adb connecting a device to itself is just bad design and a hack. Either the capabilities should just be granted directly to the app or it should all be blocked.

Same can be said about loopback device in general. Why do you need to use networking when you are literally on the same device and can use binder/dbus and friends with native apps?

Shizuku uses Binder AFAICS[^1]. Looking deeper it seems that Shizuku does not connect to the device itself per se, but rather it has a privileged server launched manually through adb. Never used Shizuku, so can't say for sure.

[1]: https://github.com/rikkaapps/shizuku#how-does-shizuku-work