Zama SAS, an open-source cryptography startup focused on building fully homomorphic encryption or FHE to protect privacy in blockchain and artificial intelligence applications, said today it has raised $57 million in early-stage funding.

The Series B funding round was co-led by Blockchange Ventures and Pantera Capital, bringing Zama’s total funding to more than $150 million and increasing the company’s valuation to more than $1 billion. This round comes a little over a year after the company raised $73 million.

Alongside the funding, Zama is launching the public testnet for its Confidential Blockchain Protocol, or CBP, which will allow developers to start building applications that can communicate privately through the company’s specialized virtual machine starting on the Ethereum blockchain.

Zama began as a pioneer in the field of FHE, a novel encryption technique that enables computation on encrypted data. The technology allows organizations to protect consumer data without compromising the utility.

Traditionally, encryption is used to safeguard data that is stored or while it is being transmitted between endpoints. However, applying encryption when data is actively being processed by a central processing unit or a graphics processing unit can be challenging. Fully homomorphic encryption addresses this problem.

Blockchain technology makes it possible to verify publicly that requests are executed according to predetermined logic and that a transaction occurred by recording it to a public ledger that is protected by cryptographic certainty. However, this requires disclosing the transactions and data to everyone. Keeping the information private would make verifying the information impossible.

“Without confidentiality, blockchain cannot reach mass adoption,” said Zama co-founder and Chief Executive Rand Hindi.

Hindi said the web started with hypertext protocol with zero encryption, or HTTP, and moved on to encrypting data in transit with HTTPS. The next natural step, he said, is to enable full encryption by default for every application from start to end — something the company calls HTTPZ.

“Until recently, however, FHE was too slow, too limited in terms of applications it could support, and too difficult to use for developers,” Hindi explained. “This is what our team at Zama has spent the last five years solving.”

Using the company’s CBP, developers can use FHE on the Ethereum blockchain, using common programming languages such as Solidity and Python, and work 100 times faster than five years ago. It is also already post-quantum, meaning there are no known quantum computing algorithms capable of breaking it.

Example use cases for the protocol include use for finance with credit card payments, remittances or banking, the tokenization of financial assets, the exchange of bonds and stocks on the blockchain, fully encrypted swaps of tokens and more. Many of these cases have required the use of private blockchains in order to preserve privacy and confidentiality.

Other examples include on-chain identity and governance or the creation of data marketplaces for AI. With FHE, users can selectively share and sell data with companies wishing to use their data to train AI models. AI models can also be trained encrypted, with the result being decrypted, which can be used to create royalty models ensuring that users have a source of revenue for their data, rather than selling it only once and having it used forever.

Zama said it expects its technology to be 100 times more scalable within the next five years. Using GPUs allows Zama’s protocol to scale to hundreds of transactions per second and the company is working on a dedicated hardware chip to advance FHE performance, with the ultimate goal of reaching tens of thousands of transactions per second.

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