Binance Founder CZ Proposes DEX to Prevent Front-Running

Unveiling a New Frontier in DeFi: Binance Founder Proposes a Dark Pool-Style Decentralized Exchange

In a bold move, Binance founder Changpeng "CZ" Zhao has proposed the creation of a groundbreaking decentralized exchange (DEX) that aims to address the pressing issues of front-running and liquidation attacks. Zhao's vision for this innovative platform is to hide trades, positions, and deposits from the public, providing a much-needed layer of privacy and protection for traders.

Citing recent events, Zhao believes the time is ripe for a dark pool-style DEX to emerge, one that would conceal critical information from prying eyes. "I have always been puzzled with the fact that everyone can see your orders in real-time on a DEX," Zhao wrote on X. "The problem is worse on a perp DEX where there are liquidations."

Perpetual futures contracts (perp DEXs) have gained popularity in the decentralized finance (DeFi) space, allowing users to place highly leveraged bets on asset prices without expiration. However, Zhao argues that this transparency comes at a cost, as it exposes traders' liquidation points, making them vulnerable to coordinated attacks.

"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."

To address these concerns, Zhao proposes a solution that leverages advanced cryptographic techniques, such as zero-knowledge proofs (ZK) or similar encryption methods, to conceal trades and smart contract activity until the later stages of settlement. This approach, he believes, could mitigate the risks of front-running and maximize extractable value (MEV) attacks, which have plagued the DeFi ecosystem.

Kadan Stadelmann, CTO of Komodo Platform, praised Zhao's vision, stating that such a solution must be "trustless, non-custodial, cross-chain, and secure" to truly address the challenges faced by traders. Annu Shekhawat, Global Ecosystem Lead at Avail, echoed these sentiments, noting that CZ's proposal "makes a compelling case for the next frontier in DeFi infrastructure."

As the DeFi landscape continues to evolve, Zhao's call for a more private and secure DEX has reignited a long-standing debate on the merits of transparency in the industry. While some argue that openness is essential for the growth and adoption of DeFi, others believe that certain use cases, particularly for institutional players, may benefit from a more discreet approach.

Zhao's invitation to developers to collaborate on this project through his ReachMe.io platform underscores his commitment to driving this vision forward. As the crypto community eagerly awaits the emergence of this new DEX paradigm, the potential impact on the DeFi ecosystem remains to be seen.