again.
