Reasons why Aztec Network is gaining attention: The potential brought by the fusion of privacy and zk-rollup

As a project that realizes privacy protection on Ethereum, Aztec Network is rapidly gaining prominence. Having successfully led a $100 million funding round spearheaded by a16z and Paradigm, how is this project evolving from existing anonymous mixer solutions?

What is Aztec Network

Aztec Network was founded in 2017 by London-based Zach Williamson and Thomas Walton-Poocock. Currently led by Zach as CEO, the project is characterized by its unique design that allows users to deposit funds into Aztec while interacting with external smart contracts such as Aave and Lido Finance.

This approach signifies a major advancement in existing privacy technologies. Users can enjoy privacy protection without losing access to the entire DeFi ecosystem.

Technical Foundation: PlonK and zk Proofs

The strength of Aztec Network lies in its proprietary PlonK technology. This is a SNARK-based zero-knowledge proof system, theoretically highly flexible. While sometimes compared to STARKs, PlonK has been more extensively tested in real-world use cases and is considered suitable for deployment.

Since the release of PlonK in 2019, the team has built multiple products on this foundation. All user assets on the Ethereum mainnet are managed through encrypted systems, with all transactions protected by zero-knowledge proofs.

Implementation of zk.money and Market Response

Released in 2021, zk.money is an application that offers Ethereum users complete privacy and up to 100 times cost reduction. Its mechanism is as follows:

When users deposit funds, Aztec creates an encrypted off-chain memo. These memos are only accessible to the owner, and user IDs and account balances are fully protected. When transactions are batched and executed on the Ethereum mainnet, gas costs are efficiently distributed among multiple users.

As of December 2022, zk.money has accumulated approximately 69,779 ETH from 93,889 users. However, about 90% of new users have only deposited less than $1 worth of ETH, indicating a significant inflow driven by speculative small deposits in anticipation of future airdrops.

Considerations on Aztec Risks

The powerful privacy features also pose risks. Since zk.money allows users to mix coins, regulatory challenges faced by existing anonymous mixers could also impact Aztec. Particularly, as the scale of fund inflows expands, the risk of attracting regulatory scrutiny cannot be ignored.

Currently, Aztec functions as the sole provider, which raises concerns about centralization and security. There are plans to integrate more providers in the future to address these issues.

Expansion of Development Platform

In 2022, Aztec Connect was launched, providing an SDK that allows integration of any Ethereum protocol into the Aztec platform. This enables developers to build ecosystems where users can interact with DApps privately.

Furthermore, in Q2 2023, the Rust-based programming language “Noir” is scheduled to launch. Noir aims to enable more developers to build zero-knowledge applications without deep cryptographic knowledge, representing a significant step toward ecosystem expansion.

Position in the Privacy Market

Aztec, as an encrypted virtual private network for users, takes a different approach from pioneering privacy coins like Zcash and Monero. By deploying as an Ethereum layer 2 rather than a sovereign blockchain solution, it offers interoperability and convenience.

Competitors include Polygon Nightfall, Obscuro, and Intmax, but Aztec’s design as a smart contract layer 2 is distinctly different from other solutions. Moving data availability off-chain also promises further scalability.

Future Outlook

Aztec Network has not issued tokens yet, but considering its decentralization roadmap, this is likely in the future. The team, committed to “coding for everyone,” is composed of experienced personnel such as Joe Andrews (co-founder and chief product officer) and Ariel Gabizon (key member).

Developer incentives through ecosystem funds and technological ambitions like Layer 3 concepts also suggest long-term potential for the project. As privacy remains a hot topic in the crypto asset market, Aztec Network will continue to aim for a leading position in this domain.