In brief
- Binance founder CZ proposed a new type of decentralized exchange that hides trades and liquidation points to protect users from front-running and manipulation.
- Analysts say the idea could enable institutional-grade DeFi, but would require a trustless, non-custodial design using atomic swaps and zero-knowledge encryption.
- CZ invited developers to contact him via ReachMe.io, a paid messaging app he introduced in March to filter high-volume inbound requests.
Binance founder Changpeng “CZ” Zhao proposed a new kind of decentralized exchange on Sunday, one that hides trades, positions, and deposits from the public, to protect traders from so-called front-running and liquidation attacks.
“Given recent events, I think now might be a good time for someone to launch a dark pool perp DEX,” Zhao wrote on X. “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.”
Perp DEXs are decentralized exchanges that offer perpetual futures contracts, enabling users to place highly leveraged bets on asset prices without expiration.
“If others can see your liquidation point, they could try to push the market to liquidate you,” he wrote. “Even if you got a billion dollars, others can gang up on you.”
Zhao noted that while CEXs hide user identities, DEXs expose wallet-linked orders and liquidation points, enabling front-running and maximal extractable value (MEV) attacks, where bots detect and exploit pending transactions for profit.
“This results in increased slippage, worse prices, and higher costs for you,” he wrote.
To mitigate these risks, Zhao proposed a “dark pool-style” approach that conceals trades and smart contract activity.
Zhao suggested the use of zero-knowledge proofs (ZK) or similar encryption to hide activity until later stages of settlement.
“CZ is really onto something here. Such a solution must be trustless, non-custodial, cross-chain, and secure,” Kadan Stadelmann, CTO of Komodo Platform, told Decrypt. “The non-custody feature, for example, promotes privacy.”
Zhao’s post has revived a long-running debate in DeFi over whether transparency is always beneficial, particularly for institutional players.
Annu Shekhawat, Global Ecosystem Lead at Avail, said CZ’s post “makes a compelling case for the next frontier in DeFi infrastructure.”
“Today’s DEXs expose too much: real-time order visibility, wallet-linked order books, and predictable liquidation points,” Shekhawat told Decrypt. “That’s great for MEV bots however, terrible for serious traders.”
Stadelmann said building the kind of DEX Zhao envisioned would require full decentralization, cross-chain interoperability, and trustless execution, pointing to “atomic swaps” that use “Hash Time Lock Contracts.”
These are smart contract mechanisms that enable two parties to trade assets across blockchains only if one party provides a specific code within a specified time limit; otherwise, the transaction is automatically canceled, and both parties recover their funds.
Shekhawat said the first to build such a platform could set the benchmark for private DeFi, noting it would “unlock a whole new design space for institutional-grade DeFi.”
Zhao, who stepped down as Binance CEO in 2023, invited developers to contact him via ReachMe.io, a paid messaging platform he introduced in March.
He introduced the feature to manage overwhelming message volume, gradually raising the price to filter out spam.
Edited by Sebastian Sinclair
Daily Debrief Newsletter
Start every day with the top news stories right now, plus original features, a podcast, videos and more.
