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- Binance co-founder CZ suggests a new type of decentralized exchange.
- He proposes a dark pool model to protect traders from manipulation.
- This concept aims to enhance privacy and reduce trading risks.
Changpeng Zhao, co-founder of Binance, has proposed a novel solution to a persistent problem in crypto trading. He believes that a new kind of decentralized exchange (DEX) could improve fairness for large investors. His idea focuses on privacy and protection, especially when traders deal with large volumes.
Order visibility is real in regular DEXs. This kind of transparency, which is great for retail traders, also allows for manipulation. Deep-pocketed traders quickly become targets. Once people see a large order being placed, they can sneak into the trade ahead of others increasing the price.
This is called front-running. In several instances, smart contracts make it worse by revealing positions and leading to forced liquidations. Zhao’s solution is to create a dark pool perpetual swap DEX. In this system, trades are confidential until after they are settled.
Unlike public order books, a dark pool conceals the size and timing of trades. This protects the trader from slippage and front-running. The concept is reminiscent of traditional finance, where dark pools allow institutional investors to trade quietly.
Binance’s Zhao Highlights DEX Vulnerabilities
Perpetual swaps are a special kind of derivative. They enable traders to speculate on future prices without actually owning the asset. Such markets are highly volatile. The use of leverage significantly increases their fragility. If others can see their position sizes or liquidation thresholds, they can easily be coerced out of the market.
Zhao pointed out that this is a grave issue. If the attackers know where the liquidations are, they can manipulate the market to induce losses. Such an attack is not theoretical; it actually occurs. Perpetual DEXs facilitate such attacks significantly due to their transparent architecture.
A dark pool DEX could solve this problem by hiding the information. Then,, the users could trade without anyone knowing what they are planning to trade. Zhao also suggests employing zero-knowledge (ZK) proofs or other cryptographic tools to conceal deposits and transactions. Such technology is in place and may provide one way of achieving safe and effective trading.
Balancing Transparency and Privacy in DeFi
Zhao is not launching the platform himself. Instead, he invites developers to take on the idea. His post serves more as a prompt to the industry than a personal business plan. He emphasizes that this is a notion, not a formal project.
However, the crypto world has taken notice. As debates over market structure become increasingly relevant, this proposal arrives at an important moment. Decentralized platforms have recently been under increasing pressure to keep up with the centralized exchanges in terms of speed, security, and user experience.
A dark pool perpetual DEX might be able to offer a new take on the mix between transparency and secrecy. The market is now waiting to see who will take on this challenge.
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