Dark pools, hidden liquidity, and the soldier economy

Contents

00Abstract

Dark pools are trading venues that execute orders without displaying them. They exist because showing a large order to the market moves the price against the order before it fills. Roughly 40% of US equity volume now executes away from public exchanges. The venues doing it sell invisibility.

s1337 is a two-part adaptation of that structure. Part one launches in a single 24-hour window: 7331 fully on-chain soldiers minting alongside the $1337 token, a fixed-price NFT ⇄ token dark pool whose execution price never moves, and a staking layer (the Garrison) that streams 9,000,000 $1337 per day plus the protocol's entire ETH fee flow to activated holders. Part two is the operation: the team runs live trading dark pools, and the revenue stream they produce is split by the same activated holders, pro-rata by rank weight. This paper describes both, with the mechanics and the math.

01What a dark pool is

A dark pool is a private trading venue — in US regulation, an Alternative Trading System (ATS) — that matches buy and sell orders without publishing its order book. Orders rest hidden. Fills print to the tape only after they happen. Nobody outside the venue sees size, side, or intent beforehand.

The lineage runs from ITG's POSIT (1987), which crossed institutional orders at scheduled times, through Liquidnet (2001), which built a network where over a thousand asset managers cross blocks directly with each other, to the broker-dealer pools of the 2000s — Credit Suisse Crossfinder, Goldman Sigma X, UBS ATS — and the independent venues of today. The SEC's Regulation ATS (1998) formalized the category; FINRA now publishes weekly ATS volume. As of 2025 there are over 50 registered ATS venues in US equities.

In 2025, total off-exchange execution ran at roughly 40–44% of consolidated US equity volume. ATS dark pools proper account for about 15–18% of that, the rest being wholesaler internalization. Dark execution set records in early 2026.

02How dark pools execute

Midpoint pricing

Dark pools borrow their prices from the lit exchanges, referencing the National Best Bid and Offer (NBBO). The canonical dark execution is the midpoint cross:

A buyer and a seller matched at P_mid each save half the spread versus crossing the lit book, and neither order ever appeared on a screen.

Matching styles

• Continuous crossing — orders match the moment a contra arrives (most broker-dealer pools).
• Periodic crosses — orders accumulate and match at scheduled or randomized times (the original POSIT model), which blunts timing games.
• Negotiated blocks — the venue alerts two naturals to each other and lets them negotiate size (Liquidnet).

Anti-gaming controls

Fills reveal information after the fact, so venues deploy minimum execution sizes, counterparty scoring and randomized matching against traders who ping pools to detect hidden blocks.

03The cost of being visible

Why does any of this exist? Because execution has a cost beyond commissions, and the cost is a function of visibility. Three standard results:

Market impact — the square-root law

Across venues, instruments and decades, the price concession paid by a metaorder of size Q is empirically well described by:

Impact grows with the square root of size: 4× the size costs 2× the concession per share. At institutional size this dwarfs commissions, which is what makes hiding the order worth paying for.

Kyle's lambda

Kyle (1985) models a market maker who can't tell informed flow from noise and therefore moves price linearly in net order flow q:

λ measures how much information the market reads out of each unit of flow. A dark pool lowers the λ your own trading faces by keeping the flow unobserved.

Implementation shortfall

Perold (1988) defines the true cost of execution as the difference between the paper portfolio (filled instantly at the decision price P₀) and the real one:

Almgren–Chriss (2000) then split impact into a temporary component (paid per slice, decays) and a permanent component (moves the price for everyone after you), and derive execution schedules that trade impact against timing risk. Dark pools attack the same cost earlier, at the point of disclosure.

04Taking the structure on-chain

A public blockchain is the most lit venue ever built: every order hits a public mempool before it executes, and MEV searchers are the same predatory flow dark pools were built against. An on-chain order book cannot be hidden. s1337 therefore inverts the approach and removes the price's ability to react:

The soldier pool holds NFTs on one side and $1337 on the other, trading them at one number. Traditional pools sell invisibility of orders; the soldier pool sells invisibility of selection. The standard buy is a blind fill — the pool picks which soldier you get — so a buyer accumulating quietly gives away nothing about which pieces they value. Choosing a specific target is the information leak, and §5 prices it accordingly.

