Transparent Dark Pool: A New Direction for Innovative Trading Patterns

In the field of financial technology, an exciting new concept is emerging - transparent dark pools. How will this innovation reshape the trading landscape? Let's delve into this fascinating topic.

Around 2008, some pioneers attempted to end the favoritism of traditional exchanges towards large clients. They believed that this practice put ordinary investors at a disadvantage. However, these early attempts were ultimately exploited by quantitative trading teams, and the issue of information asymmetry still persists.

Nowadays, the development of blockchain technology has brought new possibilities for solving this problem. The CEO of a well-known trading platform recently proposed the concept of "dark pools," sparking widespread discussion in the industry. This idea aligns with the application of cryptographic technologies such as ZK, MPC, and FHE.

However, the CEO's understanding of dark pools seems to differ from the actual applications on the blockchain. He emphasized hiding large order information to avoid targeted attacks, but this does not fully address the current issues.

Taking the recent experience of a trader on the Hyperliquid platform as an example. The reasons for choosing such decentralized platforms include: no KYC, freedom of funds, and the transparency of on-chain transactions. However, it is precisely this transparency that allows other traders to see large positions and liquidation prices, which has led to controversy.

In fact, a true dark pool should be about "hiding trading prices" rather than just "hiding trading intentions." An ideal blockchain dark pool should be able to eliminate MEV( maximum extractable value), while protecting trading privacy.

With Ethereum adopting the Risc-V architecture, we can expect to see more innovations. Risc-V, as an open-source chip instruction set, provides the possibility for customized blockchain infrastructure. This could bring about three levels of anonymity protection: subject anonymity, transaction anonymity, and interaction anonymity.

The combination of ZK and TEE technologies is the current mainstream solution, while FHE( fully homomorphic encryption) may be a more promising technological route. Although FHE currently faces challenges in performance, this issue is expected to be resolved with the development of dedicated hardware.

Overall, transparent dark pools are an emerging field full of potential. They require significant financial and technological investment, but also represent an important direction in the evolution of DeFi. With the gradual clarification of the regulatory environment and the growth of market demand, we may soon see this innovative concept implemented in reality.