Zama announces token auction plan, FHE to debut in blockchain issuance scenario

Can Zama Create the Blockchain’s “HTTPS Moment”?

Written by: Sanqing, Foresight News

On December 1, Zama announced that it will launch a Dutch auction using a sealed-bid mechanism on Ethereum from January 12 to 15, 2026, selling 10% of the total token supply, with claims opening on January 20. This auction will use Zama’s self-developed fully homomorphic encryption (FHE) technology to conceal all bids, keeping the bidding process confidential on-chain, thereby preventing frontrunning and gas wars, and achieving fairer price discovery.

Zama stated that this event is not driven by fundraising needs, but aims to distribute fully unlocked and tradable tokens more fairly to developers, node operators, and community participants before the protocol launch. As this is the first time FHE technology is being deployed in a large-scale blockchain issuance scenario, Zama also hopes to use this auction to showcase its core capabilities in privacy computing and on-chain asset security.

ZAMA Token

Zama has not yet released a complete tokenomics model. According to available information, the ZAMA token is the native token of the Zama protocol, mainly serving three functions: fee payment, staking, and governance. The protocol is designed with burn and mint mechanisms to maintain the long-term value foundation of the token and to ensure a stable economic incentive structure for all network users and operators.

All fees collected by the Zama protocol will be automatically burned, thereby reducing the token’s circulating supply. The protocol itself does not charge for FHE computation, but instead concentrates fees on three quantifiable aspects: verifying zero-knowledge proofs, decrypting ciphertext, and cross-chain bridging of ciphertext. To allow developers to accurately predict costs, the protocol uses USD-denominated pricing, dynamically updating the ZAMA/USD price via oracles to keep fees stable across different market phases.

The Zama protocol sets an initial inflation rate of 5% as a reward mechanism to incentivize operator nodes in the network. These nodes are responsible for executing FHE computations as co-processors and providing key management services, among other critical tasks, and therefore require continuous token rewards to maintain operations. The inflation rate can be adjusted through governance in the future to balance rewards and token value.

Operators participating in network operations need to stake ZAMA to qualify for work, while ordinary holders can also join the security maintenance process through delegation. Zama adopts a Delegated Proof of Stake (DPoS) mechanism, allowing token holders to delegate their ZAMA to trusted operators, jointly enhancing network stability and sharing reward yields, thereby forming a long-term oriented collaborative and incentive loop within the ecosystem.

Team and Investors Overview

Zama is a deep tech company focused on cryptography and privacy computing, co-founded by two highly influential scientists in the fields of cryptography and encryption applications. CEO Dr. Rand Hindi is a serial entrepreneur and deep tech investor who has been focused on blockchain and privacy computing since 2014. CTO Dr. Pascal Paillier is a prominent cryptographer in the field of homomorphic encryption; the Paillier encryption scheme he proposed remains a widely used core algorithm globally. According to Rand, Zama’s team has over 90 members, nearly half of whom hold PhDs.

Zama has so far raised over 150 millions USD, including 73 millions USD in Series A and 57 millions USD in Series B, with the latest valuation reaching 1 billions USD. Its investor lineup includes leading crypto industry institutions, major players in the tech sector, and several well-known founders. The Series A was led by Multicoin Capital and Protocol Labs, and also attracted Stake Capital, Metaplanet, Blockchange, Vsquared Ventures, and several renowned industry founders, including Juan Benet, Gavin Wood, and Anatoly Yakovenko. The Series B was led by Pantera Capital and Blockchange.

Pantera Capital is one of the earliest large traditional asset management institutions to enter the crypto space, with an investment style focused on infrastructure, underlying technology, and long-term value. Vsquared Ventures comes from the European deep tech fund ecosystem, with long-term investments in artificial intelligence, quantum security, next-generation chips, and other high-barrier technologies. Metaplanet, as a Bitcoin treasury strategy company, is supported by Japanese tech enterprises and sovereign wealth capital, excelling in supporting strategic technology infrastructure. Protocol Labs, while part of the crypto industry, has a layout in distributed systems, data storage, and research ecosystems that closely resembles traditional tech giants.

Zama Protocol and Technology Overview

The Zama protocol is positioned as a cross-chain confidentiality layer built on existing public chains, rather than a new L1 or L2. Its goal is to directly cover mainstream chains such as Ethereum, Solana, BNB Chain, and Tron, adding privacy protection capabilities on top of these chains to fundamentally address the privacy shortcomings caused by the default transparency of public chains. The Zama team believes that the complete public nature of all on-chain amounts, balances, and activities has long hindered large-scale adoption by financial institutions and major enterprises, and Zama’s vision is to make privacy the default configuration for all online and on-chain applications.

FHE (Fully Homomorphic Encryption) is its core technology, hailed as the “holy grail of cryptography.” It allows computations to be performed directly on encrypted data without decryption, meaning all operations are conducted in a “blind computation” state, with data remaining encrypted throughout its entire lifecycle. In blockchain applications, FHE enables smart contracts to process encrypted balances and amounts without seeing plaintext, achieving both public verifiability and confidentiality.

To understand Zama’s role in the blockchain space, it can be likened to the HTTPS of the blockchain world. Just as HTTPS enabled the internet to move from plaintext transmission to end-to-end encryption, FHE will help blockchain shift from full transparency to comprehensive encryption, providing true privacy protection without sacrificing verifiability. Zama’s FHE technology offers several key advantages. First, in terms of security, it is post-quantum secure, meaning that even powerful quantum computers in the future cannot break the encryption. Second, in terms of composability, FHE tokens have the same composability as regular ERC20 tokens and can be directly used to build DeFi stacks, avoiding the “island effect” seen in traditional privacy solutions. Additionally, FHE natively supports programmable compliance, allowing smart contracts to define who can decrypt which data, enabling application developers to embed permissions and compliance logic directly on-chain—for example, banks can view customer balances, while ordinary users still cannot access sensitive information.