ZAMA TVL Surpasses $75 Million as Protocol Expands Privacy Features

Zama, a privacy protocol built on Ethereum, has seen its confidential vault total value locked (TVL) surpass $75 million (approximately KRW 104 billion). However, the inclusion of subsidies and repackaged existing products means further verification is needed to confirm whether this reflects genuine demand for paid privacy services or token value capture. Zama expanded its Morpho-based confidential vaults from five to 21 on September 15 and launched the Zama Swap protocol supporting cross-confidential asset swaps. On September 17, it partnered with Merkl to introduce confidential incentives offering liquidity rewards.

According to Techflow, Zama's protected TVL exceeded $75 million, with DefiLlama reporting a figure of $78.28 million (approximately KRW 108.5 billion). The protocol's first vault reached $40 million in TVL within seven weeks of its June launch. ZAMA token price has fluctuated from an initial $0.05 in February to $0.017, rebounding to $0.085 by September 20. Techflow reported a 24-hour price increase of around 42%, a market cap of $210 million (approximately KRW 291.3 billion), and trading volume of $112 million (approximately KRW 155.3 billion).

Confidential vaults are DeFi deposit products designed to keep user balances and trading strategies hidden from public ledgers. Zama's core technology, fully homomorphic encryption (FHE), allows smart contracts to compute on encrypted data without decryption, maintaining both input and output in encrypted form. The protocol provides a confidential computing layer operating on Ethereum and other Layer 1/Layer 2 networks, enabling developers to build confidential applications without additional permissions while charging fees for encryption and decryption tasks.

Merlin Egalite, co-founder of Morpho, stated that Zama allows expanding confidential DeFi without altering strategies, liquidity, or risk profiles. This approach aims to reduce exposure for institutional and large fund transactions by combining privacy features with existing DeFi products. Supported assets include USDC, USDT, WBTC, AUSD, TGBP, among others. Liquidity providers such as StakeHouse Financial, Wintermute's Amity, Flowdesk, LockrwayX, and Bitwise are involved in operations.

TVL composition requires further analysis: of the 21 vaults, 12 are hybrid models layering privacy features over existing Morpho strategies, while four are standalone confidential vaults. Hybrid vaults may lead to double-counted TVL as assets from both base Morpho vaults and external confidential vaults are aggregated. Standalone vaults better reflect direct demand for privacy features rather than public product alternatives. However, the exact funding split between types remains unclear from available data.

Confidential incentives also impact TVL sustainability. If deposits grew during subsidy periods, the long-term viability depends on whether funds remain after subsidies end. ZAMA's token economics feature fee burning against new issuance: all encryption fees are burned, but rewards for FHE co-processing operators and delegated stakers come from new token issuance. The protocol documents an initial annual inflation rate of 5%. With a total supply of 11 billion tokens, this equates to approximately 550 million new tokens annually. Techflow estimates that at $0.13 per encryption fee, around 4.2 billion transactions would be needed yearly to offset issuance. Current TVL and usage rates suggest burning may not yet exceed new issuance.

Competitors in the FHE-based privacy infrastructure market include Phoenix (Fhenix), Inco Network, and Mind Network. Zama emphasizes Ethereum compatibility and multi-application connectivity but remains in a verification phase regarding repeated use and actual fee payment adoption.