For several months, the decentralized hyperliquid trading platform has been talked about. Indeed, it is the undisputed leader of decentralized perpetual trading platforms. In addition, its transparency allows anyone to follow the movements of traders, even those which open gargantuan positions, as was the case at the end of May with a position at $ 1 billion. A situation that has caused many debates, opposing the vision of two founders, namely Changpeng «Cz» Zhao de Binance and Jeff de Hyperliquid.
The key points of this article:
Hyperliquid dominated the market for decentralized perpetual trading platforms, aroused debates on transparency thanks to its massive positions exposed. Changpeng Zhao de Binance proposed the creation of Dark Pools to protect major transactions from attacks, while Jeff Yan de Hyperliquid advocates transparency as a guarantee of trust and security.
CZ advocates the creation of «Dark Pools» on Dex
As we have just seen, the community has recently followed the evolution of several massive positions open to Hyperliquid. Whether last March, with first positions for several tens of millions of dollars Or more recently, James Wynn's trades. A situation that did not fail to react the Exchange industry, and more particularly, Changpeng Zhao, the founder of Binance. Thus, on June 1, CZ published on X a reflection on this transparency. In practice, he declares to be in favor of the creation of a DARK POOLS type Dex For perpetual contracts.
«Given the recent events, I think the time may have come for someone to launch a Dark Pools Dex. »»
In practice, these dark pools allow large institutions to carry out significant size orders without the market being able to or even before the finalization of the transaction. According to CZ, this gain of confidentiality would be beneficial for the DEFI. Indeed, this would limit attack vectors, including Mev attacks. As a reminder, these are manipulation attacks by bots that exploit the transparency of the mempoools to ahead of transactions and take advantage of it. In particular via methods such as the front-ring. According to him, transparency will degrade the conditions of execution of large transactions. Indeed, in a classic market, if an order is visible by all before its execution, this can lead to a reaction of the market. Conversely, in a dark pool, the order remains invisible until its execution, which protects the trader against price manipulations and targeted attacks.
Liquidations cases
CZ also addresses the Liquidation question. As a reminder, on a perpetual exchange, the liquidation occurs when the position of a user no longer has enough funds to be maintained (Margin). In this case, the margin, namely the collateral which ensures the position, is liquidated. On platforms such as hyperliquid, liquidation prices are visible by all. This allows malicious traders to identify vulnerable positions and attack them to trigger liquidations to their advantage. The example of the James Wynn trader, who underwent a Spectacular liquidation of $ 100 million on hyperliquidillustrates this risk. CZ believes that the confidentiality offered by Dark Pools could protect traders from this type of attack, while attracting new institutional actors, which are traditionally cautious to expose their strategies on public procurement. In fact, there are several methods to approach decentralized dark pools. This could, for example, go through the use of zero-knowledge evidence (ZK-Proofs) which would validate the transactions without revealing their details.
Jeff Yan de Hyperliquid has another vision
In fact, the publication of CZ occurs the day after another size publication on the subject. Indeed, on May 31, Jeff Yan, the co -founder of Hyperliquid also addressed the subject of Dark Pools and transparency on X. However, his position is the antipodes of that of CZ. For him, transparency is a guarantee of trust and security. It would even be beneficial to traders. Indeed, this would allow market contents (Market Marker) more possibilities of providing liquidity on the right price beaches, which results in better execution.
“$ 1 billion positions can be better executed on hyperliquid than on centralized scholarships. »»
In addition, he explains that users are less likely to be victims of liquidation hunts When everyone can see liquidation prices. Indeed, on opaque exchanges, only platform operators have access to this information. As a result, they can handle the market to their advantage, while on a transparent Dex like Hyperliquid, everyone is on an equal footing. Jeff Yan also underlines that the confidentiality of Dark Pools would complicate the audit of transactions, making it more difficult to detect market manipulations. Sophisticated verification protocols should then be put in place, which would increase the costs and the operational complexity of the platforms. The debate between CZ and Jeff Yan crystallizes a fundamental tension in the DEFI: should we favor confidentiality to protect traders and attract institutions, or on the contrary bet on transparency to guarantee the confidence and security of all? Events such as embezzlement of a market maker highlighted by Binance last March suggest that transparency remains the best solutions.