Secret Crypto Trades: How Market Makers Are Going Dark to Protect Strategies

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Market makers are fleeing public blockchains to protect their secret trading playbooksMarkets

What to know:

  • Close to half of all U.S. equity trading happens off public exchanges, yet virtually no equivalent exists in crypto, leaving market makers fully exposed to copy trading and public scrutiny.
  • GoDark, starting up on Solana in May, uses zero-knowledge proofs to conceal trade details from everyone in the system, including the node operators running the order book.
  • The platform faces the same challenges that have tripped up most DEX launches — bootstrapping liquidity and sustaining volume past the initial incentive period — with the added complication of a privacy model that regulators have not yet had to reckon with.

Big traders face a challenge: they need to execute their deals without causing prices to move or giving away their investment plans.

For years, traditional markets like stocks have allowed large trades to happen privately, using methods like dark pools and off-exchange venues. In fact, Bloomberg reported that as early as January 2025, over half of all U.S. stock trading already occurred outside of public exchanges.

Unlike traditional finance, cryptocurrency lacks a clear way to track the flow of money, and this gap is becoming more noticeable. All activity on platforms like Hyperliquid and decentralized exchanges is public, and companies such as DeFiLlama and Arkham are making that information easier to understand.

Despite aiming to revolutionize finance, the cryptocurrency market is facing a problem common in traditional finance: large players’ actions are easily predicted. Companies that provide trading liquidity on public decentralized exchanges report that their strategies are quickly figured out by others.

According to Denis Dariotis, co-founder of crypto trading firm GoQuant, leading traders on Hyperliquid need to change their trading methods roughly every three weeks to stay ahead. He explains that strategies are quickly copied by others, which creates a challenge in maintaining a competitive edge – what he calls the ‘alpha problem’.

Beyond these issues, crypto markets often unfairly blame market makers – the companies that ensure smooth trading – whenever problems arise. We’ve seen this recently with Jane Street and the Terra/Luna collapse. When a large firm’s trades are publicly tracked on the blockchain, it’s easy for a negative story to develop, forcing the company to spend time and resources on public relations. These same trades would go unnoticed on traditional financial markets.

GoQuant is launching GoDark, a new decentralized exchange (DEX) on Solana in May. GoDark uses advanced technology called zero-knowledge proofs to keep trade information private – not only from other traders, but also from the people who operate the exchange. The goal is to create a trading system where no one can see the details of the trades being made.

The biggest challenge is whether this technology can work quickly enough to be practical. Zero-knowledge proofs require a lot of computing power, and this system adds delays that simpler systems don’t have. Initial tests show order matching taking between 25 and 50 milliseconds – Dariotis points out this is fast compared to many decentralized exchanges, which often take hundreds of milliseconds, and he’s correct. However, it’s still significantly slower than the speeds available to firms that connect directly to a traditional exchange. This difference likely won’t matter to individual traders, but it could be a problem for the market makers GoDark relies on to provide trading volume.

Now, let’s talk about the real challenge. A private exchange without trading activity is essentially useless. GoDark’s strategy to encourage trading – by offering incentives to provide liquidity – is very similar to what Hyperliquid did with their HLP vault. Essentially, users deposit funds which are then used to facilitate market making, and in return, those users earn a portion of the trading fees and get priority access to any liquidation opportunities.

Hyperliquid successfully used this approach, but most other decentralized exchanges (DEXs) that have tried to copy it haven’t had the same luck. Typically, their trading volume drops significantly after the initial rewards or incentives run out.

The team hasn’t yet had to directly address the legal and regulatory issues. While traditional dark pools keep orders hidden before they’re executed, they still have to report trades afterward and are subject to regulatory supervision.

GoDark is built for maximum privacy, meaning it can’t fully track transactions. While it includes automatic checks to comply with financial regulations, these likely won’t be enough for regulators who are currently demanding more openness in the crypto world. It’s unclear how this conflict will be resolved, and whether it will restrict involvement from larger financial institutions to countries with less strict rules.

GoDark is different from another product called GoDark that GoQuant already offers to institutions. That first version is a traditional cryptocurrency exchange launching next month, designed for a limited group of professional clients. The May launch of GoDark is specifically for everyday retail investors.

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2026-04-12 17:15