Binance Founder Proposes “Dark Pool” DEX to Halt Front-Running
Binance founder Changpeng “CZ” Zhao has suggested a new type of decentralized exchange that conceals trades and liquidation points to shield users from predatory practices.
In a proposal published Sunday on X (formerly Twitter), Binance co-founder Changpeng (CZ) Zhao has suggested a new type of decentralized exchange (DEX) — one designed to shield users from the predatory practice of front-running and aggressive liquidation tactics.
Zhao’s concept, termed a “dark pool-style” perpetual DEX, proposes hiding trade activity and liquidation points from the public ledger. “This results in increased slippage, worse prices, and higher costs for you,” he wrote in his post.
The Problem: Why Visibility is Bad
While centralized exchanges (CEXs) typically hide user identities, current decentralized exchanges broadcast wallet-linked orders and liquidation points — information easily exploited by aggressive traders.
As Zhao highlighted, this transparency creates fertile ground for Maximal Extractable Value (MEV) attacks, where high-frequency bots detect pending transactions and execute near-instantaneously for profit. Liquidation points on perpetual contracts are particularly vulnerable.
“If others can see your liquidation point, they could try to push the market to liquidate you,” he wrote.
The Proposed Solution: Dark Protocols
To mitigate these risks, Zhao champions a model using cryptographic privacy features, specifically mentioning zero-knowledge proofs (ZK). These cryptographic tools verify transactions without revealing details until later stages in settlement. (Think serenading a house to prove you’re 21 without singing your birthday song).
Achieving this while maintaining decentralization, security, non-custodiosity, and cross-chain functionality requires “atomic swaps” — using smart contract mechanisms like Hash Time Lock Contracts (HTLCs) for secure cross-chain trading.
What’s the Beef? Expert Opinions
Industry experts echo Zhao’s concerns that current DEX transparency disadvantages serious traders who are vulnerable prey.
“Today’s DEXs expose too much,” said Annu Shekhawat, Global Ecosystem Lead at Avail. “real-time order visibility, wallet-linked order books, and predictable liquidation points… That’s great for MEV bots however, terrible for serious traders.”
Kadan Stadelmann, CTO of Komodo Platform, lauded its potential as the future for institutional-grade DeFi. “Such a solution must be trustless, non-custodial, cross-chain, and secure,” he stated. “The non-custody feature, for example, promotes privacy.”
However, building this vision requires significant technical hurdles: trustless execution, full decentralization, and cross-chain interoperability, experts argue.
Next Steps: A Call to Action
Echoing a call to developers, Zhao suggested a framework for this next-generation DEX. But his mechanism relies on his own ReachMe.io platform, a paid messaging tool introduced last March to manage the high volume of questions stemming from his frequent public appearances. “I was always wondering why it’s impossible to have a Dark Pool,” Zhao’s X post concluded.
