Vitalik questions whether Rollup is effective; can Aztec stand out by leveraging controllable privacy?

Author: CoinW Research Institute

Summary

Aztec is a privacy-first zkRollup built on Ethereum, not solely aimed at scaling, but attempting to establish a smart contract system with “default privacy and verifiable execution.” Through a architecture combining private execution with on-chain verification, and utilizing Noir, a language designed specifically for zero-knowledge development, Aztec aims to create a complete privacy-native application ecosystem. The project has completed multiple rounds of funding from top-tier institutions and clearly defines network incentives and community participation mechanisms within its tokenomics. Compared to mainstream Layer 2 solutions competing primarily on performance, Aztec chooses a differentiated privacy execution approach, making it uniquely positioned within the Ethereum ecosystem. However, its long-term value still depends on whether privacy becomes a mainstream demand, as well as the evolution of regulation, technical performance, and ecosystem expansion.

1. Why has Aztec recently gained market attention?

Sector Outlook: Structural Revival of Privacy Narratives

In recent years, increased regulation and cautious stance from exchanges toward anonymous protocols have cooled the privacy sector. Many privacy projects have been marginalized, and “privacy” was once considered a high-risk narrative. But the environment is changing. As on-chain applications evolve, privacy is returning to the discussion table in new ways. AI agents enable automation strategies, which require transaction logic and data to remain partially private; RWA (Real-World Assets) and institutional entry demand “verifiable but not overly transparent” models; assets must be real, but business details need not be fully exposed. Meanwhile, technologies like zkEVM and zkVM are maturing, making verifiable yet invisible computation more feasible. Privacy is no longer just a tool for anonymous transfers but is becoming a new infrastructure capability. Aztec’s rising interest reflects this structural shift.

Team Background and Credibility

Initially, Aztec launched Aztec Connect to explore privacy DeFi, but later proactively shut down that product to focus on building a “privacy-native Rollup.” This adjustment was controversial at the time but demonstrated the team’s willingness to make long-term technical trade-offs rather than maintain short-term narratives. Subsequently, Aztec clarified its focus on a default privacy zkRollup architecture and launched Noir, a programming language tailored for zero-knowledge development, gradually building a comprehensive privacy smart contract ecosystem.

Founder Zac Williamson has long been engaged in zero-knowledge proofs and cryptography research, and was an early contributor to the PLONK universal proof system. The Aztec team has maintained deep expertise in ZK tech over the years, from privacy asset protocols to Rollup architecture and Noir language development, always centered on verifiable privacy computation. Even during the privacy sector downturn, the team continued R&D, actively transforming and restructuring their product direction. This sustained investment and technical background position Aztec more as a long-term infrastructure project rather than a short-term hype driven by market cycles.

Capital Strength

In December 2021, Aztec completed a $17 million Series A led by Paradigm, with participation from a_capital, Variant, Nascent, and industry notable investors like Vitalik Buterin. In December 2022, amid a market downturn, Aztec raised another $100 million in a Series B led by a16z crypto, with participation from A Capital, King River, and others, bringing total funding to over $119 million. Both a16z and Paradigm are top-tier institutions with long-term commitments to crypto infrastructure, favoring technological and foundational bets over short-term narratives. Completing a large funding round during a bear market signals that capital values Aztec’s technical path and long-term potential, rather than current market sentiment.

Aztec’s current attention is driven by multiple factors: the team’s long-term accumulation in ZK, a clear product restructuring roadmap, and ongoing support from leading capital. Capital and market focus are in place, but the ecosystem scale is still under development.

2. What is Aztec’s core positioning? What exactly is it building?

Not just Layer 2, but a privacy-focused execution layer

Aztec is not an independent Layer 1 blockchain but a zkRollup Layer 2 network built on Ethereum. All transaction results and zero-knowledge proofs are ultimately submitted to Ethereum mainnet for validation, so security still derives from Ethereum. However, it’s inaccurate to simply think of it as another L2. Most Layer 2 solutions address performance issues—reducing gas costs, increasing transaction speed—while Aztec aims to solve the fundamental transparency problem of blockchain.

On Ethereum, account balances, transaction records, and contract logic are all public. This transparency ensures verifiability but limits many real-world use cases. Institutional strategies cannot be hidden, on-chain bidding is hard to keep confidential, and future AI automation algorithms would expose details. Real-world commercial activities do not operate in fully open environments. Aztec’s starting point is to enable blockchain to maintain verifiability while establishing reasonable privacy boundaries.

