Binance’s CZ Suggests Dark Pool DEX to Address DeFi Risks

Binance co-founder and former CEO Changpeng Zhao (CZ) has ignited a new debate in the DeFi world with a proposal that could fundamentally reshape crypto derivatives trading. On June 2, CZ took to X (formerly Twitter) to question a core tenet of decentralized exchanges: radical transparency.Given recent events, I think now might be a good time for someone to launch a dark pool perp DEX.

I have always been puzzled with the fact that everyone can see your orders in real-time on a DEX. The problem is worse on a perp DEX where there are liquidations.

Even with a CEX…The issue, CZ argues, is especially acute on perpetual DEXs, where open order books and visible liquidation points leave large traders exposed to front-running and MEV (Maximal Extractable Value) bot attacks. In these scenarios, automated bots or even coordinated groups can spot vulnerable positions and push the market to force liquidations, leading to massive losses.Hyperliquid Liquidation Map. Source: CoinglassThis point was driven home last week when high-profile trader James Wynn reportedly lost nearly $100 million in Bitcoin positions on Hyperliquid. As Bitcoin briefly dipped below $105,000, social media buzzed with claims that on-chain observers had coordinated to “hunt” Wynn’s liquidation.To address these vulnerabilities, CZ suggests borrowing a page from traditional finance: dark pools. In TradFi, dark pools are private trading venues where large orders are hidden from public view until execution, shielding traders from predatory tactics and price slippage.A simple flow chart showing how dark pools work. Source: B2broker“Even with a CEX order book, where orders aren’t linked to a specific individual, 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,” noted CZ.In the context of DeFi, a “dark pool perp DEX” would use cryptographic tools like zero-knowledge proofs (ZK-proofs) or delayed settlement to keep order books and positions private until trades are finalized. This would help prevent front-running and MEV attacks, but also raises new questions about manipulation and transparency.Maria Carola, CEO of StealthEX, told Cointelegraph:“The fundamental challenge in building a dark pool-style perp DEX is achieving both privacy and verifiability. I think one concrete approach is leveraging zk-SNARKs or zk-STARKs to validate trade execution and settlement without revealing trade details.“Implementing dark pools on-chain isn’t just a technical challenge. Regulatory scrutiny is intensifying, especially after recent privacy protocol crackdowns. Carola warns that opacity is a double-edged sword: while it reduces front-running, it also makes it harder to detect manipulation, especially in leveraged environments.CZ himself acknowledged the trade-offs:“I won’t get into an argument on which is right or wrong. Different traders may prefer different types of markets.”To address risks, experts suggest that DEX dark pools should include adaptive risk management engines and behavioral anomaly detection, ideally with cryptographic auditability.CZ’s proposal has already sparked a wave of discussion among developers and traders. Some Solana-based projects are reportedly working on private DEX protocols, and privacy tokens like Monero have surged in response to the debate.Crypto Total DeFi Market Cap, $. Source: TradingViewAs the DeFi sector matures, the balance between privacy and transparency is likely to become a defining issue. Whether CZ’s vision for a dark pool DEX becomes reality remains to be seen, but the conversation is already reshaping how the industry thinks about security, fairness, and the future of decentralized trading.Get Started on eToro