CZ Calls for DeFi Dark Pools but What Are the Trade-Offs?
Olivia Capozzalo & Camila Russo
June 03, 2025
gm Defiers! A heads up that from now on The Defiant Daily will be in your inboxes ET mornings.
Today’s big story:
- CZ suggests making DEXs less transparent as James Wynn drama continues
Plus:
- Public firms file to raise over $7 billion to buy top cryptos
- Robinhood finalizes acquisition of OG crypto exchange Bitstamp
- Consensys closes SharpLink deal for $425M to buy ETH
- One analyst sees the vote to restore frozen funds from Cetus exploit as “Sui’s DAO hack moment”
- DNA fund CEO Chris Miglino details shift from ETH & Tether to a $50M bet on decentralized AI [MEDIA PARTNERSHIP]
- Andrew McFarlane of Validation Cloud shares how they’re building the backbone of web3 [MEDIA PARTNERSHIP]
Read more below! But first, please give our sponsors some love; they make this newsletter possible.
Money is broken. Finance today is trapped in analog while the world runs on code. M0 rewires finance at its core. This is financial infrastructure for builders who create, not extract.
Soul is a cross-chain lending protocol aggregator that unifies liquidity across lending protocols, offering seamless access to the best borrowing and lending rates across ecosystems. Users can supply assets on one protocol and borrow against them on another, optimizing yield strategies without bridging assets.
Money is broken. Our financial system is trapped in analog bureaucracy while the rest of the world runs on code. Fintech built nicer interfaces, but institutions and gatekeepers still loom large.
M0 isn’t here to polish old systems with prettier frontends. We believe permissionless stablecoins rewire finance itself, so builders can control their own money. We put programmable money directly into the hands of builders who create, not extract.
We’re back! Here’s what you need to know in web3 today
DEXs and the Transparency Trade-Off
When the co-founder of the world’s largest CEX lobs an exchange-related idea at Crypto Twitter, it makes waves.
“Given recent events, now may be a good time for someone to launch a dark-pool perpetuals DEX,” Changpeng (“CZ”) Zhao posted to his over 10 million followers.
CZ’s tweet highlights how radical transparency can inadvertently morph into a new attack surface: on DEXs, every order, size, and liquidation price is visible in real-time, incentivizing MEV bots and opportunistic whales to front-run or hunt liquidations.
Dark pools are TradFi’s answer to this problem. They’re private trading venues where buy and sell orders are hidden from the public order book until (or even after) they’re filled, letting large traders execute without tipping off the market, reducing slippage and front-running.
So why the sudden call for secrecy? A little over a week ago Hyperliquid trader James Wynn splashed his billion-dollar positions across the timeline, allegedly inviting traders to snipe his liquidation levels.
Telegram channel Newsmakerclub summarizes the different exchange models out there well:
- Robinhood: charges zero trading fees but monetizes retail flow by quietly selling order data to market-makers. (You know what they say, if it’s free, then you’re the product.)
- Centralized exchanges (CEXs): charge commissions and keep everyone’s positions under lock-and-key. (They essentially run private dark pools for the masses.)
- Perp DEXs like Hyperliquid: charge fees and give away the most sensitive trading intel — open-source order books, position sizes, even liquidation thresholds — for free.
In other words, on-chain venues have managed to combine the worst possible trade-offs: higher explicit costs plus zero privacy.
A dark-pool DEX would shield order flow from prying eyes, likely with zero-knowledge proofs or trusted enclaves, while settling trades immutably on-chain.
It’s not a brand-new concept. Here are just a handful of projects building something similar:
- Renegade (Arbitrum One): Live on-chain dark-pool DEX that hides order size and executes trades at the midpoint of the Binance spot spread, eliminating price impact and slippage.
- Penumbra (Cosmos zone): A fully private proof-of-stake chain whose batch-swap DEX keeps every quote, fill, and LP position shielded until settlement, giving users dark-pool execution across any IBC asset.
- Panther Protocol: Privacy-enhanced DeFi infrastructure that lets institutions spin up compliant dark-pool environments using shielded pools and zero-knowledge proofs.
- Railgun: Zero-knowledge privacy layer for EVM chains that supports private swaps, lending and leverage; its smart-contract “dark pools” obscure sender, asset and amount while remaining fully on-chain.
Yet secrecy carries its own issues. Dark pools in TradFi have long drawn criticism:
- Lack of transparency can prevent efficient price discovery
- High-frequency traders use tactics like “pinging” these pools to front-run institutional clients
- Dark pool operators may have conflicts of interest, potentially trading against their clients' orders
- Dark pools can fragment information and liquidity
- They’re VIP lanes for whales, leaving small traders who can’t access these pools at a disadvantage
Dark pools would trade DeFi’s transparency issues for a different set of problems.
The likely outcome is a spectrum of privacy tiers; a “selective transparency” future where whales can hide size until execution, auditors can still verify settlement, and retail traders decide which compromise they prefer.
With love,
Cami, founder of The Defiant
📈 Markets in the last 24 hrs:
| TICKER | VALUE | 24H | |
|---|---|---|---|
 | Bitcoin | $105,374 | 1.23 % |
 | Ethereum | $2,608.02 | 4.78 % |
 | XRP | $2.22 | 3.24 % |
 | BNB | $664.23 | 1.92 % |
 | Solana | $161.03 | 4.62 % |
 MessariPortals | MINDSHARE Rank | MINDSHARE % Change (7d) |
|---|---|---|
Solana SOL | 6  | 41.55% |
Avalanche AVAX | 20 | 28.95% |
TRON TRX | 8  | -19.81% |
| Powered by Messari Portals | ||
This is the news that mattered in the past 24 hrs:
- In the past week alone, the newest public firms to enter the crypto treasury game filed to raise a total of over $7 billion to buy large-cap assets BTC, ETH and XRP; roughly 75% of that sum is intended for BTC treasuries.
- Stock trading app Robinhood has finalized its acquisition of OG crypto exchange Bitstamp for $200 million; EU-based Bitstamp launched in 2011, making it one of the oldest centralized crypto exchanges.
- SharpLink’s $425M ETH treasury deal officially closed, with Consensys as lead investor, making its founder and CEO, Joe Lubin, chairman of SharpLink’s board; the news comes days after a new SEC filing revealed the company's intention to raise an additional $1 billion to buy ETH.
- Last week, L1 Sui had its “DAO hack moment” as validators overwhelmingly voted to implement a hard fork upgrade to restore $162 million in frozen assets; The frozen funds were part of the $223 million stolen from Sui DEX Cetus in a recent exploit.
🎬WATCH
In the latest episode of The Defiant Podcast, we explore the world of crypto payroll and stablecoins with Megan Knab, cofounder and CEO of Franklin.
From tackling crypto volatility to how stablecoins can reshape global economies, this episode dives into the challenges and opportunities for crypto-native payment infrastructure.
That’s it for today — if you enjoyed this newsletter, tell your friends! https://thedefiant.io/subscribe
