The Future of Blockchain Transactions: Transparent Dark Pools and Privacy Protection

In the cryptocurrency space, the balance between transaction transparency and user privacy protection has always been a hot topic. Recently, the CEO of a well-known trading platform sparked widespread attention in the industry with discussions on the concept of "dark pools." However, this CEO's understanding of dark pools seems to differ somewhat from their actual application on the Blockchain.

Around 2008, some individuals attempted to put an end to the practice of traditional exchanges providing preferential order information to large clients. However, this effort was ultimately exploited by quantitative trading teams, and the disparity in information transparency still exists.

As a long-time observer of fully homomorphic encryption ( FHE ) technology, I am pleased to see industry professionals beginning to discuss the concept of "dark pools." This indeed presents potential application scenarios for advanced encryption technologies such as zero-knowledge proofs ( ZK ), secure multi-party computation ( MPC ), and FHE.

In a recent event, a trader chose to conduct a large transaction on a certain decentralized perpetual contract trading platform instead of using a centralized exchange. This choice reflects the advantages of decentralized platforms in terms of no KYC, capital freedom, and on-chain transactions.

However, the transparency of on-chain transactions also allows others to see the trader's positions and liquidation prices, which has sparked discussions about privacy protection. Although there are already some on-chain privacy trading solutions, the market mainstream seems to favor convenience over strict privacy protection.

The dark pool in traditional financial markets originated from the excessive competition of high-frequency quantitative trading. In the world of Blockchain, the issue of maximizing value extraction (MEV) has similarities with traditional dark pools. The real challenge is how to eliminate MEV while protecting privacy.

Future development directions may include:

1. Eliminate MEV: Improve the trading mechanism so that even if order information is seen, the market cannot be manipulated.

2. Enhance Privacy: Develop more advanced privacy protection technologies, such as zero-knowledge proofs and fully homomorphic encryption.

It is worth noting that a true dark pool does not merely hide trading intentions but also conceals trading prices. An ideal blockchain dark pool should be a decentralized trading system that combines MEV optimization and advanced encryption technology.

As platforms like Ethereum begin to embrace the RISC-V architecture, we may see new opportunities brought by the integration of software and hardware, especially in the area of FHE dark pools. The open-source nature of RISC-V allows for customized development, which may provide better underlying support for complex privacy protection mechanisms.

From the perspective of privacy protection, future dark pools may need to achieve subject anonymity, transaction anonymity, and interaction anonymity simultaneously. The deep integration of RISC-V and zero-knowledge proof technology may bring about a usable perpetual contract DEX dark pool mechanism. The combination of FHE-dedicated RISC-V acceleration chips and Blockchain is expected to achieve a perfect unification of anonymity, high-frequency, and large-amount transactions.

Although true transparent dark pools will take time to realize, we have already seen a clear market demand and technological development direction. With the gradual clarification of the regulatory environment and the growing demand for professional trading tools in the industry, we have reason to expect that this innovation will become a reality in the near future.