Technical core: private execution with on-chain verification

Aztec’s underlying logic can be summarized as: private execution, public verification. Users perform transactions or contract calls locally, generating zero-knowledge proofs. On-chain, the network verifies only whether the operation complies with rules, not the specific data or amounts involved. The network confirms correctness of computation without revealing amounts, data, or execution details. This differs from traditional Rollups, which compress and submit transactions with data still being public; Aztec changes the execution model itself, allowing state to be private while maintaining trustworthiness. This structure is called “verifiable but invisible.” It does not eliminate transparency but shifts transparency from data to proof layers.

Privacy Smart Contracts and Noir Ecosystem

Aztec’s goal extends beyond private transfers to supporting “privacy smart contracts.” In traditional blockchains, contract states are public by default. On Aztec, contracts can have private states and logic, while still interacting with the public world when necessary. Developers can choose what to disclose and what to keep confidential, forming a “controllable transparency” application structure. To enable this mode, Aztec launched Noir, a programming language for zero-knowledge applications. Zero-knowledge development is inherently complex, but Noir aims to engineer this complexity, allowing developers to build privacy applications with a more familiar programming experience. Aztec is not just building a network but establishing a complete privacy-native execution system, including execution environment, proof mechanisms, and developer tools.

3. Economic model and long-term value

Current token info: total supply, distribution, issuance

According to Aztec’s whitepaper, the initial total supply is 10.35 billion AZTEC tokens, allocated across various roles and purposes. Overall, tokens are distributed to investors, core team, foundation, ecosystem builders, and community participants. About 21.96% (~2.273 billion) are allocated via token sales, including public auctions and genesis node sales, mainly for early price discovery and network launch incentives.

Structurally, AZTEC’s distribution revolves around key categories: early investor and supporter rewards, long-term team incentives, protocol development and governance support from the foundation, ecosystem grants to attract developers and applications, plus network rewards (Y1 Network Rewards) and reserves for liquidity and future incentives. This tokenomics balances early capital support with a significant portion reserved for ongoing network operation and ecosystem growth, leaning toward a long-term infrastructure-oriented distribution.

Value capture for privacy L2: how will tokens function?

AZTEC’s design includes several functions:

(1) Network security and staking incentives. Tokens are expected to be used for staking by network participants (sequencers or ordering nodes) to maintain network stability and decentralization. Holders can run nodes or delegate tokens for rewards, similar to other PoS/staking systems.

(2) Governance rights. Token holders can participate in network governance, including protocol upgrades, parameter adjustments, and resource allocation. This makes tokens not only a value carrier but also a tool for community decision-making.

(3) Fee payment and execution incentives. If Aztec’s smart contract execution environment is enabled in the future, tokens could be used to pay transaction or execution fees, and to incentivize proof and ordering service providers.

From these, it’s clear that privacy capabilities are part of its value proposition. Unlike other L2s that mainly focus on scaling, Aztec’s “privacy,” “selective disclosure,” and “controllable transparency” models provide a technical foundation for real-world finance, institutional applications, or high-privacy-demand scenarios. Theoretically, this aligns its network fee and token demand structure more closely with high-value on-chain activities.

4. Token sale and TGE: fair auction & community voting

Using CCA mechanism for public sale

Aztec’s token sale employs the Continuous Clearing Auction (CCA) mechanism, jointly developed with Uniswap Labs for Uniswap v4. This is the first comprehensive on-chain attempt to use CCA for token issuance. CCA allows market participants to set prices and bid transparently on-chain, avoiding front-running, gas wars, and monopolization by large players. The entire auction process is fully verifiable on-chain, ensuring fair price discovery.

The public auction ran from December 2 to December 6, 2025, attracting over 16,700 participants, selling approximately 19,476 ETH worth of tokens (~$61 million). About 14.95% of total supply was allocated. Participants included community members, testnet node operators, early contributors, and ETH stakers. The project set a maximum bid limit per person to prevent excessive concentration. After the auction, initial liquidity was automatically matched in Uniswap v4 pools, including about 273 million AZTEC tokens (~2.6% supply), providing a foundation for secondary trading.

