Zhao Suggests Dark Pool DEX to Curb Crypto Manipulation

Binance co-founder Changpeng Zhao has floated the idea of a decentralised exchange (DEX) that conceals trading activity to stop common manipulation tactics like front-running and liquidation targeting.

In a recent post on X, Zhao proposed the creation of a dark pool swap DEX—a platform where trade orders remain hidden until after execution. He believes such a system could offer traders the kind of protection that exists in traditional financial (TradFi) markets, where dark pools allow large investors to trade anonymously and avoid moving the market.

“I have always been puzzled with the fact that everyone can see your orders in real-time on a DEX,” Zhao wrote. He added that this level of transparency becomes a bigger problem in the perpetual futures market, where open positions can be tracked and exploited.

He compared the idea to how large players in TradFi operate. “Large traders in TradFi use dark pools, often 10 times bigger than the ‘lit pools’ (ie, normal orderbooks),” he explained. This privacy shields major positions from unwanted attention and, more importantly, prevents the kind of slippage that often follows exposure.

Zhao explained that large-scale buyers—those eyeing, say, $1 billion worth of tokens—would rather not alert the market before the trade is done. If others notice, the price could spike, making the purchase more expensive.

“This results in increased slippage, worse prices, and higher costs for you,” he warned.

The danger is even more serious in derivatives trading. Since liquidation points are visible on-chain, malicious actors could push the market in a way that forces those positions to be closed at a loss. “Even if you got a billion dollars, others can gang up on you,” Zhao wrote.

Zhao acknowledged that some traders may prefer transparent systems, where market makers can easily absorb large orders. However, he stressed the importance of offering choices. “Different traders may prefer different types of markets,” he noted.

He then floated the concept of an on-chain DEX that either hides the order book or delays the visibility of deposits into smart contracts. Such privacy-focused features, he said, could potentially be achieved using zero-knowledge proofs or other encryption technologies.

“Now might be a good opportunity for someone to launch an on-chain dark pool style DEX + perps,” Zhao suggested.

Pushback and Centralised Comparisons

Zhao’s suggestion drew some questions from users online, including Abdul Rafay Gadit (@ARafayGadit), who wondered why such tools were necessary when platforms like Binance already offer advanced trading features.

Zhao responded by pointing out that not all traders are willing—or able—to use centralised exchanges. “Some people may not want to custody with a 3rd party, or they may be in a region Binance is not available, which includes many countries. Many possible reasons. Who knows...”

The conversation has since sparked debate around the future of DEX infrastructure and how best to balance transparency with trader protection.