A new proposal by Binance founder Changpeng “CZ” Zhao has reignited discussions on how decentralized exchanges (DEXs) can better protect traders from front-running, maximal extractable value (MEV) attacks, and forced liquidations. CZ's idea: a “dark pool-style” perpetuals DEX that hides trades and liquidation points from the public until settlement.
The concept, shared by Zhao in a May 26 post on X, calls for a shift away from the full transparency typical of most DEXs. While openness has long been considered a foundational strength of decentralized finance (DeFi), critics say it increasingly benefits exploitative bots and adversarial actors more than genuine traders - especially on perpetual futures platforms where visibility of positions can invite manipulation.
“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,” Zhao wrote.
Unlike centralized platforms (CEXs), Perpetual DEXs often publish all pending trades, wallet activity, and margin levels on-chain, exposing traders to targeted attacks.
This visibility makes perp DEXs attractive targets for MEV bots, which scan mempools for profitable opportunities. These bots can reorder transactions, front-run large trades, or force liquidations by pushing asset prices just enough to cross leveraged users’ margin thresholds. The result is not only market distortion but higher slippage, worse pricing, and substantial losses for users.
Zhao pointed out that even traders with large capital can be vulnerable: “Even if you got a billion dollars, others can gang up on you.”
Dark Pool-Style Perp DEX: What CZ Is Suggesting
Zhao’s proposed solution borrows from traditional finance’s “dark pool” concept - venues where large trades can be executed privately to avoid market impact. Translated into the DeFi space, this would mean a decentralized, privacy-preserving perpetual DEX that conceals order flows and liquidation data using cryptographic techniques.
Specifically, Zhao suggested the integration of zero-knowledge proofs (ZKPs) or other forms of on-chain encryption to delay public visibility of trades until post-settlement.
Such a design would reduce the attack surface for MEV strategies while maintaining non-custodial control and on-chain verification - a crucial requirement for any decentralized system.
Technical Requirements and Challenges
Experts agree the model has potential, but say its execution will demand trustless architecture, cross-chain support, and decentralized infrastructure.
Kadan Stadelmann, CTO of Komodo Platform, emphasized the need for “atomic swaps” and Hash Time-Locked Contracts (HTLCs) - a class of smart contracts that allow cross-chain trades to settle only if predefined conditions are met. These tools are foundational for building non-custodial exchanges that support multiple assets without central intermediaries.
“Such a solution must be trustless, non-custodial, cross-chain, and secure,” said Stadelmann. “The non-custody feature, for example, promotes privacy.”
Annu Shekhawat, ecosystem lead at data availability project Avail, also endorsed the idea, calling it “a compelling case for the next frontier in DeFi infrastructure.” She noted that today’s DEXs offer transparency at the cost of user safety: “Wallet-linked order books and predictable liquidation points make today’s platforms ideal for bots but dangerous for serious traders.”
Private DeFi
Zhao’s call to action comes as DeFi wrestles with how to attract institutional capital while maintaining its decentralized ethos. Privacy-preserving infrastructure is a major barrier. Institutions are hesitant to deploy large sums on platforms where their positions can be tracked and exploited in real time.
A perp DEX with encrypted trades and hidden liquidation levels could address these concerns, creating a foundation for institutional-grade DeFi. It would also mark a departure from the ethos of radical transparency that initially defined blockchain systems - echoing similar trade-offs being discussed in the context of private rollups, layer-2 privacy solutions, and confidential computing.
Whether such a DEX would be compliant with emerging regulatory frameworks remains an open question. In jurisdictions like the EU or U.S., financial transparency and anti-money laundering (AML) rules may clash with full encryption models, even if these platforms are fully decentralized.
Focus on Privacy and MEV Defense
The idea also comes amid a broader trend of DeFi protocols and infrastructure projects attempting to limit the damage of MEV and front-running.
Projects like Flashbots, MEV-Blocker, and Shielded Pools are already exploring ways to obfuscate order flows or create fair sequencing mechanisms. Several new L2 networks and appchains now integrate native MEV protection at the protocol layer. Still, most of these solutions are in early stages or remain specific to spot trading, not leveraged products like perps.
Zhao’s suggestion extends this privacy debate into perpetuals - a space that is especially sensitive to transparency risks. While many in the DeFi community have raised similar ideas before, CZ’s signal could accelerate development by drawing attention from developers, investors, and market makers.
Final thoughts
Zhao, who stepped down as Binance CEO in 2023 following a major U.S. enforcement case, invited developers to reach out via ReachMe.io, a pay-to-message platform he launched to manage inbound communications.
While Zhao didn’t indicate plans to build the exchange himself, the post can be interpreted as a form of open sourcing an idea - challenging the broader DeFi community to build a more private, trustless exchange architecture from the ground up.
There is, however, no shortage of challenges: developing a system that maintains both privacy and on-chain verifiability, avoids introducing custodial risk, and supports multiple assets without compromising decentralization remains a complex technical task.
But with rising concerns around predatory on-chain behavior and growing institutional interest, the need for new privacy layers in DeFi is becoming more pressing. Whether CZ’s post leads to a new generation of perp DEXs - or simply reopens an old debate - remains to be seen.