Recently, both the BTC community and the Ethereum community have been paying a lot of attention to privacy. Zama, which is working on Fully Homomorphic Encryption (FHE) technology, has launched its testnet and is expected to release its mainnet soon. What changes will Zama bring to privacy in the crypto space? Let's discuss briefly:

To put it simply, Zama is like putting a "super invisibility cloak" on public chains like Ethereum, allowing users to transfer, lend, trade, buy stocks, participate in prediction markets, etc., all with encrypted data that no one can see—not even the participating nodes. However, the necessary computations can still be performed, and verifications can still be publicly validated. It's akin to bringing the WeChat Pay experience onto the blockchain, but with even more privacy, as even WeChat cannot see your balance or transfer amounts. Vitalik no longer has to worry about people seeing how much ETH he transfers each time.

Previous blockchains could not achieve privacy for a simple reason: they are completely public, like a transparent glass house where everyone can see how much money each address has, who it is transferring to, and how much is being transferred. Because of this, institutions and companies have been hesitant to put real money into the system. Zama's technology, which is based on Fully Homomorphic Encryption (FHE), aims to solve this problem.

In simple terms, Zama is not a new chain but a "privacy layer" that overlays existing blockchains. Users can utilize privacy features without changing chains. This aligns with our previous viewpoint that privacy should not be a separate chain but an optional feature for all chains. The advantage of Fully Homomorphic Encryption technology is that data can be computed (addition, subtraction, multiplication, division) directly while encrypted, without needing to decrypt it; additionally, it has high security and resistance to quantum computing.

Zama's privacy computing has many application scenarios. For example, if you transfer 1000 USDC to a friend, currently, people can see the address you transferred to and the amount transferred. With Zama, others can only see "someone made a transfer," without any visibility into the amount or balance. This has a wide range of applications in the current DeFi space, such as when people participate in contracts on Lighter, borrow on Aave, or trade on Uniswap, making it difficult for others to discover these activities; DAO voting also benefits from this, as the results are public regardless of whether users voted for or against, but who voted remains confidential.

Institutions have long had a demand for putting assets like stocks on-chain, but they also have privacy concerns, especially regarding Real World Assets (RWA). Stocks, bonds, and funds have always faced privacy issues when being put on-chain, and Zama's technology can alleviate these concerns for institutions. Institutions do not want their actions to be exposed, and once this issue is resolved, the likelihood of traditional assets being put on-chain on a large scale increases.

Another scenario that has not developed well is on-chain identity. With Zama's privacy technology, it may help facilitate the large-scale adoption of on-chain identities. Specifically, on-chain identities can prove that a person is an adult, has a driver's license, or holds a certain nationality without exposing their ID or passport numbers, addressing current issues of identity misuse. On-chain identities are more convenient than physical identities and cannot be lost, making them suitable for users traveling across borders.

For developers, they can continue to write code in familiar Solidity; they just need to replace regular "addition, subtraction, multiplication, and division" with Zama's "encrypted version of addition, subtraction, multiplication, and division." It's not complicated—after modifying a few lines of code, privacy can be achieved in DeFi and voting without needing to understand specific cryptography.

In summary, it's somewhat like the internet upgrading from HTTP (fully plaintext) to HTTPS (encrypted transmission). Zama attempts to upgrade blockchain from "fully transparent and exposed" to donning a "fully encrypted invisibility cloak," which will promote the on-chain movement of large sums of money related to RWA.

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