Original Title: The Real Reason Institutions Need Onchain Privacy (Rand Hindi on The Roll Up Show)

Original Source: ZAMA

Editor's Note: Over the past week, ZAMA more than doubled and hit an all-time high on September 21. Behind this narrative is a series of fundamental changes: on September 15, Zama announced that confidential DeFi had entered a scaling phase, launching 16 confidential vaults at once and introducing a confidential swap protocol; on September 17, it also integrated with Merkl, allowing confidential tokens to plug into incentive distribution. Prior to this, its first confidential vault in partnership with Steakhouse and Morpho reached $40 million in TVL, ranking among the top ten USDC vaults on Morpho. "Confidential DeFi," built on fully homomorphic encryption (FHE), is transforming from an experimental concept into a sector priced by the market.

On September 16, 2026, Zama co-founder and CEO Rand Hindi appeared on The Rollup podcast to discuss Zama's newly launched scaled confidential DeFi. He talked about what this release means, why confidentiality will become increasingly important as institutional capital moves onchain, the future of programmable vaults, and how Zama is building its business model and token value capture around confidential finance. The following is the original podcast content:

One Vault Reaching $40 Million in TVL Led Zama to Roll Out Confidential DeFi

The Rollup: Zama has been rolling out confidential DeFi for a while now. What is important about today's release is "scaled confidential DeFi." What does "scaled" mean here?

Rand Hindi: When we launched the first confidential vault with Steakhouse and Morpho in June of this year, we didn't expect it to gain so much momentum. Its TVL rose to $40 million, making it one of the top ten USDC vaults on Morpho. After seeing that result, we thought: when people are using vaults and earning yield on assets, they really want confidentiality.

Today we are launching 15 new vaults, covering five assets: confidential USDC, USDT, AUSD, tGBP, and WBTC. You can now truly encrypt your Bitcoin. This is not a meme; you can encrypt your Bitcoin and earn yield on it. We also have five partners curating these strategies: Steakhouse remains closely involved with us, along with Flowdesk, Rockaway, Bitwise, and Armitage. Some of these vaults are Zama-exclusive and can only be accessed by depositing confidential assets.

The real challenge isn't more vaults, but how assets move between them

The Rollup: You previously built narrow but deep liquidity in a handful of vaults, and now you're expanding into breadth. How do you think about the balance between fragmentation and composability in the vault ecosystem?

Rand Hindi: I don't think multiple vaults create much of a fragmentation problem. The real difficulty is how to let people swap between assets so they can move from one vault to another. That's the second thing we're launching today: a confidential swap protocol, with Flowdesk as the first market maker quoting on it. This means you can take confidential USDC, confidentially swap it into WBTC, and deposit that BTC into a vault.

You can now move laterally between vaults without ever decrypting or disclosing how much money you moved between strategies. Think for a second about what that means — it's a big deal. You're not just able to deposit confidentially; you're able to manage an entire portfolio confidentially.

Institutions don't want to hide balances — they want to avoid being front-run

The Rollup: When you launched in June, this still had an experimental feel, but you've seen significant adoption and some signs of PMF. Now you're starting to call confidential DeFi a category. What makes you confident the market really needs this?

Rand Hindi: It's simple. We talked to multiple curators, institutions, and investors, and everyone said the same thing: if you want to bring trillions of dollars on-chain, you need confidentiality.

Institutional adoption of crypto is held back partly by regulation and partly by a lack of confidentiality. If you move $100 on-chain, it doesn't really affect market prices. But if you move $10 million, $100 million, or even $1 billion, the market will move. And not only will it move — it will actively front-run you.

The more money a person has to manage, the more privacy becomes a necessity. Not just because they want to hide their balances, but because they want better execution on their trades. That's exactly the problem we're solving.

You'll realize that vaults will become extremely large, and institutional-grade on-chain RFQ and OTC will also become extremely large. Our vision is that the future won't be 15 or 16 vaults, but millions of vaults and tens of thousands of assets, including tokenized stocks and tokenized RWAs. We want you to be able to encrypt, hold, swap, and earn yield on all of these assets without ever having to leave the chain you're on.

Once Strategy Rules Are Public, Performance Fees Can't Be Charged

The Rollup: As vault products expand, they shift from relatively passive products to more actively managed strategies, with assets traded and moved between positions, which sends much more information to the market. Is this the right angle to understand "why privacy is increasingly important for vaults"?

Rand Hindi: Yes. There are actually two types of roles in a vault: the Curator who defines and curates the strategy, and the LPs who deposit funds to earn yield.

