Erased Crypto Gains

gm Bankless Nation,
A brutal week for crypto prices threatens to unravel the 2025 narrative momentum.

Today's Issue ⬇️

1. ☀️ Need to Know: Erased Gains
   Crypto prices unwind their 2025 momentum.
2. 🗣️ Analysis: Zama Wraps Chains in Privacy
   The encryption protocol brings FHE to the mainstage.
3. 🎧 Latest Pod: The Two-Species Future
   Bryan Johnson is here on Bankless.

Sponsor: Bit Digital — ETH treasury that combines the two greatest assets of our time: ETH & AI.

1. ☠️ Bitcoin's 2025 Gains Vanish. Despite Wall Street and political support, BTC’s sharp slump shows fragility as it turns red on year-to-date price action.
2. 💸 Monad Token Sale Goes Live on Coinbase Exchange. Coinbase customers in over 80 countries can now purchase MON tokens.
3. 👁️ White House Considers Dialing Up Offshore IRS Crypto Surveillance Capabilities. The proposed rule would expand IRS visibility into Americans’ foreign digital asset transactions.

	Crypto $3.11T	↘ 1.5%	↘ 12.8%
	BTC $91,999	↘ 1.1%	↘ 12.9%
	ETH $3,013	↘ 1.0%	↘ 15.0%

After months of testing and what the team calls "the largest audit in web3 history," crypto privacy protocol Zama is gearing up for mainnet launch.

Today, the project announced the release of Testnet v2 and confirmed its mainnet beta will go live later this year, introducing the $ZAMA token along with full production privacy infrastructure. For those tracking the growing wave of privacy-enhancing technologies in crypto, this marks a significant milestone: the first large-scale deployment of fully homomorphic encryption (FHE) in production.

Since launching its public testnet in July, Zama has seen over 120K addresses conduct more than 1.2M encrypted transactions. Now, with Testnet v2 serving as the mainnet release candidate, the protocol is ready for production deployment across several EVM chains.

But what makes this particularly significant is the approach Zama takes toward implementing privacy. Instead of building a new blockchain, it adds an encryption layer on top of existing chains like Ethereum and the EVM ecosystem. Think of it like HTTPS wrapping encryption around websites. Zama wraps encryption around smart contracts, enabling confidential computation without requiring anyone to migrate, bridge, or switch chains. 

Below, we'll break down how Zama works, the role of its token, what's live today, and the applications preparing for mainnet launch. 👇

What Zama Does

At its core, Zama is a confidentiality protocol that uses fully homomorphic encryption to enable private smart contracts and encrypted computation directly on existing layer-one and layer-two blockchains, instead of isolating it on a new layer.

FHE is what makes this possible. Unlike traditional encryption that protects data only during storage or transmission, FHE keeps data encrypted even while being processed. Think of it like a locked safe with programmable gloves: you place sensitive data inside, program specific instructions for what operations to perform, and send it off for computation. The processor follows your instructions without ever seeing the actual data inside. When the safe returns, you unlock it to find the correct result. This eliminates the vulnerability window that exists when data must be decrypted for processing.

Zama weaves privacy into existing networks rather than forcing developers to move to a new chain that must develop its own liquidity, tooling, and network effects.

How Zama Works

Zama’s architecture is made up of several connected components that power its encrypted processing:

fhEVM

The fhEVM is Zama's suite of smart contracts and code libraries for executing confidential smart contracts on EVM chains. It includes two main components working in tandem: the fhEVM library and the fhEVM executor.

• The first component provides Solidity developers with tools to create confidential smart contracts and is designed to feel familiar to anyone who's written Solidity before.
• The second piece, the fhEVM executor, is a smart contract deployed on the host chain (Ethereum, Arbitrum, Polygon, and others) that handles FHE operations. When a confidential contract is triggered, the executor alerts Zama’s coprocessor network that encrypted computation is needed, and the coprocessors take it from there.

Coprocessors

The coprocessors are where the heavy lifting happens. They're an offchain network of FHE nodes that listen for events from the executor – these guys perform the actual encrypted operations and then return results to the host chain. By offloading computation to specialized hardware, Zama keeps the main blockchain from getting clogged while still maintaining verifiability and security. Multiple coprocessors commit their results to Zama's gateway, which runs a majority consensus to ensure accuracy.

