Author: David Christopher, author of Bankless; Translator: @JinseFinancexz
After months of testing and what the team calls "the largest audit in Web3 history," the crypto privacy protocol Zama is making final preparations for its mainnet launch.
The project has just announced the release of testnet v2 and confirmed that the mainnet beta will launch at the end of the year, at which time the ZAMA token and a complete production-grade privacy infrastructure will be launched simultaneously. For observers following the wave of privacy-enhancing technologies in the crypto space, this marks a significant milestone: the first large-scale production deployment of fully homomorphic encryption (FHE) technology.
Since the public testnet launch in July, Zama has attracted over 120,000 addresses to complete over 1.2 million crypto transactions. Now, with testnet v2 as a candidate version for mainnet launch, it means that the protocol is ready for production-grade deployment on multiple EVM chains.
However, the most noteworthy aspect is Zama's technological path to privacy. It doesn't build a new blockchain, but rather adds a cryptographic layer to existing chains like Ethereum and the EVM ecosystem. This can be compared to HTTPS wrapping a website in cryptography—Zama gives smart contracts a cryptographic cloak, enabling privacy-preserving computation without requiring users to migrate, cross-chain, or switch underlying chains. Below, we will analyze Zama's operating mechanism, its token functionality, current progress, and the application ecosystem preparing to connect to the mainnet. 1. Zama's Core Functionality Essentially, Zama is a privacy protocol based on fully homomorphic encryption (FHE). It enables private smart contracts and cryptographic computations to run directly on existing Layer 1/Layer 2 blockchains without relying on a new protocol layer. Fully homomorphic encryption (FHE) is key to achieving this functionality. Unlike traditional encryption methods that only protect data stored statically or during transmission, FHE maintains encryption throughout the entire data processing process. Think of it as a safe with a programmable glove: you store sensitive data inside, pre-set the operations to be performed, and then send it to the computing unit. The processor follows the instructions to complete the calculations, but can never see the actual data inside the safe; unlocking the safe yields the correct result. This completely eliminates the security risk window that exists when data must be decrypted before processing. Zama weaves privacy protection capabilities into the existing network ecosystem, rather than forcing developers to migrate to a new chain that requires rebuilding liquidity, toolchains, and network effects.

2. Zama's Operating Mechanism
Zama's architecture consists of multiple interconnected components that work together to drive its cryptographic capabilities:
fhEVM
fhEVM is a set of smart contracts and code libraries in Zama used to execute confidential smart contracts on the EVM chain. It contains two core components that work together: the fhEVM function library and the fhEVM executor.
... The first component provides Solidity developers with a toolset for writing confidential smart contracts, designed to allow developers familiar with Solidity to get started quickly. The second component, the fhEVM executor, is a smart contract deployed on a host chain (such as Ethereum, Arbitrum, Polygon, etc.) responsible for handling FHE operations. When a confidential contract is triggered, the executor sends a cryptographic computation request to Zama's coprocessor network, and the coprocessor takes over the subsequent computation.

Coprocessors
Coprocessors are components that undertake core computational tasks. They are off-chain networks composed of fully homomorphic encryption (FHE) nodes that listen for events emitted by the executors—these nodes actually perform encryption operations and then return the results to the host chain. By offloading computational tasks to dedicated hardware, Zama avoids main chain congestion while maintaining verifiability and security. Multiple coprocessors submit computation results to the Zama gateway, which ensures the accuracy of the results through a majority consensus mechanism.
... **Security System** Zama constructs its security system through multiple tightly integrated components: **Gateway**, acting as the core hub, drives the entire protocol process through smart contracts on its dedicated Arbitrum scaling chain. It is responsible for verifying encrypted input, processing decryption requests, and transferring encrypted assets across host chains, acting as the traffic control center for the entire system. **Key Security Component** The **Key Management Service** (KMS) holds the keys required for decryption. While such operations may pose a centralized risk, Zama mitigates this by employing Multi-Party Computation (MPC): the key is distributed among multiple operators, each holding only a portion of the key, requiring majority collaboration for decryption. Therefore, even a malicious operator cannot obtain the data independently. Ultimately, **Access Control Lists (ACLs)** track decryption permissions, ensuring that only authorized parties can access the results, even though computations are performed off-chain. All operations remain publicly verifiable through the gateway. The complete workflow is as follows: A user invokes a confidential smart contract on Ethereum and sends encrypted data → the fhEVM executor publishes an event containing the data → the Zama coprocessor receives the event → performs computations on the encrypted input using FHE → sends the encrypted result back to Ethereum through the gateway → the user decrypts it using their private key. The underlying blockchain, the coprocessor network, or any operator cannot access the plaintext information. A split-key system ensures distributed storage of decryption keys, while the gateway consensus mechanism verifies the correctness of the computation. 3. ZAMA Token The ZAMA token is coming soon and will serve as the protocol's native utility token. It performs three core functions in the network: ensuring operational security through staking, paying for protocol usage fees, and exercising governance rights over protocol parameters.

4. Zama Ecosystem Builders
In addition to announcing the launch of the testnet v2, Zama founder Rand also highlighted the outstanding team that has developed based on Zama, showcasing several applications that are ready to be integrated into the mainnet:
The Zaifer protocol converts standard ERC-20 tokens into confidential ERC-7984 tokens with encrypted balances and transfer amounts. These confidential tokens can be used for private exchanges and other operations in DeFi, and Zama's own token also uses this protocol for privacy protection. ...>