Blockchains are transparent but not so much private. Every transaction you make is out there in the open. Hackers exploit this transparency, stealing millions by targeting weak points like smart contract bugs.
Threats extend to private data leaks, including health records. For example, by analyzing patterns and metadata, attackers can potentially identify patients or infer sensitive information from supposedly anonymous blockchain-based records.
There’s no easy way out of this mess: once your data is on the blockchain, it’s there forever – no deleting, no hiding. Now, one company is on a mission to fix this glitch.
Zama – the world’s first unicorn dealing with advanced encryption
Paris-based Zama, a cryptography firm specializing in fully homomorphic encryption (FHE), has closed a $57 million Series B round co-led by Blockchange Ventures and Pantera Capital. The company’s valuation has exceeded $1 billion, securing its status as the world’s first unicorn in advanced encryption.
Founded in 2020 by cryptography heavyweight Dr. Pascal Paillier and AI privacy expert Dr. Rand Hindi, Zama began as a research-driven effort to build open-source tools like Concrete and TFHE-rs. Over the years, the startup has grown into a full-stack powerhouse bringing homomorphic encryption to blockchains, AI, and privacy-critical industries.
What is fully homomorphic encryption (FHE) and how does it compare to crypto mixers?
Fully homomorphic encryption is a cryptographic approach that enables processing data without ever decrypting it. In other words, sensitive information stays locked up – even while it's being used. Whether you’re storing, transmitting, or running computations, FHE keeps your data private every step of the way.
It’s tailor-made for untrusted environments like public blockchains or cloud platforms. Especially since the mechanism is touted as quantum-resistant – FHE systems are based on math problems that even quantum computers can’t easily solve – making it a good choice for the coming quantum computer era.
In business applications, FHE allows companies to – in Zama’s words – „provide services without accessing user data, while users experience unchanged functionality.”
FHE offers a different approach to privacy than crypto mixers. Tools like Tornado Cash scramble transaction trails to hide who sent what to whom, but the content still remains public. On the other hand, FHE hides transaction data but leaves the on-chain trace. In other words, you can trace which wallets interacted with each other, but the actual transaction details, like balances or amounts, remain hidden.
By keeping transaction data private while maintaining traceability, FHE opens a path to compliant DeFi privacy. It allows financial institutions and DeFi protocols to offer private transactions that still meet regulatory requirements such as auditability, KYC, and AML checks. Unlike privacy tools that obscure the entire transaction flow, FHE supports selective disclosure and fine-grained control over what’s visible and to whom. This balance makes FHE a solid groundwork for privacy-first, regulation-ready financial systems on-chain.
Is FHE the next ZK-rollup-like boom?
Zama’s solution, combining privacy tech with crypto compliance, may be the starting point of the next ZK-rollup-like boom. The company has made significant strides in overcoming FHE’s traditional limitations – boosting speed by over 100x, supporting popular programming languages like Solidity and Python, and planning hardware acceleration to scale throughput to thousands of transactions per second. These advances position Zama’s tech as a practical, scalable privacy layer that can be integrated across existing blockchains without requiring users to switch networks.
Given the explosive growth and impact of ZK-rollups in improving blockchain scalability and privacy, Zama’s combination of cutting-edge FHE with built-in compliance features could potentially spark a ZK-rollup-like surge, unlocking new use cases in confidential DeFi, tokenization, identity, and governance, while satisfying regulatory demands.
To put things in perspective, Zama FHE unicorn-level valuation contrasts with projects like Aleo and Iron Fish, which primarily rely on zero-knowledge proofs (ZKPs) for privacy but don’t enter the FHE playground.
These projects haven’t reached comparable valuations or funding scales. While Aleo and Iron Fish did well in privacy by encrypting transactions and enabling confidential smart contracts, their market impact and capital raise remain more modest compared to Zama’s explosive growth fueled by investor confidence in FHE’s potential.
