In a recent post on X, Changpeng Zhao (CZ), the former CEO of Binance, sparked a significant conversation within the crypto community by proposing a groundbreaking solution to some of the most persistent challenges in decentralized trading.
On June 1, 2025, CZ shared his vision for a dark pool perpetual decentralized exchange (DEX), a concept that could redefine how privacy, security, and fairness are approached in the world of decentralized finance (DeFi).
Leveraging advanced cryptographic technologies like zero-knowledge proofs (ZK), CZ’s proposal aims to address vulnerabilities such as Miner Extractable Value (MEV) attacks, front-running, and targeted liquidations, which have long plagued DEX users.
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The Transparency Problem in Current DEXs
Decentralized exchanges have been celebrated for their transparency and trustless nature, operating on public blockchains where every transaction and order is visible to all participants.
However, this transparency is a double-edged sword. As CZ pointed out in his post, “I have always been puzzled with the fact that everyone can see your orders in real-time on a DEX.” This openness exposes traders to significant risks, particularly in the form of predatory practices like front-running and MEV attacks.
Front-running occurs when a malicious actor, often using automated bots, observes a pending transaction in the mempool (the pool of unconfirmed transactions) and places their own transaction ahead of it by paying a higher gas fee. This allows them to profit by manipulating the market, often at the expense of the original trader.
MEV attacks take this a step further, where miners or validators reorder, include, or exclude transactions in a block to maximize their profits, leading to increased slippage and worse execution prices for users.
The issue becomes even more critical in perpetual futures (perps) trading, a popular derivative product in crypto markets. Perpetual contracts allow traders to hold leveraged positions without an expiration date, but they come with liquidation points — price levels at which a position is automatically closed to prevent further losses.
As CZ highlighted, “For perps (or futures), it is even more important to not let others know/see your orders. If others can see your liquidation point, they could try to push the market to liquidate you.” In a transparent DEX environment, large players or coordinated groups can exploit this visibility, deliberately driving the market price to trigger liquidations and profit from the resulting chaos. CZ emphasized the severity of this vulnerability, noting, “Even if you got a billion dollars, others can gang up on you.”
Learning from Traditional Finance: The Role of Dark Pools
To illustrate a potential solution, CZ drew inspiration from traditional finance (TradFi), where dark pools have long been a tool for institutional investors. Dark pools are private exchanges where large trades can be executed anonymously, away from the public order books of traditional “lit” markets.
According to CZ, dark pools in TradFi are “often 10 times bigger than the ‘lit pools’ (i.e., normal orderbooks),” underscoring their significance in handling substantial trading volumes without impacting market prices.
In TradFi, dark pools allow institutional players to execute block trades—large orders that could otherwise cause significant price slippage if placed on a public exchange.
By keeping these trades hidden, dark pools prevent other market participants from front-running or reacting to the order, ensuring better execution prices and minimizing market disruption.
CZ believes that a similar mechanism could revolutionize the DeFi space, particularly for perpetual futures trading, where privacy is paramount.
CZ’s Vision: A Dark Pool Perpetual DEX Powered by ZK Technology
CZ’s proposal centers on creating an on-chain dark pool-style perpetual DEX that prioritizes privacy while retaining the benefits of decentralization.
He suggested that such a platform could either hide the order book entirely or delay the visibility of deposits into smart contracts until a later time. This approach would shield traders from the predatory practices that thrive on transparency, such as MEV attacks and targeted liquidations.
To make this vision a reality, CZ advocated for the use of zero-knowledge (ZK) proofs or similar encryption technologies. ZK proofs are a cryptographic method that allows one party to prove a statement is true without revealing any underlying data.
In the context of a dark pool DEX, ZK technology could enable traders to submit orders and deposits without exposing their details to the public blockchain.
For example, a trader could prove that their order meets the platform’s requirements (e.g., sufficient collateral) without revealing the order’s size, price, or liquidation point.
This selective disclosure ensures privacy while maintaining the integrity and verifiability of the trading process.
By integrating ZK technology, a dark pool perpetual DEX could offer several key features:
- Hidden Order Books: Unlike traditional DEXs, where order books are publicly visible, a dark pool DEX would conceal orders, preventing front-running and MEV attacks.
- Confidential Deposits: Deposits into smart contracts would remain private, ensuring that large traders—often referred to as “whales” — are not targeted by malicious actors.
- Protection Against Liquidation Attacks: By hiding liquidation points, the platform would make it nearly impossible for others to manipulate the market to force liquidations.
- On-Chain Privacy: Despite being fully on-chain, the use of ZK proofs would ensure that sensitive trading data remains confidential, aligning with the ethos of decentralization.
The Broader Implications for DeFi
CZ’s proposal comes at a time when the crypto market is under increasing scrutiny for its trading practices, as noted in a recent article by AInvest. The visibility of orders on DEXs has long been a pain point for large traders, who face higher costs due to slippage and market manipulation.
A dark pool perpetual DEX could address these issues, providing a more secure and efficient trading environment for both retail and institutional participants.
Moreover, the idea aligns with a broader trend in the blockchain industry toward privacy-focused solutions.
Zero-knowledge proofs have already been implemented in projects like Zcash and Ethereum’s ZK rollups, demonstrating their potential to balance transparency with confidentiality.
As Howard Wu, founder of Aleo, noted in a Decrypt article, “Zero-knowledge proofs offer a cryptographic alternative to the binary choice between full transparency and complete opacity.”
This technology could be a game-changer for DeFi, enabling platforms to meet the privacy and compliance needs of institutional players while remaining decentralized.
Challenges and Counterarguments
While CZ’s proposal has garnered significant attention, it has also sparked debate within the crypto community.
Some argue that transparency in DEXs is a feature, not a bug. As CZ acknowledged in his post, “The counterargument I have seen is that being more transparent allows market makers to absorb your large orders.”
Transparent order books enable market makers to provide liquidity and better pricing, which can benefit traders, especially in highly liquid markets. A dark pool DEX, by contrast, might face liquidity challenges, as the lack of visibility could deter market makers from participating.
Additionally, implementing ZK technology at scale is not without its challenges. ZK proofs can be computationally intensive, potentially leading to higher transaction costs or slower processing times.
However, advancements like ZK rollups and Bulletproofs (introduced in 2018 and used in projects like Monero) are making ZK-based solutions more efficient and practical for real-world applications.
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The Path Forward
CZ’s idea has already inspired responses from builders in the space. For instance, the team at 0x0exchange, which is developing a privacy-focused trading platform called Spectre, replied to CZ’s post, noting that they are “building exactly that.” Their Arcane Wallet, which enables private on-chain swaps and transfers, is already live, with plans to launch Spectre for leveraged trading soon.
This suggests that the infrastructure for a dark pool perpetual DEX may be closer to reality than many realize.
As the DeFi ecosystem continues to evolve, CZ’s proposal highlights the need for innovation in privacy and security.
By drawing on lessons from TradFi and leveraging cutting-edge cryptographic tools, a dark pool perpetual DEX could offer a compelling solution to the vulnerabilities of transparent trading.
Whether this vision becomes a reality remains to be seen, but one thing is clear: the conversation around privacy in DeFi is only just beginning.
In conclusion, Changpeng Zhao’s suggestion to launch a dark pool perpetual DEX using ZK technology addresses some of the most pressing issues in decentralized trading. By hiding order books, deposits, and liquidation points, such a platform could protect traders from MEV attacks, front-running, and targeted liquidations, creating a safer and more equitable trading environment.
As the crypto industry grapples with the balance between transparency and privacy, CZ’s idea may well pave the way for the next generation of DeFi platforms.
