Open positions have shifted from "default" to "optional settings," bringing new support to the institutionalization process of DeFi.

Written by: Sanqing, Foresight News

On June 17, Zama, in collaboration with Morpho and Steakhouse Financial, launched the first DeFi yield vault for confidential USDC (Confidential USDC, cUSDC) on Ethereum, the Steakhouse Confidential USDC Prime. This means that institutions can finally achieve yields comparable to traditional flagship vaults while maintaining confidentiality regarding on-chain deposit sizes and operational timelines.

The vault will officially open for deposits on June 23. Morpho's total value locked (TVL) is approximately 7 billion US dollars, while the TVL managed by Steakhouse Financial's related vaults is nearly 2 billion US dollars, also managing yield products within exchanges such as Coinbase, Bitget, and Crypto.com.

Institutions Deterred by "Public"

“We continuously hear one demand from institutions, which is for on-chain confidentiality,” said Morpho co-founder Merlin Egalite. “The confidentiality tech stack built by Zama on top of Morpho enables institutions to allocate funds to the Morpho vault just like any on-chain configuration, without sacrificing operational privacy.”

The transparency of public chains has long been seen as the ethical foundation of decentralized finance, but for institutional capital, it acts as an invisible shackle.

Existing lending protocols rely on public chains, where the information of each deposit is publicly visible. Actions taken by an asset management firm can immediately be captured by arbitrage bots, competitors, and on-chain analytical tools, deducing their liquidity management strategies. Position sizes, build windows, and risk preferences on collateral are all laid bare.

Competitors can infer strategic intents from this and even engage in targeted replication or counter-operations; arbitrage bots may exploit information advantages to front-run. This implies institutions not only lose the confidentiality of their strategies but may also face higher execution costs and lower actual yields.

Institutions are reluctant to heavily enter DeFi, even building their own networks, due to multiple factors including regulation, custody compliance, operational security, and heightened transparency being one of the core pain points.

Reusing Mature Vaults

“The stabilization of the economy through stablecoins is advancing rapidly,” said Steakhouse Financial co-founder Sébastien Derivaux. “Steakhouse USDC Prime is our oldest vault on Morpho, designed with a strong focus on liquidity and risk awareness.”

The product design of the Steakhouse Confidential USDC Prime vault intentionally maintains the principle of minimal change. The vault directly uses Steakhouse Prime v2 as its underlying layer, with credit strategies, risk parameters, and collateral baskets (cbBTC, WBTC, wstETH) remaining unchanged. Users deposit cUSDC, while the underlying routing stays the same as the original vault, with yields coming from the Morpho lending market.

The only change is the form of deposited assets, which need to be first confidentialized through the Zama app (Shield, turning standard USDC into cUSDC, a single transaction, without cross-chain or new wallet creation), before being deposited into the vault to start earning yields.

Deposit sizes, operational directions, and entry times remain confidential on-chain, while the overall supply and audit data of the vault remain auditable for compliance parties.

FHE Three-step Approach, From Token Issuance to Confidential Yields

Zama is a deep-tech company focused on cryptography and privacy computing, co-founded by CEO Dr. Rand Hindi and CTO Dr. Pascal Paillier. Paillier is a significant cryptographer in the field of homomorphic encryption, and his proposed Paillier encryption scheme remains a core algorithm widely used globally. The team has over 90 members, nearly half of whom hold PhDs.

Zama has completed over 150 million US dollars in funding (A round 73 million US dollars led by Multicoin Capital, Protocol Labs; B round 57 million US dollars led by Pantera Capital, Blockchange), with the latest valuation reaching 1 billion US dollars, becoming the world's first unicorn in the FHE domain. Investors also include notable founders such as Gavin Wood, Anatoly Yakovenko, and Juan Benet.

Zama's core technology FHE (Fully Homomorphic Encryption) is hailed as the "Holy Grail of Cryptography." It supports computation directly on encrypted data. In blockchain applications, this means smart contracts can process encrypted balances and amounts without seeing plain text, allowing for public verifiability and confidentiality to coexist.

As of the time of publication, the accumulated total value shielded (TVS) of the Zama protocol has reached 191 million US dollars, with FHE's on-chain actual adoption having reached a certain scale.

In February 2026, Zama completed the public auction of the ZAMA token, which is also the first ICO on Ethereum utilizing FHE technology, using encrypted sealed bidding, where all bids were encrypted throughout the auction period to prevent front-running. The total committed value on-chain during the auction was approximately 121 million US dollars, with actual fundraising of around 44 million US dollars based on the liquidation price.

In May 2026, Zama acquired the enterprise-grade token lifecycle management platform TokenOps, extending confidentiality capabilities to scenarios of token issuance, ownership, and airdrop distribution.

Steakhouse Confidential USDC Prime is the third step, integrating FHE into the existing DeFi yield structure, providing a true capital efficiency exit for confidential assets.

Validating technical feasibility, establishing token economics, and unblocking the revenue loop of institutional funds, Zama is expanding the boundaries of “Confidential Token” applications with each step.

FHE has long remained in cryptographic laboratories but is now capable of supporting real institutional funds operating on the Ethereum mainnet. When protocols of Morpho's scale integrate confidential deposit capabilities into their architecture, it signifies that confidential DeFi has reached the stage of being "production-ready."