From a $100 million liquidation disaster to CZ's 'invisible contract' concept, is the next battleground for crypto trading 'invisibility'?

Last week, the experience of crypto mogul James Wynn sent chills down the spines of all leverage players. His nearly $100 million position (949 Bitcoins plus a bunch of meme coins) on Hyperliquid was instantly wiped out as Bitcoin fell below $105,000.


But Wynn refused to accept it. He felt he wasn't defeated by market volatility but had become the 'prey'. He publicly accused that someone was specifically targeting his publicly disclosed large positions on-chain, precisely launching a 'liquidation hunt'—briefly breaching his liquidation line, triggering forced liquidation, and swiftly pulling back the price to complete the harvest.


Regardless of the truth, this matter acts like a scalpel, precisely dissecting a fatal wound in decentralized trading (DeFi): everyone's hidden cards are laid bare on the table.
Imagine playing poker where your opponent can see your hand directly; how can you play? On-chain, your wallet address is an open ledger, and a large holder's substantial position is like a lighthouse in the night, attracting 'hunters'.


CZ's 'invisibility' solution: Dark pool perpetual contract DEX
Just after the Wynn liquidation storm, Binance founder CZ proposed a solution: to create a 'dark pool perpetual contract DEX'. The core idea is simple and straightforward: If everyone is 'invisible', who can accurately 'hunt'?
Using zero-knowledge proofs (ZK) and similar technologies to hide the order book, with trades being matched quietly in the background, preserving the essence of decentralization while protecting large players from targeted liquidation.


Dark pool: A relic or a new weapon?
'Dark pool' sounds mysterious, but it has long been an old hand in traditional finance. It emerged in the 1980s to solve a very practical problem: How can institutional giants quietly complete a major deal?
Imagine this: a pension fund wants to sell 10 million shares of Apple stock. If they place a direct order on the open market, the market will see this huge sell order, and the price might collapse before they can sell half. Everyone panics and sells, or even front-runs, forcing you to sell at a loss.


To address this pain point, the U.S. SEC approved 'Alternative Trading Systems' (ATS) in 1979, which is essentially the prototype of dark pools. Institutions can match large trades privately in these venues, with transaction details only made public after completion. By 2017, dark pools accounted for nearly 40% of trading in the U.S. stock market!


The core gameplay is just four points:
Hidden order book: Buy and sell orders are not public.
Private matching: The trading parties secretly agree on a price (usually the midpoint). Public disclosure after the fact: Only after the trade is completed does it get announced.
High barriers: Mainly serving institutional giants. This mechanism's core is to protect the privacy of large trades and market stability.
Why does the crypto world need 'dark pools' more than traditional finance?
If traditional finance's dark pools are the icing on the cake, in the crypto world, they might be the lifeline, or even a lifesaver. Why?
Because the extreme transparency of blockchain has become the Achilles' heel in the predator-prey (PvP) market.


This transparency has spawned a series of 'on-chain predators':
MEV (Maximum Extractable Value): This is the 'cancer' of on-chain trading. Bots listen to the memory pool, front-running your trades and intercepting your rightful profits. It's like someone peeking at your cards and then betting precisely.
Copy trading: Too lazy to study strategies? Just copy the wallet operations of the big players! This 'parasitic' behavior squeezes the profit margins of experts (of course, the experts have also learned to use copy traders as 'exit buyers'). Liquidation hunting: Wynn's experience is a living textbook. On-chain leveraged positions are clear, and hunters can accurately calculate liquidation points, collaborating to create volatility for 'targeted liquidation'. Withdrawn quotes (Quote Fading): Market makers see a large order coming, immediately withdraw their orders, widen the spread, causing you to trade at the most disadvantageous time, skyrocketing costs. The 'black technology' shield of crypto dark pools
To combat these 'predators', crypto dark pool projects have deployed various privacy protection technologies to build 'invisible' trading fortresses:
Zero-knowledge proofs (ZKPs): A magical technology! It can prove that a transaction is valid without revealing the transaction content ('I know the password is correct, but I won't tell you what the password is').
Multi-party computation (MPC): Several trading requests are combined to match trades without anyone knowing the other party's cards, protecting privacy. Trusted execution environments (TEEs): Create a secure 'black box' to execute trades. For example, Uniswap's L2 network Unichain uses TEE to package blocks, preventing MEV bots from peeking. Its 'Rollup-Boost' locks trades in an encrypted memory pool, providing similar dark pool protection for the entire DeFi ecosystem. The goal is clear: trades must be both private and verifiable; anonymous yet auditable. While maintaining the blockchain's foundation of 'trustlessness', it provides traders with real privacy armor.