The second part is operational: the team runs trading dark pools — market-neutral execution desks working size away from lit books — and routes the net revenue to activated holders (§8).

Distribution: one window, two lanes

The collection is 7331 soldiers, distributed in a single 24-hour window that opens when the $1337 position goes live.

• Whitelist lane — a merkle snapshot of holders of six Robinhood Chain collections (StonkBrokers, Chain Mancers, Yardkeepers, Cash Cats, Zaibatsu Wagies and pyopyopyopyo) mints one soldier per wallet, free. It opens first and holds a 10-minute head start before the paid lane joins, then stays open for the rest of the window.
• Public lane — 0.01 ETH per soldier, up to 10 per transaction and no per-wallet cap, open to anyone. Mint proceeds transfer to the team wallet as each mint lands and fund the launch itself: the Uniswap position, the pool's token side and the Garrison reserve. They sit outside the rewards stream described in §8, which is fed by trading and activation fees.

Wallets holding several of the six collections still get a single free claim. The per-transaction cap on the paid lane is a throughput limit: it stops one transaction clearing the book in a single block, while leaving buyers free to send as many as they want. The head start gives the snapshot holders the project came from first claim on their free soldier.

When the window expires, the remainder N_rest = 7331 − N_minted is swept into the dark pool by a permissionless sweepToPool() call and becomes NFT-side liquidity at the fixed price. Demand during the window therefore sets the pool's depth.

05The soldier pool

Contract: DarkPool1337. One price, three operations, one flat fee, and a burn on every trade.

The burn, β = 10%

Every trade in either direction destroys 10% of the base price:

The burn is charged at the edges of the trade: buyers pay it on top of P, sellers have it withheld from their proceeds. Taking it from the pool's own side would drain β·P per round trip and let a trader cycle the reserve dry for the cost of gas. Charged this way, the reserve after any buy-then-sell cycle is where it started:

Liquidity holds constant while supply falls. The price stays fixed in nominal $1337, and the $1337 it is denominated in gets scarcer with every trade.

Buy — blind fill

Of that, P = 333,333 enters the pool and 33,333.3 is burned. The pool selects the soldier pseudo-randomly from inventory — no selection information leaves your wallet — and the trade pays a flat 0.01 ETH fee.

Snipe — targeted fill

Choosing a specific soldier reveals preference, so it carries a premium φ = 20% on top of the burn:

Split three ways: 333,333 to the pool, 66,666.6 to the Garrison reward reserve, and 33,333.3 burned. The emission schedule pays the premium back out to activated holders, so snipers subsidize soldiers.

Sell

The pool releases P less an optional spread s (0 at launch, hard-capped at 20%); the seller receives that amount less the burn:

Sizing the pool

The token side sets how many soldiers can be sold in before it empties. For a token reserve R:

Depth is two-way: each buy returns P to the token side and each sell takes it out, so sustained flow in both directions keeps N_bid roughly where it started. By (7) the burn never touches the reserve, so volume alone does not erode the bid. Unminted soldiers swept in at the close arrive as NFT-side depth and convert to token-side depth as they are bought.

Fees

Every buy, snipe and sell pays a flat 0.01 ETH. Fees go to the vault and enter the 24-hour distribution cycle (§8). The pool's NFT and token inventory has no withdrawal function; the owner can tune fees and the spread, and nothing else.

06Garrison emission math

Contract: Garrison. Soft staking — soldiers stay in the holder's wallet. Activating soldier i at rank r burns the rank cost c_r and registers weight w_r:

The ladder is priced off the pool: 10%, 25%, 50%, 100% and 250% of one soldier, a 25× span across five tiers. Activation burns leave supply permanently. Upgrading from rank a to rank b burns c_b − c_a. Ranks, costs and the emission rate are immutable in the contract, which has no owner.

The drip

The Garrison emits at a fixed rate E = 9,000,000 $1337/day while at least one soldier is active and the reserve is positive. It uses a standard accumulator: with total active weight W(t), the per-weight index A advances as

and the claimable balance of soldier i with weight w_i activated when the index stood at A_i is

Equivalently: each soldier's share of any day's 9M is w_i/W. Upgrades settle pending at the old weight into carried and re-index at the new weight, so no drip is lost. Selling or transferring an activated soldier voids it and forfeits its pending back into the reserve.

