CZ: Now Might Be a Good Time to Launch a Dark Pool Perpetual DEX

BlockBeats News, June 2nd, Binance founder CZ posted on X, stating, "Given the recent events, I believe now might be a good time to launch a dark pool perpetual decentralized exchange (DEX). I have always been puzzled by the fact that on a DEX, everyone can see your order in real time. On a perpetual DEX with liquidation, this issue is even more serious. Even in a centralized exchange (CEX) order book, orders are not associated with specific individuals, but if you want to buy $1 billion worth of a cryptocurrency, you probably wouldn't want others to notice your order before it is completed. Otherwise, others might front-run you, essentially engaging in front-running. In a DEX, this could lead to MEV attacks. This would result in increased slippage, worse prices, and increased costs for you. Hence, large traders in TradFi use dark pools, which are usually 10 times larger in scale than a 'light pool' (i.e., regular order book)."

"For perpetual contracts (or futures), it is even more critical not to let others know/see your order. If others can see your liquidation point, they may try to push the market to liquidate you. Even if you have $1 billion, others may collude to go against you. This may be what we have recently witnessed."

"The opposite view I see is that increased transparency can allow market makers to absorb your large orders. This could be true. I don't want to argue which view is right or wrong. Different traders may prefer different market structures. Now might be a good time to launch an on-chain dark pool-style DEX + perpetual contract, either by not displaying the order book or, even better, by not displaying the smart contract's deposits at all, or by delaying the display for a long time. This could be achieved through zero-knowledge proofs or similar cryptographic techniques."