In a recent post, CZ proposed the creation of a dark pool-style perpetual swap DEX, offering institutional-grade anonymity to shield large players from front-running, MEV bot exploitation, and liquidation hunting.

The Problem With Transparency on DEXs

CZ highlighted a core flaw in current DEX infrastructure—real-time transparency. While this characteristic promotes openness, it also exposes traders to opportunistic behavior. In perpetual futures markets, where positions and liquidation levels are visible, the risk is amplified.

“If others can see your liquidation point, they could try to push the market to liquidate you… even if you got a billion dollars,” CZ warned, noting that this dynamic may have contributed to recent high-profile liquidations.
Unlike centralized exchanges (CEXs), where order books are anonymized and buffered by institutional liquidity providers, DEXs expose user intent to the entire network. This transparency, while aligned with DeFi’s ethos, leaves large traders particularly vulnerable.

The Dark Pool Solution

CZ’s suggestion: build a perpetual futures DEX that functions like a dark pool, hiding trade intent and execution from public view. This would mirror traditional finance (TradFi), where dark pools are often 10x larger than “lit” public exchanges.

Key features of CZ’s vision include

No visible order book
Concealed deposits into smart contracts
Delayed trade visibility
ZK (zero-knowledge) or encryption-based privacy infrastructure

This approach would allow whales to trade without tipping off the market, minimizing slippage and reducing the likelihood of being targeted by MEV bots or coordinated liquidation attacks.

Timing and Market Fit

CZ believes “now might be a good time” for such an innovation, especially given recent events that exposed systemic weaknesses in on-chain trading. He acknowledged opposing views, such as the argument that transparent order books help market makers absorb large trades more efficiently. However, he emphasized that “different traders may prefer different types of markets.”

Call to Builders

Though CZ clarified he’s not committed to backing such a project, he invited builders working on similar concepts to reach out via reachme.io, stating:

“No guarantees I will invest, or even reply. 🙏 Just a Sunday idea.”

With market structure becoming a focal point in DeFi’s next evolution, CZ’s proposal could spark a new wave of privacy-focused on-chain trading platforms designed for institutional-scale activity.

The post CZ Proposes New Solution to Shield Whales From MEV and Liquidation Attacks appeared first on Coindoo.

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Filed under: Bitcoin - @ June 2, 2025 10:00 pm