The co-founder of Binance, Changpeng “CZ” Zhao, proposed to create a decentralized perpetual exchange (DEX) scholarship to prevent market manipulation.
In a post of June 1, Zhao said that he had “always been perplexed 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,” he said.
Zhao added that “if you are looking to buy $ 1 billion in one room, you would not generally want others to notice your order until it is finished.” It is a question of preventing attacks of robots of extractable value and maximum extractable value (MEV), which leads to an increase in the shift, prices worse and higher costs.
His comments follow the liquidation of nearly $ 100 million in Bitcoin Hyperliquid positions, which would have been held by a merchant known as James Wynn. The event, which occurred after Bitcoin, fell below $ 105,000, sparked allegations on X that some users had coordinated to “drive” the liquidation of Wynn.
An X user said that the co-founder of Tron Justin Sun was showing interest in participation, but the complaint remains unconfirmed. He also went so far as to invite Eric Trump, the son of the United States, Donald Trump, to the group.
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What are dark pools?
Zhao said that “Tradfi traders use dark swimming pools, which are often 10 times larger” than traditional and transparent swimming pools. The dark pools are private negotiation places where large orders are hidden in view of the public until their execution.
This prevents attacks on the front, slipping and mev, hiding the size, price and intention of order. However, the implementation of decentralized dark pools requires complex systems, such as evidence of zero knowledge (residence on ZK) or delayed settlement mechanisms.
Maria Carola, CEO of instant Exchange Stealthex, told Cintelegraph that “the fundamental challenge for the construction of a dark swimming pool perplexion achieved both confidentiality and verifiability”. She noted that zK-insproofs and the correspondence of encrypted orders are promising pathways for development. She added:
“I think that a concrete approach is to take advantage of ZK-Snarks or ZK Starks to validate the execution of the trade and the regulations without revealing the details of the trade.”
The obstacles are not only of a technical nature. Carola stressed that “the launch of a dark onchain swimming pool, especially for perpetuals, enters a complex regulatory landscape”.
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The privacy of exchanges is essential to derivatives
Zhao argued that privacy is particularly important on the derivative markets. He said that the public visibility of liquidation levels exposes large traders to coordinated attacks which could force the premature liquidation:
“If others can see your liquidation point, they could try to push the market to liquidate you. Even if you have a billion dollars, others can take you on you.”
The co-founder of Binance admitted that there were counter-arguments to these conceptions, the additional transparency allowing market decision-makers to absorb large orders. He said it is “maybe true”.
“I will not enter into an argument on what is good or bad. Different traders may prefer different types of markets,” he said.
The Stealthex Carola has added that “opacity is a double -edged sword”, noting that it reduces the first round, but “also obscures the attempts to handle, in particular in a lever -effect environment”. “To remedy this, a” dark “Dex must implement engines at adaptive risk and a detection of behavioral anomalies, ideally with cooked cryptographic responsibility,” she said.
Zhao concluded by encouraging the developers to launch a decentralized exchange of the dark swimming pool of Onchain with perpetual swaps. He said it could be done “either by not showing the order book, or better still not showing deposits in smart contracts, or until much later.”
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