Community vote to launch TGE

Post-auction, a large portion of AZTEC tokens obtained via auction, node sales, and rewards remain locked until the Token Generation Event (TGE). According to official announcements, the TGE has been approved via community governance vote, scheduled for February 12, 2026 (Beijing time). Participants in the sale will be able to freely transfer and trade their tokens after TGE.

This arrangement reflects Aztec’s governance logic: the final free circulation of tokens is not decided unilaterally by the team but is determined collectively by community voting. The successful trigger of TGE marks a new phase of token economy activation and community participation in network governance and future power distribution.

The token sale and unlocking mechanisms combine fair price discovery, broad community involvement, and on-chain governance, laying a more open and decentralized foundation for long-term value.

5. Competitive landscape

Differentiation from mainstream L2: not just performance, but privacy

Current major Ethereum Layer 2 solutions like Starknet, zkSync, Scroll mainly focus on scaling—improving throughput, reducing costs, and EVM compatibility. Their core goal is to solve slow and expensive chains, with privacy not being a primary feature. Aztec, while also based on zkRollup, takes a different approach. It explicitly positions itself as a privacy-first zkRollup, with privacy as a default feature rather than an add-on. It supports private states and privacy smart contracts, emphasizing verifiable but invisible execution. Therefore, Aztec’s relationship with mainstream L2 is not a performance race but a differentiated competition. Other projects compete in scaling markets, while Aztec aims to establish a privacy execution layer.

Comparison with other privacy projects: technical paths and ecosystem integration

Within the privacy sector, Aztec occupies a unique position. Zcash focuses on payment privacy—hiding transaction amounts and addresses but not supporting complex smart contracts. Secret Network uses TEE technology for privacy contracts but is a separate Layer 1, requiring cross-chain bridges to Ethereum. Projects like Zama explore fully homomorphic encryption (FHE), but are still early-stage. In contrast, Aztec’s features include: directly built on Ethereum, inheriting mainnet security; supporting programmable privacy contracts, not just private transfers; and developing a complete privacy development toolkit via Noir. Within the Ethereum ecosystem, Aztec is one of the most systematic projects advancing privacy smart contracts.

6. Potential risks and future variables

Regulatory risks: Will privacy be restricted?

Privacy protocols have always been sensitive in the crypto industry. Over recent years, some privacy tools faced regulatory pressure, and policies are not fully friendly to untraceable tech. Aztec emphasizes default privacy, which, although verifiable and not fully anonymous black boxes, could still attract regulatory scrutiny. The uncertainty lies in whether regulators will permit “controllable privacy,” whether exchanges and institutions will support privacy Layer 2 solutions, and how these factors influence Aztec’s development.

Technical and ecosystem risks

Zero-knowledge proofs require significant computational resources. Compared to standard L2s, privacy execution is more complex, requiring users to generate proofs locally, which is not costless. Private state design and development complexity are higher. Although Noir reduces ZK programming difficulty, it remains a new language with an immature ecosystem, which may impact large-scale adoption. If performance and user experience cannot be continuously optimized, adoption could suffer. Moreover, Aztec’s privacy-native approach contrasts with the mature EVM ecosystem and large user base of mainstream L2s. Whether developers are willing to redesign applications for privacy remains a practical concern. Additionally, technological competition accelerates—more efficient zkVMs, modular solutions, or FHE tech could pose substitution risks.

Thoughts: Will RWA push demand for “controllable privacy”?

Beyond regulation and technology, the need for “controllable transparency” in on-chain finance might influence Aztec’s long-term prospects. RWA is seen as a key incremental direction. Unlike retail DeFi, RWA participants are often institutions. In real transactions, sensitive info—counterparties, terms, holdings, strategies—is involved. Fully public data could weaken bargaining power or impact markets. Therefore, RWA does not seek “full anonymity” but prefers selective disclosure under compliance. Assets must be real and verifiable; rules auditable; but business details need not be public. From this perspective, Aztec’s “verifiable but invisible” model aligns with such needs, providing a form of controllable transparency—public verification of results, hiding sensitive data.

However, caution is warranted. Many RWA projects still prefer permissioned or consortium chains, or off-chain custody, rather than directly adopting public chain privacy layers. This indicates that while privacy is needed, acceptance of public chain privacy architectures is still evolving. If future trends favor open public chains with compliant privacy execution, Aztec’s architecture could find opportunities; if institutions prefer closed systems, the space for public chain privacy may be limited.