CZ Proposes Private Dark Pool DEX for Crypto Futures

Zhao's Dark Pool Vision: Secure, Private DEX to End MEV Attacks

A private, secure DEX could be the next big thing in crypto.

Binance founder Changpeng Zhao has proposed the establishment of a perpetual decentralized exchange (DEX) with a dark pool (DP) for trading cryptocurrency futures. He tries to reduce worries about transparency and how it affects big trades while promoting more privacy for traders who use DEXs. Zhao's call follows the James Wynn liquidation controversy, in which he lost $100 million and revealed the crooked system. He also suggests a dark pool system for DEXs and draws attention to the difficulties traders have on current DEXs.

Challenges of Traditional DEX Ecosystem 

Binance founder Changpen Zhao identifies two major challenges in traditional decentralized exchange: front-running and MEV Attacks. 

• Public orders on DEXs = front-running & MEV attacks

• Traders are getting wrecked by bots 

• Observers can exploit visible orders to execute trades ahead of large buyers, increasing trading costs. 

• Public visibility of liquidation points can lead to coordinated efforts to trigger liquidations, exposing traders to significant risks. 

Large traders in traditional finance prefer DP for secrecy around order details. Developers on Solana are working on improving transparency, with private DEXs dominating trading activity.

Changpeng Zhao's Dark Pool DEX Vision 

• Prioritizes privacy by concealing order books or delaying deposit visibility. 

• Utilizes advanced cryptographic techniques like zero-knowledge proofs for secure transactions.  

He believes dark pool decentralized exchange will address traders' privacy and security. Advocates for developers to build an on-chain dark pool DEX catering to large-scale traders.

By incorporating ZK technology, a dark pool everlasting DEX could offer several essential features:  

Hidden Order Books: Unlike regular DEXs, where order books are publicly available, a DP decentralized exchange would hide orders, prohibiting front-running and MEV attacks.  

Confidential Deposits: Smart contract deposits would stay confidential, ensuring that major traders often referred to as "whales" are not targeted by malevolent actors.   

Protection Against Liquidation Attacks: By concealing liquidation points, the platform makes it practically impossible for outsiders to manipulate the market and force liquidations.  

On-Chain Privacy: Despite being totally on-chain, the usage of ZK proofs would keep sensitive trading data confidential, in line with the decentralization ethos.

CZ's comment is both a critique of current DEX designs and a challenge to developers. 

Developing a DP decentralized exchange with everlasting futures would necessitate resolving complicated concerns with privacy, user trust, and scalability. However, the payback might be massive: a safer, more equitable environment for high-volume DeFi dealers.   This might be an excellent chance for developers looking to create the next big thing in cryptocurrency. As front-running and MEV remain hot subjects, a solution like this could transform decentralized trading.

The wider implications for DeFi

CZ's concept for a dark pool long-term DEX could help major traders overcome the difficulties of slippage and market manipulation in the cryptocurrency industry. This would create a more secure and efficient trading environment for regular and institutional investors. The notion is consistent with the blockchain industry's tendency toward privacy-focused solutions, such as zero-knowledge proofs in projects like Zcash and Ethereum's ZK rollups. This technology has the potential to transform DeFi by allowing platforms to meet institutional participants' privacy and compliance requirements while staying decentralized.