Paradex, the Starknet-based perpetuals exchange, announced the release of Privacy Perps on December 15, 2025. With this upgrade, orders, positions, and balances will be encrypted and accessible only to the account holder through authenticated access.
This is a radical departure from the traditional model of decentralized exchanges (DEXs), where anyone running a node or querying an explorer could reconstruct trading activity. Paradex’s new system ensures that trading data is private at every layer:
- Paradex Cloud: User-facing infrastructure now restricts visibility to authenticated accounts.
- Paradex Chain (L2): State commitments are encrypted, preventing external observers from piecing together positions.
- Ethereum (L1): State diffs are posted in encrypted form, with correctness enforced via zero-knowledge proofs.
How It Works
Paradex’s privacy upgrade relies on advanced encryption and ZK proofs:
- Encrypted L1 state diffs: Even when data is posted to Ethereum, it remains unreadable without the proper keys.
- Authenticated RPCs: Only verified account holders can query their balances and positions.
- Key management: A committee comprising Paradex, the Paradex Foundation, and Karnot oversees decryption keys for state recovery.
This design effectively mimics the privacy guarantees of centralized exchanges, but within a decentralized, self-custodial framework.
Why It Matters
For traders, the implications are profound:
- No more public alpha leaks: Competitors can’t spy on open positions or strategies.
- Institutional adoption: Funds wary of exposing positions on-chain now have a viable path into DeFi.
- Security & compliance: By encrypting state data, Paradex reduces risks of exploitation while still maintaining verifiable correctness through ZK proofs.
Privacy has long been a missing piece in decentralized trading. While DeFi prides itself on openness, that same openness has deterred professional traders who don’t want their strategies exposed. Paradex’s move could spark a wave of privacy-focused innovation across DeFi, especially in derivatives markets where position secrecy is critical.
By encrypting trading data while preserving verifiability, Paradex is reshaping the narrative around DeFi privacy. If successful, this could become the blueprint for the next generation of decentralized exchanges.
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