There is an interesting paradox in the financial markets—places with good liquidity often lack transparency, while transparent venues have prohibitively high trading costs.

Just look at traditional stock markets. Nasdaq and NYSE are both price-transparent, but once institutional investors place large orders, they are immediately targeted by high-frequency traders and arbitrageurs, resulting in significant slippage losses. That’s why Wall Street has developed dark pools. Data shows that over 40% of trading volume in the US stock market occurs in these private, opaque venues.

The problem is that dark pools themselves are also flawed. They are centralized operations, with information asymmetry; operators may profit from insider trading, and some traders can receive special treatment. In simple terms, bad money drives out good, and trust costs are extremely high.

DeFi initially aimed to solve the centralization problem, but ended up overcorrecting. Protocols like Uniswap are fully transparent—every order, position, and strategy is on-chain. This is fair for retail investors, but a nightmare for institutions. Want to buy $100 million worth of Dusk on-chain? Not only will you face MEV bots, but you’ll also be attacked by arbitrageurs across the market, causing transaction costs to explode.

Institutions are stuck in a dilemma: either tolerate the black box and fraud risks of traditional dark pools, or endure the transaction slippage in DeFi. Dusk Network is exploring a third way with zero-knowledge proof technology—ensuring decentralization while protecting transaction privacy, giving institutional funds a new option.