Chainfeeds Preface:
I'm not crazy, and the title is not sensationalist. Let me explain everything.
Article Source:
https://mp.weixin.qq.com/s/BrXJxJfEVFExcfzesDXN-Q
Article Author:
Zuo Ye
Viewpoint:
Zuo Ye: Around 2008, Josh Levine hoped to break the unfair system where US exchanges gave large clients order information advantages. Although the trading data display tool he designed promoted transparency, it was ultimately exploited by quantitative traders, forming a paradox where those with more transparent information always win. Today, blockchain technology supporters are beginning to conceptualize decentralized dark pools using encryption technologies like ZK, MPC, and FHE. CZ recently discussed dark pools on X, but his understanding leans towards the traditional meaning - hiding large orders to prevent attacks, rather than full-chain privacy protection. Taking James Wynn's experience on Hyperliquid as an example, his exposed liquidation information led to him being hunted, sparking discussions about on-chain privacy mechanisms, with CZ's proposed "dark pool DEX" becoming the focus. James chose Hyperliquid over Binance because it requires no KYC, and on-chain trading can prevent front-running, offering more freedom. However, this transparent trading also exposed his position and liquidation line. Hyperliquid was not designed incorrectly; the problem is that all on-chain information is visible, providing arbitrage opportunities for attackers. This is not the first time on-chain privacy practices have encountered real-world barriers, from Zcash to Tornado Cash, none have become mainstream. Convenience and privacy are difficult to balance, with users preferring convenient tools. What CZ truly means by dark pools is building a Hyperliquid that can avoid MEV. Traditional dark pools aim to counter high-frequency trading's unfairness to retail investors, while on-chain transparency exposes everyone to MEV risks. BNB Chain once administratively limited front-running behavior, indicating the difficulty of solving this issue. To truly achieve a decentralized dark pool, MEV must be eliminated or high-level privacy achieved. The core of dark pools is hiding transaction prices, not intentions, which is the primary handle for MEV. Future solutions may combine ZK and FHE, especially with Risc-V's hardware-software collaborative architecture supporting complex operations like FHE execution in the hardware layer. As an open-source instruction set, Risc-V allows Ethereum to create custom chips, breaking free from existing commercial architectures. In practice, TEE can secure keys, ZK can blur order details, and FHE can encrypt calculations to achieve transaction anonymity. However, its high cost and low efficiency still require Risc-V custom chips to improve. Ultimately, we can hope to build a high-frequency, large-volume, privacy-conscious on-chain dark pool mechanism - the blockchain implementation of the dark pool CZ imagines in traditional finance.
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