How does Zama put a "quantum invisibility cloak" on the blockchain?

Recently, both the BTC community and the Ethereum community have been very concerned about privacy. Zama, which is engaged in fully homomorphic cryptography (FHE), has already launched a testnet and expects the mainnet to be soon. What changes will Zama bring to privacy in the crypto space? Let's talk about it briefly:

To use a simple analogy, Zama is similar to installing a “super stealth cloak” for public chains such as Ethereum, allowing users to transfer, borrow, trade, buy and sell stocks, participate in prediction markets… and encrypt all data on the chain, which no one can see, not even the participating nodes, but the calculation can still be calculated, and the verification can be publicly verified. It's similar to moving the experience of WeChat Pay on-chain, but it's more private than WeChat Pay because even WeChat can't see your balance and transfer amount. Vitalik no longer has to worry about people seeing how much ETH he transfers each time.

Previous blockchains were unable to achieve privacy for a simple reason: they are completely public, like a transparent glass house where everyone can see how much money each address has, who it transfers to, and how much is transferred. Because of this, institutions and companies are hesitant to put their real money into play. Zama's technology is based on fully homomorphic encryption (FHE), which is designed to address this issue.

In simple terms, Zama is not a new chain, but a “privacy layer” that is built on top of existing blockchains. Users can utilize privacy features without switching chains. This is also a point we have consistently made before: privacy should not be a separate chain, but an optional feature for all chains. The advantage of fully homomorphic encryption technology is that data can be computed (addition, subtraction, multiplication, division) directly after encryption, without the need for decryption; moreover, it is also highly secure and has resistance to quantum computing.

Zama technology has many applications for privacy-preserving computing. For example, if you transfer 1000USDC to a friend, now people can see the amount you transferred to that address, and the amount of money you transferred. With Zama, others can only see “someone transferred”, and they can't see the amount and balance at all. This has a wide range of applications in the current DeFi field, such as people participating in contracts on Lighter, borrowing and lending on Aave, and trading on Uniswap, which is difficult to be discovered by people anymore; There are also benefits to DAO voting, regardless of whether users vote for or against, the results are public, but who voted is confidential;

Institutions have always had a demand for putting assets like stocks on the blockchain, but there are also privacy concerns, especially regarding RWA. There have always been privacy issues with stocks, bonds, and funds being put on the blockchain, and Zama's technology can address these institutional concerns. Institutions do not want their actions to be exposed, and once this problem is solved, the probability of traditional assets being put on the blockchain on a large scale will increase.

There is still a scenario for on-chain identity that has not developed, and with Zama's privacy technology, it may help with the large-scale adoption of on-chain identity. Specifically, on-chain identity can prove that a person is an adult/has a driver's license/nationality, etc., without exposing their ID/passport number, addressing current problems of identity being easily misused. On-chain identity is more convenient than offline physical identity and cannot be lost, making it suitable for users traveling across borders.

For developers, it's just a matter of using familiar Solidity to write code, simply replacing ordinary “addition, subtraction, multiplication, and division” with the “encrypted version of addition, subtraction, multiplication, and division” provided by Zama. It's not complicated; after modifying a few lines of code, privacy can be achieved in DeFi and voting, without needing to understand the specifics of cryptography.

In simple terms, it's somewhat like the internet upgrading from HTTP (plain text) to HTTPS (encrypted transmission). Zama attempts to upgrade blockchain from “full transparency” to donning a “full encryption cloak,” which has a promoting effect on solving the large-scale on-chain issues of RWA.