Binance founder Changpeng Zhao (CZ) has introduced his concept of a decentralized exchange utilizing a dark pool approach to prevent market manipulation in DeFi.
A Solution to DeFi’s Transparency Problem
CZ proposed a dark pool for a decentralized exchange to protect traders from attacks like front-running and maximal extractable value (MEV). He believes that current decentralized exchanges are susceptible to manipulation due to transparency, which allows other parties to see your orders in real-time.
*“Given recent events, I think now might be a good time for someone to launch a dark pool perp DEX,”* Zhao posted on X.
Dark pools can hide orders and liquidation points using technologies like zero-knowledge proofs (ZKP).
Institutional Interest and Technical Challenges
Kadan Stadelmann, CTO of Komodo Platform, supported CZ’s idea, noting that such a solution should be trustless, non-custodial, and secure. He emphasized the importance of advanced cryptographic technologies in creating such platforms.
*“CZ is really onto something here. Such a solution must be trustless, non-custodial, cross-chain and secure,”* Stadelmann said.
Experts also note that current DEXs expose too much transparency, negatively impacting serious traders.
Privacy vs Trustlessness
The debate over transparency in DeFi is ongoing, and CZ’s proposal has sparked discussions on balancing openness and trading confidentiality. CZ aims to create a platform where even high-net-worth traders can participate without the risk of manipulation.
*“This results in increased slippage, worse prices and higher costs for you,”* he noted.
Experts, such as Stadelmann and Shekhawat, agree that the first to implement such a DEX will open new horizons for institutional-grade DeFi.
Following his proposal, CZ invited developers to collaborate on the idea through ReachMe.io, a messaging platform he launched. It will be interesting to see how this initiative impacts the future of DeFi and whether it attracts investors and developers.
