Zama and Fully Homomorphic Encryption (FHE)

The crypto company Zama, focused on fully homomorphic encryption (FHE) technology, has announced a $57 million Series B funding round led by Blockchange Ventures and Pantera Capital. The total funding has now exceeded $150 million, with the valuation rising to over $1 billion, making it the first "unicorn" project in the FHE field.

Fully Homomorphic Encryption (FHE) in blockchain is an encryption technology that allows computations to be performed on data while it remains encrypted. Unlike traditional methods that require data to be decrypted before processing, FHE maintains privacy throughout the entire computation process.

For example:

• Traditional method: You hand over your bank account balance to the server to calculate interest, which requires exposing the real balance (i.e., decrypting).
• FHE mode: You submit an "encrypted balance," and the server computes the interest without knowing how much money you have, returning a "encrypted result," which you then decrypt yourself to view.

Zama is committed to applying FHE to blockchain and AI privacy scenarios. Developers can build encrypted DApps through its protocol without requiring complex cryptographic backgrounds. The testnet is now live, and the funding will be used for mainnet deployment, ecosystem expansion, and continuous R&D.

Comparison with ZK Technology

Zero-knowledge proof (zk) technology has been widely applied in on-chain scenarios where verification does not expose information. FHE goes further, protecting data privacy and supporting general computational logic. FHE can perform complex operations without decrypting the original data, granting smart contracts true "encrypted execution" capabilities.

The application scope of FHE has far exceeded private payments and is now penetrating more complex and frequent on-chain activities, including:

• Encrypted stablecoins and confidential transactions
• Private identity verification and on-chain compliance checks
• Decentralized AI inference and model training
• Anonymous governance, cross-chain communication, and controlled data sharing, among others

As on-chain activities become more diverse, the generality of FHE will provide it with greater value anchors.

Currently still in early stages, performance and cost are the main bottlenecks

Current mainstream FHE systems (such as fhEVM) have performance around 5 TPS, which is still insufficient to support large-scale applications. High costs of encrypted computing and high development barriers are two major obstacles to its adoption. However, referring to the development path of zero-knowledge proof technology — from algorithm optimization, hardware acceleration to the emergence of specialized circuit chips — the evolution potential of FHE is also highly anticipated.

Compliance becomes a necessary prerequisite for future promotion

Privacy technologies face regulatory challenges. Tornado Cash being blacklisted and Monero being delisted by multiple exchanges are warnings. In comparison, projects with "optional privacy" mechanisms, such as Zcash, have more room for survival.

Zama has now launched a public testnet and is expected to launch the Ethereum mainnet in the fourth quarter of 2025, initially supporting only applications approved by the official body, and will issue the $ZAMA token by the end of the year. Additionally, it will expand to more EVM chains, enabling permissionless DApp deployment. In 2026, Zama will further support Solana.