When we talk about privacy finance, an unavoidable dilemma is presented: how to protect user privacy while meeting regulatory requirements? The Hedger mechanism proposed by Dusk is designed to solve this seemingly contradictory problem.

Unlike most privacy chains that simply encrypt all transaction information, Hedger takes a different approach. It is not aimed at maximizing confidentiality, but rather at ensuring system consistency and verifiability in regulated financial scenarios. This distinction is crucial.

What is the approach of traditional privacy chains? They directly encrypt all transaction content. This method works well for anonymous transfers, but becomes problematic in complex financial activities. Once transactions are completely invisible, external systems cannot determine whether the transaction complies with regulations, and auditing in case of disputes becomes impossible. This is the pitfall Hedger aims to avoid.

The cleverness of Hedger lies in separation — splitting privacy protection and rule verification. Sensitive information is protected, but whether a transaction complies with rules can be confirmed in a verifiable manner. In other words, your transaction details remain private, but the system can still verify that you are not violating any rules. This balance is exactly what sets Hedger apart from other privacy solutions.