Zama Launches Privacy-Focused $ZAMA Token with Fully Homomorphic Encryption

• Zama launched its $ZAMA token on February 2, 2026, introducing a privacy-focused metric called Total Value Shielded (TVS) to measure encrypted value processed on-chain. The token's sealed-bid auction on Ethereum was oversubscribed by 218%, with $121 million in value locked from 11,000 participants.

• The ZAMA token enables encrypted computation on public blockchains like Ethereum and Solana using Fully Homomorphic Encryption (FHE), allowing private smart contracts while maintaining public verifiability. This approach addresses a long-standing dilemma in blockchain: the trade-off between privacy and transparency.

• Zama's Delegated Proof of Stake (DPoS) system includes 18 genesis operators, with an initial 5% annual inflation rate and a Square Root reward formula to promote decentralization by rewarding smaller operators. The ZAMA token also serves as a utility, governance, and security mechanism within the protocol.

What is Fully Homomorphic Encryption (FHE) and How Does Zama Apply It?

Fully Homomorphic Encryption (FHE) is a cryptographic technique that allows computation on encrypted data without the need to decrypt it first. Zama's implementation is the first production-scale application of FHE on public blockchains, enabling encrypted smart contracts and private transactions while maintaining public verifiability. This technology allows for confidential computation directly on encrypted data without revealing the underlying information to node operators or third parties.

What Is the Significance of Total Value Shielded (TVS)?

Total Value Shielded (TVS) measures the total amount of value processed using encrypted computation, offering a privacy-focused alternative to DeFi's Total Value Locked (TVL). TVS quantifies the economic impact of maintaining privacy on-chain through cryptography and could redefine how investors assess the scale and value of encrypted transactions. The launch of TVS marks a milestone in the evolution of on-chain privacy metrics and positions Zama as a leader in encrypted computation for decentralized finance.

What Are the Risks and Limitations of Zama's Model?

Zama's DPoS model is designed to promote decentralization, but its success depends on the distribution of staking rewards and the behavior of network operators. The Square Root reward formula aims to counteract centralization by rewarding smaller operators more effectively. However, the long-term sustainability of Zama's inflation model and the demand for its token remain uncertain, as the project's growth will depend on broader adoption of encrypted smart contracts and private transactions.

Zama's token also faces competition from other privacy-focused protocols and DeFi platforms that are actively developing their own solutions to balance transparency and confidentiality.

Zama's launch represents a significant step forward in blockchain privacy, offering a scalable infrastructure for confidential transactions and encrypted smart contracts. The integration of FHE into public blockchain markets could redefine the standards for privacy in DeFi and influence future developments in decentralized finance and institutional blockchain adoption.