Security Layers

Zama anchors security through a few tightly linked components.

• The Gateway sits at the center, driving all protocol flow via smart contracts on a dedicated Arbitrum rollup. It verifies encrypted inputs, processes decryption requests, and moves encrypted assets across host chains. Think of it as the traffic controller for the entire system.
• The next critical security piece is the Key Management Service (KMS), which holds the decryption keys needed to unlock encrypted results. While a practice like this could present centralization risk, Zama employs multi-party computation (MPC) to counteract that. Using MPC, keys are split across multiple operators, each holding only a fragment with a majority required to decrypt. Thus, even a malicious operator cannot access data alone.
• Finally, an Access Control List (ACL) tracks who can decrypt what, ensuring that even though computation happens offchain, only authorized parties can access results. All operations remain publicly visible and verifiable through the Gateway.

Here’s how it all comes together: a user calls a confidential smart contract on Ethereum, sending encrypted data. The fhEVM executor emits an event with that data, which Zama’s coprocessors pick up. They perform the computation on the encrypted inputs using FHE, and post the encrypted result back to Ethereum through the Gateway. The user decrypts the result using their private key. At no point does the underlying blockchain, the coprocessor network, or any operator see the unencrypted information. The split-key system ensures decryption keys remain distributed, while the Gateway's consensus mechanism verifies that computations were performed correctly.

The $ZAMA Token

The $ZAMA token is on the way, and will serve as the native utility token for the protocol. It plays three core roles in the network: securing operations through staking, paying for protocol usage, and enabling governance over protocol parameters.

Who’s Building on Zama

Beyond merely announcing the launch of Testnet v2, Zama’s founder, Rand, also gave some shoutouts to the standout teams building on Zama, showcasing several of the apps preparing for mainnet launch:

• Zaiffer Protocol converts standard ERC-20 tokens into confidential ERC-7984 tokens with encrypted balances and transfer amounts. These confidential tokens can then be used across DeFi for private swaps and other operations. Zama uses Zaiffer to shield its own token.
• TokenOps provides confidential token distribution for crypto companies and foundations. The platform handles confidential vesting and airdrops, with Zama using TokenOps for its own distribution programs.
• Bron Wallet offers native support for confidential ERC-7984 tokens. Built by the founder of Copper, a leading institutional custodian, Bron is an MPC self-custodial wallet designed for holding and transferring confidential assets like stablecoins and other encrypted tokens.
• Raycash operates as a self-custodial bank using confidential stablecoins. The platform keeps funds onchain securely and privately while enabling users to stake, swap, and spend offchain via debit card and IBAN.

Mainnet Soon

We've given you a lot to chew on about Zama, but if you’re going to take away two things from this article, let them be:

1. It’s a project focused on bringing privacy to Ethereum, rather than bringing Ethereum to privacy.
2. The breakthroughs Zama has made in FHE allow this technology to actually be used in day-to-day operations, something which could cause a cascade of new development for one of the most secure and important forms of cryptography.

Overall, it continues to be a very exciting time for privacy, with years of diligent engineering paying off to truly encrypt our onchain environment.

Crypto’s Privacy Tech Wave on Bankless

A number of privacy-enhancing technologies (PETs) are rapidly making their way into new crypto apps. That’s a very good thing.

BanklessDavid Christopher Jun 25, 2025 • 6 min read

Bit Digital: The premier ETH treasury that combines the two greatest assets of our time—ETH & AI compute. Harness massive Ethereum holdings with institutional-grade staking for optimized rewards, while powering cutting-edge AI infrastructure for unparalleled innovation. Unlock the future of digital assets where blockchain meets intelligent computing.

*We’re being compensated by Bit Digital (NASDAQ: BTBT) for this ad promoting their company and BTBT. The compensation is paid in cash as a one-time payment. You can find additional information about Bit Digital and BTBT on their Investor page at bit-digital.com/investors. Not investment advice.

Bryan Johnson lays out “Don’t Die,” a moral framework that puts existence first and turns longevity into a shared fight against entropy.

We pressure-test the hard stuff: selfishness, inequality, stagnation, and the so-called two-species future. Bryan argues these are solvable with smart societal engineering if “Don’t Die” is for everyone. We finish on crypto, from his Braintree days with Coinbase to how web3 could power a broader “Don’t Die” commons.

Listen to the full episode 👇