Zama Launches Confidential Dutch Auction for ZAMA Tokens

Zama uses FHE for sealed-bid Dutch auctions, preventing bots and ensuring fair price discovery.

Tokens are fully unlocked Jan 20, ready for staking, delegation, or paying encryption fees.

Users shield stablecoins into encrypted ERC-7984 tokens, maintaining privacy while retaining flexibility.

The Zama Protocol is set to sell 10% of its $ZAMA token supply through a sealed-bid Dutch auction on Ethereum from January 12th to 15th. This auction uses Fully Homomorphic Bids are kept private using encryption (FHE), which guarantees equitable distribution and accurate price discovery.

By employing its own protocol, Zama avoids bots, gas wars, and last-minute sniping, allowing users to bid independently and safely. Tokens purchased will be fully unlocked on January 20th, ready for staking, delegation, or paying encryption fees within Zama.

Zama Protocol functions as a confidentiality layer for existing blockchains rather than a new L1 or L2. It allows users to convert any token into a confidential version while remaining on the same chain. For example, stablecoins on Ethereum can be upgraded to encrypted, confidential tokens without bridging networks

These tokens maintain balances and transaction amounts privately while allowing transfers, swaps, and staking like standard ERC-20 tokens. Moreover, $ZAMA plays a critical role, covering encryption and decryption costs and incentivizing operators and stakers. Fees are burned, while rewards follow a yearly emission schedule.

Auction Mechanics and Advantages

Participants must first shield their stablecoins, converting USDC, USDT, or DAI into encrypted ERC-7984 tokens. Shielded coins remain usable for other transactions, providing flexibility beyond the auction

Bidding opens January 12th, allowing users to submit multiple sealed bids for preferred quantities and prices. The auction determines the clearing price—the lowest price at which all allocated tokens are sold—ensuring fair pricing. Overpayments are refunded, and bids below the clearing price are returned in full.

Unlike traditional public auctions, Zama’s approach eliminates race conditions. Bots cannot front-run bids, and participants can submit bids anytime during the four-day window

Additionally, partner platforms will facilitate bidding alongside the Zama app, improving retail access and distribution. Eight percent of the supply will be sold through the auction, while the remaining 2% will be supplied at a fixed price subsequently, capped at $10,000 per participant.

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