Binance founder Zhao Changpeng (CZ) recently stated that it is a key time to develop a decentralized perpetual contract exchange (DEX) that supports dark pool models. This perspective directly addresses the market efficiency issues caused by the exposure of large orders in the existing DEX architecture, and points out that cryptographic technologies such as zero-knowledge proofs can achieve better transaction privacy protection.
I. The Transparency Dilemma of Existing DEX
CZ points out two core issues in the analysis:
1. Order pre-knowledge risk
— Public mempool completely exposes large buy and sell intentions, leading to front-running
— Instance: A trader's $100 million BTC perpetual contract position on Hyperliquid was targeted for liquidation price leakage, facing specific attacks from counterparties
2. Liquidation vulnerability
— The transparency of the liquidation points of perpetual contract holders can easily induce market manipulation
— Data evidence: The average slippage of large orders on DEX is 3.2 times that of CEX (source: Chainalysis Q1 report)
II. The Operational Logic of Traditional Dark Pools and On-chain Adaptability
To solve the problem, CZ draws on the traditional financial dark pool model, whose core characteristics include:
| Advantages of Traditional Dark Pools | On-chain Implementation Solutions |
| Hiding order size and direction | ZK-proof encrypted order book |
| Delayed trade disclosure | Smart contract timed settlement mechanism |
| Reducing market impact costs | Batch order matching optimizes liquidity |
The current technical feasibility has been verified:
Renegade Protocol: Achieves full encryption of orders through secure multi-party computation (MPC)
Penumbra: Uses sealed bid auctions, only disclosing net position changes
Arcium: Builds a programmable privacy trading engine on Solana
III. Special Needs of the Perpetual Contract Market
CZ emphasizes that perpetual contracts are the best application scenario for dark pool DEX, due to:
1. Risk control needs for liquidation
Hiding position details can avoid targeted price manipulation attacks
2. Institutional participation thresholds
Traditional asset management institutions require confidentiality in trading strategies, and current transparent DEXs cannot meet this requirement
3. Liquidity optimization space
Dark pools aggregate fragmented liquidity, improving the execution efficiency of large orders (theoretical calculations show a 30% reduction in impact costs)
IV. Key Challenges in Technical Implementation
Despite the broad prospects, three major bottlenecks still need to be overcome:
1. Balance between privacy and regulation
Need to develop verifiable compliance modules (such as selective disclosure to regulators)
2. Cross-chain liquidity integration
Current solutions are limited by single-chain ecosystems, and cross-chain dark pools are not yet mature
3. New mechanisms for MEV defense
Delayed disclosure may give rise to new predictive MEVs, requiring the design of protective systems
V. Market Opportunities and Evolution Trends
Multiple factors drive the development of dark pool DEX:
Surge in institutional demand: The wave of crypto asset allocation by listed companies has spawned covert trading channels
Technological maturity: ZK-proof verification speed has improved to milliseconds, Gas costs have decreased by 80%
Regulatory evolution: New regulations by the US SEC recognize the legality of privacy trading (refer to the revised Reg ATS)
> Industry data shows: The annual growth rate of DEX transaction volume with privacy protection reached 217% (TokenInsight 2025Q1)
Conclusion: The realistic path of incremental innovation
CZ's proposal does not deny the transparent value of DEX but promotes the construction of a multi-layer market structure:
1. The base layer retains the public order book to meet the needs of ordinary users
2. The professional layer provides dark pool services to attract institutional funds
3. The regulatory layer achieves penetrative management through ZK technology
As a16z researcher Scott Duke Kominers said: “Privacy protection and market transparency are inherently complementary; the key lies in building a flexible architecture that adapts to different scenarios.” The exploration of dark pool perpetual DEX may become an important milestone in the evolution of crypto trading infrastructure.
(This article is based on publicly available technical documents and market data and does not constitute any investment advice)
