ZAMA In-Depth Analysis: Achieving True Privacy Protection on Decentralization

Public blockchains have revolutionized the way we verify ownership and coordinate the flow of value, but they were never designed to protect privacy. Transparency allows anyone to verify the integrity of the system, but it also exposes every transaction and all user data. This creates a core paradox: the very features that ensure the security of blockchains also make them unsuitable for highly sensitive activities such as finance, identity, or governance.

The industry has long oscillated between two less-than-ideal choices: a completely public system with no privacy, or an off-chain or permissioned solution that reintroduces trust and weakens decentralization. Without simultaneously achieving verifiability and privacy, blockchain cannot truly gain traction in mainstream applications that require confidentiality.

Zama Protocol was created to fill this gap. Through advanced fully homomorphic encryption (FHE), multi-party computation (MPC), and lightweight zero-knowledge proofs (ZK), Zama provides a universal confidentiality layer on top of existing blockchains. It enables assets and applications to achieve end-to-end full encryption while remaining publicly verifiable, providing a new path for building confidential dApps without sacrificing composability and decentralization.

The token is currentlylisted in the pre-market OTC ZAMA zone of the XT exchange, providing users with the opportunity to trade in advance before the token is officially listed.

Quick Summary

• Zama enables fully confidential smart contracts through fully homomorphic encryption (FHE), bringing privacy capabilities to the blockchain without sacrificing decentralization and composability.
• Zama Protocol operates as a cross-chain confidentiality layer, enabling public chains such as Ethereum and Solana to perform computations in a fully encrypted state.
• $ZAMA is the protocol's core token, used for paying fees and staking. It uses a "burn and mint" model to reward network operators and provides fee discounts based on usage.
• Core use cases cover scenarios such as confidential payments, RWA tokenization, sealed bid auctions, and on-chain identity and privacy governance, and can currently be participated in in advance through XT pre-market trading.

What is ZAMA?

Zama is a company and protocol that uses fully homomorphic encryption (FHE) to implement confidential smart contracts.

Zama has built the Zama Protocol (a confidentiality layer for existing blockchains) and the FHEVM library, enabling developers to run computations directly on encrypted data. The protocol verifies, executes, and decrypts encrypted computations through coprocessors, gateways, and multi-party secure computation (MPC), ensuring data privacy while maintaining public verifiability.

Founded in 2020 by Dr. Rand Hindi (CEO) and Dr. Pascal Paillier (CTO), the company is led by several renowned researchers, including Chief Academic Officer Professor Nigel Smart and Chief Scientist Dr. Marc Joye.

How ZAMA Works: Core Mechanism Analysis

Zama Confidential Blockchain Protocol (Zama Protocol for short) enables developers to issue, manage, and trade assets confidentially on existing public blockchains. As the most advanced privacy protocol currently available, it possesses the following capabilities:

• End-to-end encryption of transaction inputs and status : No one can view the data, not even the node operator.
• Composability of confidential and public contracts : Developers can continue to build on top of other contracts, tokens, or applications without sacrificing composability.
• Programmable privacy : Smart contracts can define who can decrypt which information, giving developers complete control over the application's privacy rules.

Zama Protocol is not a new L1 or L2, but rather a cross-chain privacy layer built on top of existing chains. Therefore, users can access confidential dapps from any chain without having to cross over to a completely new network.

This protocol leverages Zama's cutting-edge fully homomorphic encryption (FHE) technology, allowing computation to be performed directly on encrypted data. FHE has long been considered the "holy grail" of cryptography because it provides true end-to-end encryption for any application, both on-chain and off-chain.

Today, Zama's FHE is highly efficient, supporting any application scenario and can be developed using common languages such as Solidity and Python. It is also over 100 times faster than it was five years ago. More importantly, Zama's FHE technology is quantum resistant; currently, no known quantum algorithm can break it.

While FHE is the core of the Zama Protocol, Zama also incorporates multi-party computation (MPC) and zero-knowledge proofs (ZK) to compensate for the shortcomings of other privacy solutions:

• FHE : Achieve privacy while maintaining full public verifiability (anyone can recalculate the FHE operation and verify its correctness).
• MPC : Decentralizes the network's global key, ensuring that no single entity can access it. Limiting MPC to key generation and user data decryption significantly reduces latency and communication costs, making it more scalable and decentralized than using MPC for full privacy computation.
• ZK : Ensures that the encrypted input submitted by the user is indeed correctly encrypted. Since ZK is used solely for this purpose, its proofs are extremely lightweight and can be quickly generated in a browser or on a mobile device.

