The current market is flooded with "Privacy Wrappers" and Layer 2 ZK-rollups that promise to bring confidentiality to Ethereum. As an on-chain architect, I must be blunt: for institutional use, these are a security and regulatory scam.
The Structural Failure of "Bolt-On" Privacy
A privacy wrapper is essentially a "bolt-on" solution. You take a transparent asset, lock it in a bridge, and mint a "private" version on a Layer 2. This creates three critical points of failure that no risk-conscious fund manager would ever accept:
Bridge Risk: The bridge between the L1 and L2 is the most common vector for multi-billion dollar hacks. For an institution, the risk of losing the underlying collateral while holding a "private proxy" is an unacceptable trade-off.
Liquidity Fragmentation: Your "private" asset is disconnected from the main liquidity pools, creating massive slippage. You end up with a "private" asset that you cannot trade without revealing your intent through high price impact.
Leaky Privacy: Heuristic analysis can often deanonymize users as they move funds between the transparent L1 and the "private" L2. If the entry and exit points are visible, the privacy is an illusion.
Native Privacy: The Only Path to Sovereignty
The Rusk VM solves this through Native Privacy. On Dusk, privacy is not an option you "wrap" around an asset; it is the default state of the ledger. When an asset is issued via the XSC standard, it is born private. There is no bridge to hack, no liquidity to fragment, and no "leakage" between layers.
Institutions do not want "wrappers" that add complexity and risk. They want a foundational Layer 1 that understands the difference between secrecy (hiding everything from everyone) and confidentiality (hiding from the public but remaining auditable via Citadel). Privacy wrappers are a band-aid; the Rusk VM is the cure.