Pioneers of 'on-chain dark pools'
The idea is beautiful, but how about practice? Some projects are already exploring:
Renegade (Arbitrum): A dark pool DEX based on MPC technology.
Focusing on privacy and zero slippage.
Peer-to-peer matching, executing trades at Binance's midpoint price, eliminating front-running and price manipulation.
Goal: To complete large transactions quietly, without disturbing the market.


Silhouette (Hyperliquid): Still under development, no launch date yet.
The core is to integrate the hidden order system into Hyperliquid's high performance and deep liquidity.
The biggest advantage: No need for dedicated wallets! The barrier to entry is greatly reduced, making privacy trading easier to popularize.

Penumbra (Cosmos): A brand new blockchain focused on privacy.
Offers spot dark pool trading.
Big move: Use ZK technology to hide everything! Trades, balances, staking, and even governance votes, all remain invisible.
The DEX adopts batch auctions to prevent front-running, using cryptographic means to achieve comprehensive privacy.

sFOX (Centralized Institutional Services): A compliant crypto trader for institutions (regulated by FinCEN and the state of Wyoming).
Access to liquidity from over 30 exchanges.
Provides hidden order functionality, helping institutions discreetly complete large buy and sell orders.

The ideal is beautiful, but reality is stark: Why hasn't the dark pool taken off yet? Dark pools sound like a weapon to solve MEV and liquidation hunting, so why haven't they become popular in the crypto circle? There are several challenges:
Privacy vs. Verifiability: The art of walking a tightrope requires hiding transaction details while proving the system hasn't cheated and the prices are fair, which is technically very difficult. ZK, MPC, and TEE are directions, but implementation is complex.
Just hiding data is not enough; one must prevent others from reverse engineering transaction information through subtle clues (like price changes from a certain AMM).



Liquidity dilemma: Which came first, the chicken or the egg? For dark pools to be effective, there needs to be sufficient trading volume. But without trading volume, who is willing to participate? Cold starting new projects is as difficult as climbing to the sky.
Perpetual contracts require higher liquidity depth and real-time activity, doubling the difficulty.

Trust paradox and price distortion risk: Dark pools are inherently opaque and can easily trigger a trust crisis. The soul of the crypto circle is 'trust, but verify'. If the details are not visible, how can you trust?
Deeper concerns: Dark pools may tear the market apart. Institutions get good prices in dark pools, while retail investors suffer poorer liquidity and greater volatility in the open market, creating a 'dual-track system'.
Traditional finance has lessons: Barclays was fined $70 million for false statements regarding its dark pool operations, and Credit Suisse has also faced setbacks.

Regulatory minefield: Creating dark pools supporting perpetual contracts on-chain? Technically difficult, compliance is even harder! Derivatives, privacy technology, cross-border flow... The triple overlap creates a compliance maze with almost no ready answers.


The revelation from the Wynn incident: Transparency is a double-edged sword. Whether or not Wynn was truly 'hunted', his $100 million tuition exposes a core contradiction: The ultra-transparent system we created for 'trustlessness' may itself become a weapon for malicious exploitation. Dark pools offer a possibility for repair, but they walk a very delicate tightrope—seeking a balance between protecting privacy and maintaining verifiability and fairness. Projects like Renegade prove that dark pools in the spot market are technically feasible. It achieves 'proving innocence without exposing one's hand'. However, CZ's envisioned 'perpetual contract dark pool DEX' is still a blueprint, with Silhouette being one of the few brave ones moving toward this goal.


Is invisibility the future? As the crypto market matures and institutional funds continue to flow into on-chain, the evolution of infrastructure is urgent. Protecting large traders from 'transparent hunting', while not excluding retail investors, is a challenge that must be faced. Although the technical hurdles are high, they are not insurmountable. Dark pools are by no means a perfect remedy; they may bring new problems (such as liquidity fragmentation and regulatory challenges). But at this moment, when the on-chain 'hunting game' is intensifying, an option that allows people to trade 'invisibly' is becoming increasingly necessary. Perhaps the true decentralized future also needs a little 'invisible' shadow? This battle over the boundaries of transparency and privacy has just begun.