Today's vaults are mainly collateralized lending vaults or RWA vaults, but I think this is about to change. We will see more and more programmatic strategy vaults. For example, you could have an AI Agent automatically manage a vault of stock positions, trading and providing exposure to a basket of tokenized stocks. This can be fully programmatic, not necessarily actively managed by a person—it can be a rules system or a bot.

But if the rules in your vault are public, why would anyone pay you a performance fee? They could just copy one themselves. So privacy is not just for the investors who deposit into the vault to earn yield, but also for the curators who want to offer competitive strategies without giving away the "secret sauce"—while still keeping it on-chain, programmatic, fully automated, and verifiable. That is what we provide.

Confidential Liquidity Has Network Effects, So This Is a Winner-Take-All Market

The Rollup: We often say that once a dollar goes on-chain, it tends to stay on-chain. Similarly, once a dollar becomes confidential on-chain, it may also tend to stay confidential. As the scale of confidential on-chain assets increases, how do you view the network effects here?

Rand Hindi: There are huge network effects in privacy, just like in most DeFi protocols. The more encrypted liquidity in your protocol, the stronger the privacy people get, because there are more participants and more people in the ecosystem. This is the liquidity network effect. Whoever builds the deepest liquidity for confidential protocols the fastest—with both multiple vaults that can earn yield and deep liquidity supporting confidential swaps—will be able to offer more competitive execution than public DEXs. Whoever builds it first and scales it will win.

This will be a winner-take-all market.

You have to see this as the intersection of two trends. First, do you believe finance is moving on-chain? If we agree that trillions of dollars will move on-chain, and protocols have network effects around liquidity, that means as finance moves on-chain, a few players will capture most of the activity. To me, that is the goal. If in the end we could only achieve a very small scale, then there would be no point in building a crypto company and doing everything we are doing now.

Go big or go home.

The vault itself is an asset class, and there will be millions of them in the future

The Rollup: As tokenized asset classes move on-chain, which sector do you think is most ripe for disruption at the intersection of privacy technology and tokenization?

Rand Hindi: You can almost think of the vault itself as an asset class. That is my take on vaults.

When you go to a bank today, whether it's for Zama's treasury management or for myself, you might tell your relationship manager, "I want my dollars or other assets I hold to generate some yield." He might come back and say, "Our bank has designed a product where you can earn 7% through a long-short equity strategy." Think about how much effort and time the bank spent to create maybe only a few dozen products it can offer clients. On-chain, that's just a few lines of code in a smart contract.

And it doesn't stop there — these things are composable. In traditional finance, you can't combine Bank A's strategy with Bank B's strategy; they're two separate products. But on-chain, if both of these are vaults, they are programmable and composable. Anyone can deploy a strategy and build a meta-strategy on top of someone else's strategy.

Think about how many yield possibilities we'll have once this starts happening. I think we'll have millions of vaults that provide different types of exposure using RWAs, equities, crypto assets, stablecoins, and other assets. What's truly exciting is vaults.

The moat is not FHE itself, but integration, programmability, and compliance

The Rollup: If these strategies can increasingly be expressed as smart contracts, why don't banks, ETF issuers, and other traditional financial institutions just build their own vault stack? What advantage has Zama built through confidential vaults, Morpho, and other partners?

Rand Hindi: A few points.

There are many kinds of privacy technology, and almost every other day I see someone tweeting that they've built something better than Zama. I want to be clear: if someone really does build something better than us, we'll draw inspiration from it and then go do it. I'm very pragmatic. I just want the best technology to solve a specific problem: how to bring finance on-chain at scale. Today I believe that technology is FHE. If someone invents something better tomorrow, I'll use that.

In this context, the technology itself is less important than the products and frameworks you build around it. You need deep integration: you want wallets to support it, custodians to support it, DeFi protocols to support it. Zama's integration surface today is quite broad—for example, we just announced that Utila is integrating Zama, so anyone using Utila's wallet framework can use confidential assets, and Zerion is integrating as well. I don't want to reveal too many details, but other major players are integrating us too. Integration comes first: making confidentiality available everywhere through the tools people already use today.

Second is programmability. What makes FHE unique is that you can write any program you want on top of encrypted on-chain state. Confidential DeFi can have the same composability as regular DeFi—this is an advantage unique to FHE and Zama.

Finally, compliance. And precisely because of this programmability, we can encode compliance rules and disclosure rules into smart contracts. We can check the boxes needed to build compliant, programmable finance on-chain. Putting all this together, you'll find that not many technologies today can do all of these things the way we can.