Reserve and runway

The reserve starts at R₀ = 401,100,000 $1337 (30% of supply) and grows with every snipe premium and any voluntary fund(). Runway at full emission:

Emission pauses whenever nothing is activated, which stretches real runway past the nominal figure. Each snipe adds 66,666.6/9,000,000 ≈ 0.0074 days — snipe volume is a direct runway extension.

Claims

Claiming is free and open at any time to the wallet that activated the soldier and still holds it. The cost sits at entry instead: activating charges a flat 0.01 ETH alongside the burn, which goes to the vault and joins the daily distribution.

07$1337 launch parameters

Fixed supply, no mint function, no owner:

$1337 trades against ETH in a one-sided Uniswap v3 position on Robinhood Chain, seeded with tokens only and live from the moment the mint window opens. The position sits in the range [p₀, p_max], where p₀ is the opening price in ETH. For a token-side deposit of Δx its liquidity is

Buyers walking the price up through the range convert the token side into ETH along the curve, so the pool capitalizes itself through trading rather than from a matched ETH deposit at launch.

Allocation

08The rewards stream

Everything converges on one pipe. Inflows:

• 0.01 ETH per pool buy, snipe and sell
• 0.01 ETH per Garrison activation
• snipe premiums (paid in $1337, straight into the emission reserve)
• 10% of every pool trade, burned — this one reaches holders as scarcity rather than cash
• phase two: net revenue from the live trading dark pools the team operates

ETH inflows land in the vault, are converted (ETH, stables, RWAs) and distributed every 24 hours to activated holders, pro-rata by rank weight. A holder with weight w_i receives, of any single distribution F:

Held over a period, the rule compounds into the working formula for what an activated soldier earns: time × tier × pool value. Over T days with an average daily distributable pool value F̄ (ETH fees + trading revenue per day) and average total active weight W̄:

Doubling your time in the Garrison doubles the take; a 1337 General (w = 333) earns 3.33× a Recruit over the same period; and every unit of pool flow — fees, snipes, trading P&L — raises F̄ for everyone. The $1337 drip obeys the same shape with F̄ = E = 9,000,000 $1337/day (eq. 12–13).

100% of the stream goes to activated soldiers, and the team's economics come from holding and activating on the same terms. The trading dark pools are targeted to launch within roughly a week of the mint; their P&L reports into the same daily cycle.

09Risk disclosures

• Smart contracts can contain bugs. The contracts are open source and small; read them.
• $1337 carries no claim on equity, no redemption right and no guaranteed value.
• The daily distribution depends on fee volume and, in phase two, on trading revenue. Trading revenue can be zero or negative in any period.
• Emission is finite: the reserve runs for ~44.6 days at full rate unless extended by snipe premiums or funding.
• The mint window is 24 hours and does not reopen. Public-lane mints are paid and non-refundable, and a soldier bought at 0.01 ETH may be worth less afterwards.
• The off-chain conversion and distribution step is operated by the team and requires trusting the vault's operator.
• Nothing in this paper is investment advice.

10References

1. Kyle, A. S. (1985). Continuous Auctions and Insider Trading. Econometrica 53(6).
2. Perold, A. F. (1988). The Implementation Shortfall: Paper versus Reality. Journal of Portfolio Management 14(3).
3. Almgren, R. & Chriss, N. (2000). Optimal Execution of Portfolio Transactions. Journal of Risk 3(2).
4. US SEC, Regulation ATS (1998); FINRA ATS Transparency Data (weekly ATS volume reporting).
5. Bartlett, R. & McCrary, J. — Dark Trading at the Midpoint: Pricing Rules, Order Flow and Price Discovery.
6. Industry venue history: ITG POSIT (1987), Liquidnet (2001), Credit Suisse Crossfinder, Goldman Sachs Sigma X, UBS ATS.
7. Off-exchange share statistics: FINRA TRF/ATS reporting, 2025–2026.