TLDR
- Binance founder CZ proposed a new “dark pool” DEX that hides trades and liquidation points to prevent front-running and market manipulation
- Current DEXs expose all trading activity in real-time, allowing MEV bots to exploit traders and push markets to trigger liquidations
- The proposed solution would use zero-knowledge proofs and atomic swaps to maintain privacy while keeping trades trustless and non-custodial
- This idea comes after crypto trader James Wynn lost $100 million through liquidations, exposing market manipulation concerns
- CZ invited developers to contact him through his paid messaging platform ReachMe.io to build this solution
CZ Proposes Private DEX After $100 Million Trader Liquidations
Binance founder Changpeng “CZ” Zhao has called for the creation of a new type of decentralized exchange that would hide trading activity from public view. His proposal comes after recent high-profile liquidations that highlighted vulnerabilities in current DeFi systems.
The former Binance CEO posted his idea on X, suggesting developers build a “dark pool perp DEX” that conceals trades, positions, and deposits. Current DEXs make all trading activity visible in real-time, creating opportunities for exploitation.
Given recent events, I think now might be a good time for someone to launch a dark pool perp DEX.
I have always been puzzled 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.
Even with a CEX…
— CZ 🔶 BNB (@cz_binance) June 1, 2025
CZ pointed out that this transparency allows other traders to see liquidation points for leveraged positions. “If others can see your liquidation point, they could try to push the market to liquidate you,” he wrote. “Even if you got a billion dollars, others can gang up on you.”
The timing of this proposal follows crypto trader James Wynn’s recent $100 million loss through liquidations on Bitcoin futures. Wynn claimed the losses exposed corruption in crypto markets and how exchanges operate internal market-making desks.
JAMES WYNN HAS BEEN FULLY LIQUIDATED
CURRENT BALANCE: $16.28 pic.twitter.com/Kxmbo6aP2H
— Arkham (@arkham) May 31, 2025
Traditional DEXs suffer from front-running attacks where bots detect pending transactions and exploit them for profit. This practice, known as maximal extractable value (MEV), results in higher costs and worse prices for regular traders.
Technical Solutions for Privacy
CZ suggested using zero-knowledge proofs or similar encryption methods to hide trading activity until settlement stages. The system would need to remain trustless and non-custodial while providing privacy benefits.
Kadan Stadelmann from Komodo Platform said building such a system would require atomic swaps using Hash Time Lock Contracts. These mechanisms allow cross-chain trading without requiring trust between parties.
The contracts set time limits for trades and automatically cancel transactions if conditions aren’t met. Both parties recover their funds if the trade fails, maintaining security without central oversight.
Annu Shekhawat from Avail noted that current DEX exposure creates perfect conditions for MEV bots but terrible experiences for serious traders. Private DEXs could unlock new possibilities for institutional-grade DeFi trading.
Market Manipulation Concerns
The James Wynn liquidation highlighted concerns about market manipulation in crypto trading. Internal market-making desks at exchanges often take opposite positions to user trades, creating potential conflicts of interest.
These desks provide liquidity but can benefit when traders get liquidated. The arrangement raises questions about fair trading practices, especially during volatile market conditions.
CZ’s proposal addresses these concerns by removing visibility into trader positions and liquidation levels. Private order books would prevent coordinated attacks on large positions.
Current Solana DEX data shows private exchanges already dominate trading activity on that blockchain. Most Jupiter-routed trades now happen through private DEXs rather than public order books.
The shift toward private trading venues mirrors traditional finance, where institutional traders use dark pools to avoid market impact. Large trades in public markets often move prices against the trader before execution completes.
Developer Interest and Implementation
CZ invited developers to contact him through ReachMe.io, his paid messaging platform launched in March. The service filters high-volume requests by charging fees that increase over time.
Industry experts believe the first platform to successfully implement private DEX technology could set standards for institutional DeFi. The challenge lies in maintaining decentralization while providing privacy features.
Building such systems requires cross-chain compatibility and secure execution without central authorities. Zero-knowledge technology offers promising solutions but adds complexity to implementation.
The proposal has revived debates about whether complete transparency benefits DeFi users. While transparency prevents some forms of manipulation, it also enables others like front-running and MEV extraction.
CZ stepped down as Binance CEO in 2023 but remains active in proposing new DeFi infrastructure improvements.
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