ZAMA has reached a new all-time high, but the token’s current valuation still appears to rest largely on the fully homomorphic encryption, or FHE, privacy narrative rather than on demand that has already been proven in the market.
According to TechFlowPost, ZAMA rose about 42% over the past 24 hours to $0.085. Its market capitalization moved above $210 million, while 24-hour trading volume reached $112 million.
The immediate catalyst was a combination of product updates. On Sept. 15, Zama expanded Morpho’s Confidential Vaults on Ethereum from five to 21. On Sept. 17, Zama partnered with Merkl to launch Confidential Incentives, allowing cTokens, or confidential tokens, to connect with Merkl’s DeFi incentive infrastructure. On the same day, Zama Swap Protocol went live, adding support for swaps between crypto assets.
The project said Shielded TVL had surpassed $75 million. DefiLlama currently shows about $78.28 million.
From a TGE price of $0.05 in February, down to a low of $0.017, and then up to $0.085 now, ZAMA has traced a full V-shaped reversal in seven and a half months. The question raised in the article is how much of the right side of that V is being supported by real demand.
What Zama is trying to solve
On public blockchains, balances, transactions and DeFi positions are visible by default. Anyone can inspect them on Etherscan. For many retail users, that may not be a major issue. For institutions, though, real-time visibility into positions and trading strategies can be a serious problem.
Zama’s answer is fully homomorphic encryption. As described in the article, FHE allows smart contracts to compute on encrypted data while the inputs, the computation process and the outputs all remain encrypted. The underlying data is not exposed during execution.
The piece compares traditional DeFi to counting money in an open square, while Zama’s FHE works more like doing the entire calculation inside a sealed envelope, where only the final result is visible once the envelope is opened.
Zama positions itself as a cross-chain confidentiality layer that sits on top of Ethereum and other L1 and L2 networks through an fhEVM coprocessor. Developers do not need permission to deploy confidential applications and do not pay to deploy them. Zama charges for the encryption and decryption operations themselves, with each on-chain encryption operation costing about $0.13.
A token model defined by burn versus issuance
ZAMA’s token design is built around a burn-and-mint model.
- On the fee side: all protocol fees, including encryption and decryption fees, are burned in full. Every use of Zama’s FHE functions permanently removes some ZAMA from circulation.
- On the issuance side: staking rewards are paid through new token issuance at roughly 5% annually. Those rewards go to operators running FHE coprocessor nodes and to delegated stakers.
That leaves a simple arithmetic test: can the number of ZAMA tokens burned each year exceed the number minted each year?
If the answer is yes, the token becomes deflationary as usage grows and circulating supply keeps shrinking. If not, the token remains inflationary because staking issuance outpaces fee-driven burns.
Using the figures cited in the article, total supply stands at 11 billion tokens and current circulating supply is about 2.56 billion. At a 5% annual issuance rate, roughly 550 million new tokens would be minted each year. To offset that through burns, and using the $0.13 fee per encryption operation, the network would need about 4.2 billion encryption operations over a full year.
Based on the current Shielded TVL of around $78.28 million and present usage frequency, the article says the protocol is still far from that threshold. Its conclusion is that ZAMA remains in a phase where issuance exceeds burns by a wide margin.
How much of the $78.28 million TVL is high quality
Shielded TVL has grown quickly. The first vault went live in June, and the figure reached $40 million within seven weeks. After the expansion to 21 vaults on Sept. 15, TVL moved above $75 million and then reached $78.28 million two days later.
Still, the article breaks that growth into three layers.
Deposits driven by incentives
Through Confidential Incentives with Merkl, protocols can offer liquidity rewards for confidential vaults. That means part of the TVL may be short-term capital attracted by subsidized yields, following the same logic seen in traditional DeFi liquidity mining. The article notes that some of this TVL could leave once incentives stop.
Possible double counting from wrapped assets
Of the 21 vaults, 12 are hybrid vaults. These add a confidential wrapper on top of an existing Morpho strategy. A user deposits USDC, it is wrapped into cUSDC, or confidential USDC, and then placed into the vault. The article says that if DefiLlama counts both the underlying Morpho vault TVL and the outer confidential vault TVL, double counting may be possible.
Actual paid demand for privacy
Only four vaults are standalone vaults with no public-version equivalent. The article argues that TVL in those vaults is more likely to reflect genuine privacy demand, because users choosing them over standard Morpho products are more likely doing so because they actually need privacy.
There is no public dataset that precisely splits TVL across those three buckets. The article offers one test: how much TVL remains after incentive programs end. If more than 50% stays, that would suggest real demand exists. If TVL falls sharply, current deposits may be driven mainly by rewards.
Where Zama stands in the FHE field
The article says Zama is not alone in the FHE segment.
- Fhenix: backed by Offchain Labs, the developer behind Arbitrum, and focused on CoFHE coprocessors and privacy layers for L2 rollups. It is already live on Base and Arbitrum Sepolia. The article frames the difference this way: Fhenix is more L2-specific, while Zama is a cross-chain general solution.
- Inco Network: a modular confidential L1. The article cites March 2026 data showing 25% monthly active growth, a $4.5 million seed round, and about $4.7 billion in restaked ETH security obtained through Ethos.
- Mind Network: another FHE infrastructure project, focused on the intersection of AI and data privacy.
Zama’s advantages, as listed in the article, include more than $150 million in funding, a $1 billion Series B valuation, the largest FHE deployment on Ethereum mainnet with 21 vaults and about $78 million in TVL, and influence over FHE token standards as the proposer of ERC-7984.
At the same time, the article stresses that the FHE segment is still at a very early stage. A TVL of roughly $78 million is barely visible against the broader DeFi market. For comparison, Aave is at about $12 billion and Morpho at about $2 billion. On that basis, Zama’s first-mover edge shows up more in its technology stack and ecosystem partnerships than in market scale.
Valuation is still anchored to narrative
Using the figures in the article, ZAMA is trading at $0.085 with 2.56 billion tokens in circulation, implying a circulating market capitalization of about $217 million. Total supply is 11 billion tokens, which puts fully diluted valuation, or FDV, at about $935 million.
Against $78.28 million in TVL, that works out to an FDV/TVL multiple of about 12x. The article compares that with Morpho at roughly 3x to 4x and Aave at about 2x. That premium reflects what the market is willing to pay for an FHE privacy story, but it also means the valuation has less support if TVL growth stalls.
The article says the more important valuation variable is fee revenue. At $0.13 per encryption operation, even if all Shielded TVL were active and each dollar of TVL generated 0.01 encryption operations per day, annualized fee revenue would be only about $285,000. On that basis, FDV to annualized fees would be about 3,280x.
That leaves ZAMA looking like an asset priced on narrative rather than on cash flow. In the article’s framing, buying ZAMA is effectively buying into one assumption: that FHE privacy will become a core infrastructure layer for DeFi, that tens of billions of dollars in on-chain assets will eventually need encrypted protection, and that Zama will capture a meaningful share of that demand.