ZAMA Surges 42% Amid Product Launches and TVL Growth

Article by Xiao Bing

ZAMA has risen approximately 42% over the past 24 hours, trading at $0.085, reaching a new all-time high. Its market cap has surpassed $210 million, with a 24-hour trading volume of $112 million.

The catalyst consists of two product milestones: On September 15, Zama expanded Morpho’s Confidential Vaults on Ethereum from 5 to 21. On September 17, Zama partnered with Merkl to launch Confidential Incentives, enabling cTokens (confidential tokens) to seamlessly integrate with Merkl’s DeFi incentive infrastructure. On the same day, Zama Swap Protocol launched, supporting exchanges between crypto assets.

According to the project team, the Shielded TVL (Shielded Total Value Locked) has surpassed $75 million. DefiLlama currently reports approximately $78.28 million.

From a TGE price of $0.05 in February, ZAMA dropped to a low of $0.017, then surged to a new high of $0.085 today, completing a full V-shaped reversal in seven and a half months.

The question is: How much of the right side of this V is supported by genuine demand?

First, understand the problem that Zama is solving.

All data on public blockchains is transparent. Anyone can view your balance, your transactions, and your DeFi positions on Etherscan. This doesn’t matter to most retail users, but it’s catastrophic for institutions—no asset management firm wants competitors to see their holdings and trading strategies in real time.

Zama addresses this issue using Fully Homomorphic Encryption (FHE). FHE enables smart contracts to perform computations on data while it remains fully encrypted—the input is encrypted, the computation is performed on encrypted data, and the output is also encrypted. No one can see the underlying data at any stage.

For example: Traditional DeFi is like counting money in an open square, while Zama’s FHE performs all computations inside a sealed envelope—you can only see the result when you open it, not the process.

Zama is a cross-chain confidential layer that sits atop L1/L2s like Ethereum via the fhEVM coprocessor. Developers can deploy confidential applications without permission or upfront fees; Zama charges only for encryption and decryption operations, approximately $0.13 per on-chain encryption operation.

ZAMA's token design revolves around a "burn-and-mint" model:

Fees: 100% of all protocol fees (encryption and decryption fees) are burned. Every time someone uses Zama’s FHE functionality, ZAMA is permanently removed from circulation.

Issuance side: Staking rewards are paid through new token issuance, with an annualized rate of approximately 5%. These issuance rewards are distributed to operators and delegators who run FHE coprocessor nodes and stake ZAMA.

The core question has become a simple arithmetic problem: Can the number of ZAMA destroyed annually exceed the number minted annually?

If possible, ZAMA is deflationary: as usage grows, the circulating supply continuously decreases, creating supply scarcity for the token. If not, ZAMA is inflationary: the issuance rate of staking rewards exceeds the rate of fee burns, diluting the value for token holders.

Current data does not support an optimistic conclusion. With a total supply of 11 billion and approximately 2.56 billion currently in circulation, an annualized issuance rate of 5% means about 550 million new tokens are minted each year. To offset issuance through burns, at a crypto operation fee of $0.13 per transaction, approximately 4.2 billion crypto operations would be required annually.

Based on the current Shielded TVL (approximately $78.28 million) and usage frequency, this number is still far from reaching its potential. ZAMA is currently still in a phase where minting far exceeds burning.

The growth of Shielded TVL has been truly remarkable: the first vault launched in June, reaching $40 million within seven weeks. After expanding to 21 vaults on September 15, TVL surpassed $75 million and reached $78.28 million two days later.

But this growth needs to be broken down into three layers:

Layer 1: Subsidy-driven deposits. Zama, in collaboration with Merkl, has introduced a "Confidential Incentives" mechanism that allows protocols to provide liquidity incentives for confidential vaults. This means that a portion of TVL is attracted by subsidized interest rates—identical to the "mining subsidy" model in traditional DeFi. When subsidies end, this portion of TVL will leave.

Layer 2: Double-counting of wrapped assets. Of the 21 vaults, 12 are "hybrid vaults"—layers of confidential wrapping applied on top of existing Morpho strategies. Users deposit USDC, which is first wrapped into cUSDC (confidential USDC), then deposited into the vault. If DeFiLlama includes both the TVL of the underlying Morpho vault and the TVL of the outer confidential vault in its calculations, double-counting may occur.

Layer 3: Genuine paid privacy demand. Only four vaults are "standalone," with no public-version equivalents. The TVL of these vaults is more likely to reflect actual privacy demand—users choose them over standard Morpho because they truly require privacy.

There is currently no public data available to precisely break down the proportions of these three layers. However, one indicator is how much TVL remains after incentive programs end. If TVL stays above 50%, it suggests genuine demand exists; if it drops significantly, the current TVL is primarily driven by incentives.

The FHE赛道 not only Zama is working on; several major competitors:

Fhenix: Supported by Offchain Labs (developer of Arbitrum), focused on a privacy layer built around CoFHE coprocessors and L2 rollups. Live on Base and Arbitrum Sepolia. Unlike Zama, which is a cross-chain universal solution, Fhenix is specifically designed for L2.

Inco Network: A modular confidential L1, with 25% month-over-month active user growth as of March 2026. Raised $4.5 million in seed funding. Achieved approximately $4.7 billion in secured ETH security through Ethos.

Mind Network: Another FHE infrastructure project focused on the intersection of AI and data privacy.

Zama’s advantages include: over $150M in funding, a $1 billion valuation in its Series B round, the largest FHE deployment on Ethereum mainnet (21 vaults, $780M TVL), and leadership in FHE token standards as the proposer of the ERC-7984 standard.

However, the FHE sector as a whole is still in its very early stages; a TVL of $780 million is nearly negligible compared to the broader DeFi market (Aave at ~$12 billion, Morpho at ~$2 billion). Zama’s first-mover advantage lies more in its technology stack and ecosystem partnerships than in market size.

Current data: ZAMA price at $0.085, circulating supply of 2.56 billion tokens, and a circulating market cap of approximately $217 million. Total supply is 11 billion tokens, with an FDV of approximately $935 million.

With a TVL of $78.28 million, the FDV/TVL ratio is approximately 12x. For comparison, Morpho’s FDV/TVL is around 3x to 4x, and Aave’s is about 2x. This multiple reflects market expectations for a "FHE privacy premium," but also implies that if TVL growth stalls, the current valuation lacks fundamental support.

The more critical valuation metric is fee revenue. At $0.13 per crypto transaction, even assuming all Shielded TVL is active (generating 0.01 transactions per dollar of TVL per day), the annualized fee revenue is approximately $285,000, resulting in an FDV/annualized fee ratio of about 3,280x.

This is a classic example of an asset priced on narrative rather than cash flow. Buying ZAMA means betting on the assumption that FHE privacy will become the infrastructure layer of DeFi, and that hundreds of billions of dollars in on-chain assets will require cryptographic protection—with Zama positioned as the primary beneficiary of this demand.