The pain points of blockchain transactions are quite intense: either the ledger is completely transparent and exposed, or privacy is perfect but compliance reviews are impossible to pass. Is it possible to have both?

Dusk Network recently launched its privacy engine Hedger, which attempts to solve this dilemma. Its core idea is to keep transaction data encrypted throughout the process while still allowing verification of compliance—sounds contradictory, but technically it is feasible.

How does it work? By combining homomorphic encryption and zero-knowledge proofs. The magic of homomorphic encryption is that data can be computed directly without decrypting it. For example, if an account has 100 yuan and wants to transfer out 50 yuan, the data remains "invisible" throughout the process. Zero-knowledge proofs are responsible for demonstrating to the network that the operation is fully compliant and not creating money out of thin air—similar to presenting a "proof of correctness."

What are the real-world application scenarios of this design? Imagine a fund wanting to build a large position on a certain trading pair. On a transparent chain, the order book information is instantly exposed, and counterparties can immediately target and raise prices. Hedger-supported encrypted order books can solve this problem—buy and sell orders and prices are fully hidden, and only after the trade is successfully matched and settled can relevant parties see the information. Institutional users' trading strategies can finally be protected.