ZAMA Token Overview

$ZAMA is the native token of the Zama Protocol, used to pay protocol fees and participate in staking. Its token mechanism uses a "burn + minting" model: all protocol fees are 100% burned, while network operators are rewarded by minting new tokens.

Cost Model

Deploying confidential applications on supported chains is free and permissionless. Furthermore, Zama Protocol does not charge for the FHE computation itself, but charges for the following operations:

• ZKPoK Validation : Whenever a user submits encrypted input in a transaction, they need to pay a fee to the protocol to validate the proof.
• Decrypting ciphertext : Users need to pay a fee to the protocol when they want to decrypt ciphertext.
• Cross-chain ciphertext transmission : When a user wants to bridge encrypted values from one chain to another, they need to make a request to the protocol and pay a fee.

Protocol fees can be paid by end users, front-end applications, or relayers. Therefore, developers can build applications that allow users to use the service without directly holding $ZAMA tokens.

The price prediction opportunity regularly updates the $ZAMA/USD price on Gateway to adjust the amount of $ZAMA required for various protocol operations.

This design has several advantages:

• The cost is linked to actual usage and is not affected by speculation.
• It provides predictability for users, developers, and relayers, allowing them to estimate costs in USD rather than highly volatile tokens.

Furthermore, the Zama Protocol employs a tiered billing model based on usage: the more you use the protocol, the lower the cost per operation. The smart contract on the gateway records the number of bits each address has verified/decrypted/crossed chains in the past 30 days and provides tiered discounts based on usage.

Staking Rewards

Operators need to stake $ZAMA to participate in the protocol and receive corresponding staking rewards. Reward tokens are minted based on the inflation rate (initially 5%), which can be adjusted through governance.

When distributing rewards, the roles will be divided first (sorter, coprocessor, KMS node), and then the rewards will be distributed according to the square root of the staked amount of each operator in the group.

This reward system ensures that operators receive rewards based on their actual contributions, while preventing rewards from being concentrated in the hands of a few large nodes.

ZAMA Use Cases and Ecosystem Applications

Confidential smart contracts open up entirely new design possibilities for blockchain applications, particularly in fields such as finance, identity, and governance, where they hold immense value. Here are some typical examples:

finance

Confidential payments . Stablecoins are one of the most successful applications of blockchain, with annual transaction volumes reaching trillions of dollars. Today, everything from credit card payments and payroll to cross-border remittances and banking clearing systems is migrating on-chain, with privacy and compliance being the most critical requirements. With FHE and Zama Protocol, these needs can finally be met: account balances and transfer amounts can be encrypted end-to-end, and payment service providers can embed compliance logic directly into token contracts.

Asset Tokenization and RWA . Financial asset tokenization is driving large institutions to adopt blockchain. From fund units, stocks, and bonds to derivatives, the potential scale of assets that can be on-chain is as high as $100 trillion. However, due to privacy and compliance issues, traditional institutions have been limited to private blockchains, making interoperability difficult between different institutions. With the Zama Protocol, institutions can securely issue and trade assets on public blockchains such as Ethereum and Solana, while maintaining the confidentiality of business information and investor identities. Furthermore, compliance checks such as KYC/AML can be completed directly in smart contracts without exposing sensitive information to other parties.

Confidential DeFi . DeFi allows everyone to participate in finance and earn returns, but it has two main problems: 1) Users are unwilling to disclose their asset information; 2) bots' early adoption leads to high on-chain token exchange costs.

FHE supports end-to-end encrypted swaps, ensuring that transaction amounts (and even transaction assets) remain private at all times, fundamentally solving the aforementioned problems.

Tokens

Sealed-bid Auctions . These are on-chain sealed auctions for assets such as NFTs and tokens. Each participant submits an encrypted bid on-chain, and the highest bidder wins the item after the auction ends, without disclosing anyone's specific bid. This not only improves price discovery but also prevents bots from monitoring the mempool and bidding against each other. This mechanism is particularly effective for public token sales.

Confidential Distributions . Current airdrops or token distributions publicly disclose the amount received by each address—whether for users, developers, investors, or ecosystem incentives—which can raise privacy and security concerns. With FHE, protocols can confidentially distribute tokens, execute token vesting on encrypted data, and conduct confidential staking.

