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Points of Focus
- Zama opened confidential access to 16 Morpho vaults across USDC, USDT, WBTC, AUSD and TGBP.
- Twelve extend existing Morpho strategies, while four are new confidential-only vaults.
- Zama’s first confidential USDC vault reached more than $40 million in shielded TVL within seven weeks.
Zama has expanded its confidential DeFi offering to 16 Morpho vaults and launched a protocol for swapping encrypted assets and vault positions on Ethereum.
The vaults cover USDC, USDT, WBTC, AUSD and TGBP, with strategies curated by Steakhouse Financial, Armitage by Wintermute, Flowdesk, RockawayX and Bitwise. Twelve add confidential deposits to existing Morpho strategies, while four are new confidential-only products, including a WBTC yield vault curated by Armitage.
The launch builds on a model Zama introduced in June with Steakhouse Financial and Morpho. Its first confidential USDC vault surpassed $40 million in shielded TVL within seven weeks, according to Zama.
Morpho strategies gain an encrypted deposit layer
Zama uses Fully Homomorphic Encryption, or FHE, to keep balances and transaction amounts encrypted while smart contracts compute on the underlying data. The Zama Protocol operates as a confidentiality layer that can be deployed on existing blockchains, including Ethereum.
The original Steakhouse Confidential Prime USDC vault shows how the model works. According to Morpho, cUSDC deposits are collected over 24-hour periods and supplied to the underlying Morpho strategy as a batch. Observers can see the aggregate amount entering the strategy, while individual deposit sizes and balances remain encrypted.
Public blockchains normally expose transaction sizes, wallet balances and flows to analysis, which also allows investigators to follow funds during incidents such as the $285 million Drift exploit. For asset managers and treasury desks, the same visibility can reveal position sizes, allocation timing and strategy changes.
Zama’s confidential vaults encrypt individual positions while retaining the underlying Morpho contracts and curator strategies. For the 12 existing vaults, Zama says strategy, liquidity and risk parameters remain unchanged, with credit and smart-contract risks still tied to the underlying strategies.
Confidential swaps connect assets and vault positions
Zama also launched its Confidential Swap Protocol, supporting swaps between confidential versions of USDC, USDT, WBTC, AUSD and TGBP, as well as confidential vault share positions.
Zama says the swap amount, direction and price limit remain encrypted on Ethereum. Public observers can see that a swap settled on a given token pair, but cannot see the amount, execution price or direction. During the blind auction, whitelisted market makers can see the swap size but not its direction; only the winning market maker learns the direction to settle the trade.
The company is extending the model to DeFi incentives through Merkl. Selected vaults, beginning with Steakhouse Confidential Prime USDC, will offer campaigns using Zama’s ERC7984 confidential token standard. Users authorize Merkl to decrypt the balance required to calculate rewards, while positions and reward amounts remain encrypted publicly.
Confidential DeFi expands beyond a single USDC vault
The 16-vault rollout broadens the range of underlying strategies. Steakhouse contributes five vaults across USDC, USDT and TGBP, while Armitage provides six across USDC, USDT and WBTC. Flowdesk adds AUSD a USDT strategies, RockawayX contributes USDC and RWA-focused vaults, and Bitwise provides an RWA lending vault.
Distribution is widening as well. Zama says Utila, Zerion Wallet and Yield.xyz will integrate the confidential Morpho vaults in the weeks following launch, while all 16 vaults and the swap protocol are already available through its app.
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