Zama raises $57 million in funding: How does fully homomorphic encryption (FHE) innovate blockchain privacy and AI applications?

Gate News, in the digital age, the importance of data privacy is increasingly prominent. Recently, the cryptography company Zama, focused on blockchain fully homomorphic encryption (FHE) technology, has exciting news: they successfully completed a $57 million Series B funding round, led jointly by Blockchange Ventures and Pantera Capital. This round of financing not only brings Zama's total funding amount to over $150 million but also pushes its valuation to over $1 billion, making it the first "unicorn" company to venture into the fully homomorphic encryption field. This milestone is not only a victory for Zama but also a beacon of hope for the development of privacy protection technologies in blockchain and the entire digital world.

1. Fully Homomorphic Encryption: A Revolutionary Breakthrough in Privacy Computing

Fully homomorphic encryption (FHE) represents a significant breakthrough in the field of cryptography: it allows data to remain fully encrypted during processing, thereby eliminating the need to expose sensitive information during computation. Unlike traditional encryption methods that require decryption for analysis, FHE ensures that data remains confidential throughout its entire lifecycle. This capability is revolutionary for data-dependent industries, such as finance, where transaction privacy is crucial, or healthcare, where patient records must be protected.

Zama's FHEVM (Fully Homomorphic Encryption Virtual Machine) is a concrete embodiment of this potential. FHEVM is a virtual machine designed to execute confidential smart contracts on encrypted data, leveraging fully homomorphic encryption (FHE) technology, allowing encrypted data to be processed without decryption. This means that sensitive information remains private during the computation process, and only authorized participants can decrypt the results. FHEVM ensures end-to-end encryption of transactions and states, maintaining the confidentiality and availability of data, and functioning normally even in malicious or untrusted environments.

By implementing "zero-knowledge" computation, FHEVM bridges the gap between the transparency of Blockchain and privacy requirements. The company recently announced that it will launch the Zama protocol in July 2025, further highlighting its ambitions: developers will soon be able to build confidential applications on any Blockchain, starting first with EVM chains and Solana.

2. Solutions to Market Dynamics and Scalability Challenges

The blockchain and cloud computing markets are about to undergo a disruptive transformation. By 2027, global blockchain spending is expected to reach $62.9 billion, driven by institutional adoption of DeFi, NFTs, and Web3 applications. However, scalability and privacy remain key obstacles. Current solutions, such as Layer 2 protocols or zero-knowledge proofs, can only offer partial solutions, but there is a gap compared to the overall solution provided by fully homomorphic encryption.

The progress made by Zama in the performance scaling of FHE is remarkable—moving from 100 times faster than its initial benchmark to a goal of another 100 times improvement within five years—indicating that it is addressing these pain points. Integrating GPUs and future dedicated chips into its infrastructure could make it the backbone of a high-throughput, privacy-first blockchain. Its collaborations with major blockchains like Ethereum and Solana also hint at its ecosystem's dominance, as developers seek to build on platforms with strong privacy layers.

3. Widespread Application Scenarios and Industry Impact

The applications of the Zama protocol cover multiple fields, and its potential is enormous:

Finance: Achieve confidential stablecoin issuance, with transaction details hidden but verifiable, enhancing the privacy of financial transactions.

Healthcare: Decentralized clinical trials using encrypted patient data to ensure patient privacy while conducting data analysis.

National Defense: Sharing confidential information across cybersecurity to enhance national security levels.

Cloud Computing: Providing privacy-preserving data processing for enterprises, addressing the pain points of cloud data security.

These use cases comply with strict global regulations such as the General Data Protection Regulation (GDPR) and the Health Insurance Portability and Accountability Act (HIPAA), which impose penalties for data breaches. For investors, Zama's technology is expected to become a compliance enabler for multinational companies – by 2030, this will represent a market opportunity worth $20 billion.

IV. Investment Reasons and Potential Risks

The B round financing of Zama is led by cryptocurrency veterans Blockchange Ventures and Pantera Capital, which adds significant credibility. Both companies have previously invested in transformative projects (such as Solana and Chainlink), indicating that Zama's technology is well-tested. Its valuation reflects its first-mover advantage in the FHE space, but investors must weigh the risks:

Technical barriers: The computational demands of FHE remain high. Zama's roadmap for achieving 100x scalability depends on advancements in hardware.

Competitor Ecosystem: Competitors like Enigma or Microsoft's confidential computing are pushing alternative privacy solutions.

Regulatory Uncertainty: Excessively strict data localization laws may hinder the adoption of cross-border FHE.

Despite these risks, Zama's leading position in the research field—boasting the largest FHE team in the world—and its developer-centric tools (such as Solidity compatibility) mitigate execution risks. The company's focus on open-source development also enhances community trust, which is crucial in a decentralized ecosystem.

Conclusion: Strategic Bet on Privacy 2.0

The milestone of Zama is not just a financing event; it demonstrates the growing demand for privacy-first infrastructure. As blockchain transitions from a speculative asset class to a core technology of the global industry, the ability of FHE to coordinate transparency and confidentiality may redefine its utility.

For investors, Zama represents a concentrated investment in this subject. Despite the risks, the company's technological depth, strategic partnerships, and alignment with regulatory trends position it as a leader in this multi-billion dollar market. Those seeking to participate in the next phase of blockchain innovation should closely watch the launch of the Zama mainnet and the adoption of its ecosystem. The future of secure computing is likely to be encryption—and Zama holds the key.