Identity and Governance

Composable on-chain identities . Off-chain, we frequently use our identities to shop, book flights, or verify services, but moving these operations on-chain would expose sensitive information such as names, addresses, and social security numbers. With FHE, a complete decentralized identity (DID) + verifiable credential (VC) system can be built, keeping identity information encrypted while remaining fully composable with various dApps.

Confidential Governance . On-chain voting (used for DAO, corporate, and even government governance) has always been a focus of the community, but public voting can lead to risks such as bias, threats, and even bribery. FHE keeps the voting content (and the amount of tokens staked) private, ultimately only publishing the statistical results, not individual voting data.

How to Purchase $ZAMA | Participation Guide

The token is nowlisted in the pre-market OTC ZAMA zone of the XT exchange, allowing interested users to participate before the token's official listing. XT provides a convenient and reliable entry point for users looking to establish themselves in the Zama Protocol ecosystem early on.

In addition to direct purchases, users can also earn $ZAMA through various means of participation in the Zama ecosystem, including running nodes, contributing to the community, participating in the testnet, joining the developer program, and upcoming incentive programs. As Zama expands to more chains, participation opportunities will continue to increase, enabling users to naturally accumulate tokens through real-world use of the protocol and benefit from the long-term growth of the FHE-based confidential computing network.

ZAMA token's core competitiveness

Zama's greatest advantage lies in its ability to achieve true end-to-end privacy while maintaining public verifiability and full composability—a feat unmatched by any other current privacy solution. With FHE, all inputs and state remain encrypted, yet anyone can still verify computational correctness, thus eliminating the trade-off between privacy and transparency common in zk systems, TEEs, and private blockchains.

Developers can also use familiar tools such as Solidity and EVM to build confidential dApps and seamlessly interact with existing public chain contracts.

Zama also excels in scalability and decentralization. Its optimized FHE technology is over 100 times faster than it was five years ago and can be further scaled with GPUs and hardware accelerators. MPC ensures that no single entity controls the global key, while lightweight zero-knowledge proofs keep input verification efficient. Combined with a predictable fee model denominated in USD and a "burn + mint" token mechanism, Zama can support large-scale financial scenarios, confidential payments, RWA, identity systems, and the implementation of next-generation DeFi without requiring users to switch chains.

ZAMA's main risks and challenges

The primary risk facing ZAMA is the speed of adoption of FHE-based applications in the early stages. Despite ZAMA's high technological maturity, developers and enterprises still need time to adapt to the entirely new cryptographic tools and security model. If adoption is slower than expected, or projects prefer more familiar privacy solutions like zk or TEE, the protocol's usage and revenue generation may grow slowly. This kind of adoption resistance is a common problem for cutting-edge technologies and a major challenge for ZAMA in the short term.

Another risk stems from infrastructure performance and the degree of decentralization of operators. Scaling FHE to high throughput still relies on GPUs, hardware accelerators, and a sufficiently large network of node operators. Increased hardware costs or higher barriers to entry could lead to node centralization and impact network resilience. Furthermore, ZAMA's "burn + mint" mechanism depends on continuous on-chain usage; a weakening market environment or decreased protocol activity will affect the scale of burning and the long-term sustainability of staking incentives.

ZAMA's Future Outlook

Zama Protocol is built upon years of research and development by the team. Its testnet is already live, and it plans to launch the Ethereum mainnet by the end of 2025. The roadmap is as follows:

• Public testnet (already online) : Allows anyone to deploy and test confidential dapps, while also familiarizing operators with network operation procedures.
• Ethereum Mainnet (Q4 2025) : The first official mainnet version to introduce confidentiality capabilities to Ethereum.
• More EVM public chains (first half of 2026) : Zama will expand to more EVM chains to enable cross-chain confidential assets and applications.
• Solana Support (Second Half of 2026) : After the completion of the EVM phase, Zama will be extended to Solana to support confidential SVM applications.

About XT.COM

Founded in 2018, XT.COM is a leading global digital asset trading platform with over 12 million registered users, operating in more than 200 countries and regions, and boasting an ecosystem traffic exceeding 40 million. The XT.COM cryptocurrency trading platform supports over 1300 high-quality cryptocurrencies and over 1300 trading pairs, offering diverse trading services including spot trading , leveraged trading , and contract trading , and is equipped with a secure and reliable RWA (Real World Asset) trading market. We are committed to the philosophy of "Explore Crypto, Trust Trading," dedicated to providing global users with a safe, efficient, and professional one-stop digital asset trading experience.