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 an architecture combining private execution with on-chain verification, and using the Noir language designed specifically for zero-knowledge development, Aztec aims to create a complete privacy-native application ecosystem. The project has completed multiple rounds of top-tier institutional funding and clearly defines network incentives and community participation mechanisms within its tokenomics. Compared to mainstream L2s 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 mainstream and how regulatory, technical, and ecosystem variables evolve.

1. Why has Aztec recently gained market attention?

Sector Outlook: Structural Revival of Privacy Narratives

In recent years, with tightening regulations and exchanges cautious about anonymous protocols, the privacy sector cooled significantly. Many privacy projects were marginalized, and “privacy” was once seen as a high-risk narrative. But the environment is changing. As on-chain applications upgrade, privacy is returning to the discussion forefront in new ways. AI Agents enable automation strategies, which require that transaction logic and data not be fully public; RWA (Real-World Assets) and institutional entry also 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 about anonymous transfers but is evolving into a new infrastructural capability. Aztec’s rising attention 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 prioritize long-term technical direction over short-term narratives. Subsequently, Aztec clarified its focus on a default privacy zkRollup architecture and launched Noir, a programming language 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, being one of the early contributors 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 focus. This sustained investment and technical background make Aztec more akin to 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 over $119 million in a Series B led by a16z crypto, with participation from A Capital, King River, and others. Both Paradigm and a16z are top-tier institutions with long-term bets on crypto infrastructure, favoring technology and foundational layers 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 more 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 interest are leading indicators, but the ecosystem’s scale is still under development.

2. What is Aztec fundamentally building?

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

Aztec is not an independent Layer 1 blockchain but a zkRollup layer built on Ethereum. All transaction results and zero-knowledge proofs are ultimately submitted to Ethereum mainnet for validation, so security still derives from Ethereum. But viewing it simply as another L2 is inaccurate. Most L2s aim to improve performance—reducing gas costs, increasing throughput, and EVM compatibility—whereas Aztec addresses the fundamental transparency of blockchain data.

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

Core Technology: Private execution with on-chain verification

Aztec’s core logic can be summarized as: private execution, public verification. Users perform transactions or contract calls locally, generating zero-knowledge proofs. The chain verifies whether “the operation complies with the rules,” not “what exactly was done.” The network confirms the correctness of computation without revealing amounts, data, or execution details. This differs from traditional Rollups, which compress and submit transaction data that remains 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 the 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 selectively interacting with the outside world when necessary. Developers can choose what information to disclose and what to keep confidential, forming a “controllable transparency” application structure. To enable this mode, Aztec developed Noir, a programming language tailored for zero-knowledge applications. Zero-knowledge development is highly complex; 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. Tokenomics 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: investors, core team, foundation, ecosystem, and community. About 21.96% (~2.273 billion) are allocated for token sales, including public auctions and genesis node sales, mainly for early price discovery and network launch incentives.

The distribution focuses on several core areas: rewarding early investors and supporters, long-term team incentives, protocol development and governance via the foundation, ecosystem grants to attract developers and applications, plus network rewards (Y1 Network Rewards) and liquidity reserves. This tokenomics balances early capital support with substantial reserves for future network operation and ecosystem expansion, aligning with a long-term infrastructure-oriented project.

How will the token capture value in a privacy L2?

Aztec’s design includes several functions:

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

(2) Governance rights. AZTEC holders can participate in protocol governance, including upgrades, parameter adjustments, and resource allocation, making tokens both a value carrier and a community decision tool.

(3) Fee payment and execution incentives. In future, if Aztec’s smart contract execution environment is enabled, tokens may be used to pay transaction or execution fees and incentivize proof and sequencing providers.

From these, privacy capabilities become part of the value capture. Unlike typical L2s that mainly benefit from scaling, Aztec leverages “privacy,” “selective disclosure,” and “controllable transparency” models to provide a technical foundation for real-world finance, institutional applications, or high-privacy-demand scenarios. Theoretically, this aligns its fee and token demand structure more closely with high-value on-chain activities.

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

Using CCA for public token sale

Aztec’s public sale employs the Continuous Clearing Auction (CCA), jointly developed with Uniswap Labs, the first comprehensive on-chain CCA token issuance. CCA allows market participants to set prices and bid transparently on-chain, avoiding gas wars, front-running, and monopolization typical of traditional sales. The entire process is fully verifiable and neutral, facilitating genuine price discovery.

The public auction ran from December 2 to December 6, 2025, attracting over 16,700 participants and 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 cap per person to prevent large holders from dominating. After the auction, initial liquidity was automatically provisioned in Uniswap v4 pools, including about 273 million AZTEC (~2.6% supply), providing a foundation for secondary trading.

Community vote for TGE

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

This arrangement reflects Aztec’s governance philosophy: tokens are ultimately freely tradable, not dictated solely by the team, but decided collectively via on-chain voting by participants. The success of TGE marks a new phase of token economy activation, with the community beginning to participate in governance and future power distribution.

The combination of fair pricing, broad community participation, and on-chain governance in the token sale and unlocking mechanisms lays a more open and decentralized foundation for long-term value.

5. Competitive landscape

Differentiation from mainstream L2s: not performance, but privacy

Current mainstream Ethereum Layer 2s like Starknet, zkSync, and Scroll focus on scaling—improving throughput, reducing costs, and EVM compatibility. Their core goal is to solve slow, expensive chains; privacy is not their main selling point. Aztec, 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 other L2s is not a performance race but a differentiated competition. While others compete in scaling, 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 exemplifies 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), still in early stages. Aztec’s advantages are: it’s built directly on Ethereum, inheriting security; it supports programmable privacy contracts, not just private transfers; and it develops a complete privacy development toolkit via Noir. Within Ethereum, Aztec is one of the most systematic projects advancing privacy smart contracts.

6. Risks and future variables

Regulatory risks: Will privacy be restricted?

Privacy protocols have historically faced regulatory scrutiny. Past privacy tools encountered pressure, and policies against untraceable tech are not fully friendly. Aztec emphasizes default privacy, which, while verifiable and not fully anonymous, could attract regulatory attention. Future uncertainties include whether regulators will permit “controllable privacy,” whether exchanges and institutions will support privacy-layer L2s, and how these factors influence development.

Technical and ecosystem risks

Zero-knowledge proofs require significant computation. Compared to regular L2s, privacy execution is more complex, requiring users to generate proofs locally, which is not costless. Although Noir reduces ZK programming complexity, it remains a new language with an immature ecosystem. If performance and user experience cannot be continuously optimized, adoption may 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 is a practical concern. Technological competition is accelerating—improvements in zkVM performance, modular solutions, or FHE could pose alternative options.

Speculation: Will RWA increase “controllable privacy” demand?

Beyond regulation and technology, on-chain finance might also require “controllable transparency.” RWA (Real-World Assets) is seen as a key growth area. Unlike retail DeFi, RWA involves institutional actors with sensitive information: counterparties, terms, holdings, strategies. Fully public disclosures could weaken bargaining power or impact markets. Therefore, RWA may favor a model of verified but selectively disclosed data—assets must be real and verifiable, rules auditable, but business details not fully public. This aligns with Aztec’s “verifiable but invisible” model, offering a form of controllable transparency: verified results while hiding sensitive data.

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