From FHE Research to On-Chain Finance: Gas Fees Are a Terrible Business Model

The Rollup: Zama started from FHE as a research primitive and gradually built financial applications on top of it. How did this evolution happen?

Rand Hindi: It was an iterative process. My judgment today is that vaults will be enormous and institutional OTC on-chain will be enormous, but that's not how we started.

When we founded Zama a few years ago, our thinking was: "We want to make FHE truly usable, because we believe this technology matters. Along the way, we'll talk to a thousand companies to see who's actually willing to pay for it." We looked at confidential AI, confidential databases, confidential medical research, and confidential blockchain, and ultimately found that blockchain was where the real opportunity lay—because on blockchain, everything runs on a public network.

When we realized that Zama could build HTTPS for Ethereum and Solana, letting people transact privately on these public global networks—just like you can privately buy things on Amazon today or privately use ChatGPT over the internet—we realized we might be solving a real problem. That was step one: becoming a blockchain company building HTTPS for blockchain.

Then we look at the business model. We could have charged Gas fees for confidential computing, but Gas fees are going to zero, and infrastructure costs are going to zero. Unless you have a billion transactions a day and charge a tiny fee per transaction, you won't make much money—especially when you're targeting institutions that trade infrequently but with very large individual transaction amounts. Gas fees are a terrible business model. We realized we had to build value where value is truly generated and find ways to monetize the value we create for end customers.

That is finance: confidential swaps, confidential vaults, confidential payments. Today, although we still have about 40 PhDs and are still a very R&D-heavy company, I think it's fair to say we are primarily an onchain financial protocol, using FHE to solve the problems institutions face today: onchain privacy.

All protocol fees go to two things: subsidizing TVL and buyback-and-burn

The Rollup: Zama has a public token. If Gas fees are not the right monetization strategy, what do you think is the right model for an onchain financial protocol? How do you view ZAMA token's value capture?

Rand Hindi: If you look at Web2 finance or fintech, there aren't a million scalable revenue models. Subscription is one—you can charge monthly. The other is taking a cut of money flows, whether payments, swaps, or custody—essentially a proportional fee model.

But to do that, the value you deliver to end customers must be greater than the fees they pay you. In our case it's very simple: if you do confidential swaps onchain, there's no MEV, no front-running. Even including protocol fees, the execution price you get from confidential swaps may be better than what you'd get on a public DEX exposed to MEV and slippage. That kind of model is what can build scalable revenue.

I also think product-market fit isn't something you measure—it's something you know when it happens. You see people using your protocol even when it's imperfect, even when features are missing, even when it's still early, and people are genuinely excited to use it. Then you know you've captured something.

The next question is: how do I turn early user feedback into a hundred-billion-dollar protocol?

For us it's simple. 100% of the fees collected by the Zama protocol—from payment fees and swap fees to curator revenue shares and stablecoin yield rebates—go to two things. The first is subsidizing protocol adoption, such as incentives to attract TVL into vaults, which ultimately generate swap fees. The second is buying back and burning ZAMA tokens.

My current thinking is that we should spend aggressively to acquire TVL. There are network effects in protocol liquidity. If we can bring TVL into our confidential protocol faster than competitors, we have a real moat, and only then can we start thinking about scaled buyback-and-burn. Spending $10 million today on buyback-and-burn makes no sense if that $10 million could create $100 million in buyback-and-burn a few years later. We shouldn't be thinking about how much to burn tomorrow, but how much we can burn over four years. That's the game.

Curators are willing to endorse because their LPs are demanding privacy

The Rollup: What convinced these curators to put their names behind confidential yield? How do you see the relationship between Zama and these curators evolving?

Rand Hindi: A few things.

First, these curators are very eager to innovate, they want to try new things, and this is new. Second, their LPs are demanding privacy, and their own clients have real privacy needs.

What really changed the narrative was when we launched the first vault with Steakhouse and Morpho. By the way, thank you to Steakhouse for trusting us and being willing to go first. When that vault became a top-ten USDC vault on Morpho, people started paying closer attention. They started thinking: maybe this isn't just marketing, maybe the demand for privacy in vaults is real.

We will keep rolling this snowball, with the goal of exponential TVL growth. Ultimately, we want every financial transaction onchain, every payment, every vault deposit, every swap, to be encrypted with Zama.

The Rollup: After today's launch, what do you want people to try?

Rand Hindi: I encourage everyone to try depositing and swapping. See how familiar the experience is, and how different it is onchain.

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