The race to bring privacy and scalability to public blockchains is accelerating, and 2025 has seen a seismic shift with the Conduit Zama partnership. By combining Zama’s cutting-edge Fully Homomorphic Encryption (FHE) with Conduit’s modular rollup infrastructure, the two teams are rewriting the playbook for confidential smart contracts and scalable blockchain infrastructure. Let’s break down why this matters, how it works, and what it means for developers and enterprises betting on modular rollups.
Why Privacy Matters: The Blockchain Adoption Bottleneck
Blockchains have always struggled to balance transparency with confidentiality. For years, privacy-centric smart contracts were either too slow or required trust in specialized hardware. This left banks, enterprises, and even governments wary of moving sensitive workflows on-chain. The result? Billions in potential value left untapped due to regulatory risk and data exposure concerns.
Zama’s FHE technology is a game-changer because it enables computations on encrypted data – meaning smart contracts can process secrets without ever decrypting them. With Conduit integrating Zama’s protocol as the backbone of a dedicated Arbitrum rollup, the privacy bottleneck is finally breaking wide open.
The Architecture: Dedicated Arbitrum Rollup Meets FHE
In July 2025, Zama launched its protocol on a specialized Arbitrum rollup operated by Conduit. This isn’t just another L2 – it’s engineered specifically for parallel FHE operations at scale. Here’s why that matters:
- Performance: The rollup is optimized for the compute-heavy nature of FHE, ensuring transactions remain fast and affordable even as confidential logic gets complex.
- Cost Efficiency: By isolating FHE workloads within a dedicated environment, resource allocation is predictable – critical for enterprise adoption.
- Security: As Genesis Operator since October 2025, Conduit ensures robust validator participation from day one, fortifying network reliability.
This architecture isn’t vaporware; it’s already powering confidential oracles, indexes, block explorers, and more across Conduit’s suite of rollup tools. When Zama’s mainnet goes live later this year, all Conduit chains will be able to tap into these privacy features natively.
Explore how this integration works in detail.
The fhEVM Coprocessor: Confidential Smart Contracts On Any EVM Chain
The real breakthrough? The fhEVM Coprocessor. Instead of forcing developers to migrate to new chains or learn custom languages, Zama enables confidential computation directly on any EVM-compatible blockchain – no protocol changes required. Developers simply deploy contracts as usual but gain access to encrypted state transitions under the hood.
This means you can build privacy-preserving DeFi apps or handle regulated financial data without sacrificing composability or interoperability. For modular stack enthusiasts using Celestia or Eclipse as data availability layers alongside Conduit-powered execution environments, this unlocks a new design space for scalable blockchain infrastructure in 2025.
See how developers are leveraging fhEVM in modular rollups.
With these innovations, the landscape for privacy-centric smart contracts is fundamentally shifting. The Conduit Zama partnership is not just a technical milestone; it’s a signal to enterprises and regulators that confidential computation on public blockchains is finally viable, scalable, and ready for mainstream adoption. This synergy directly addresses the compliance and confidentiality demands of sectors like healthcare, finance, and government, domains previously locked out of DeFi due to privacy risks.
Real-World Use Cases Enabled by FHE Rollups
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Confidential DeFi Lending: Platforms like Aave can leverage Zama’s FHE-powered rollups to enable private loan originations and balances, protecting user financial data while maintaining on-chain transparency.
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Private Voting Systems: Projects such as Snapshot can implement fully private, verifiable voting using FHE-enabled modular rollups, ensuring voter anonymity without sacrificing auditability.
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Secure Medical Data Exchanges: Healthcare consortia can use Zama’s FHE rollups to exchange and process patient records securely on-chain, enabling compliance with privacy regulations like HIPAA while leveraging public blockchains.
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Confidential Enterprise Settlements: Major enterprises can utilize FHE rollups for private, auditable B2B settlements, allowing sensitive transaction details to remain confidential while benefiting from blockchain immutability.
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Privacy-Preserving On-Chain Oracles: Oracle networks such as Chainlink can use FHE rollups to deliver encrypted, privacy-protected data feeds to smart contracts, expanding use cases for sensitive data.
Beyond Zero Knowledge: FHE vs. zkRollups for Privacy
While zkRollups have long been touted as the gold standard for blockchain privacy, they’re fundamentally limited to proving knowledge or validity of transactions, not enabling computation on encrypted data itself. FHE rollups go further: they allow actual processing of encrypted inputs, outputs, and state transitions in a way that zkRollups simply cannot match. This leap means sensitive business logic, think risk models or credit scoring algorithms, can run on-chain without ever exposing raw data to validators or the public.
The distinction is subtle but profound for developers navigating the modular ecosystem. With Zama’s FHE layer available across Conduit-powered rollups (and interoperable with Celestia and Eclipse), teams can now choose between fast proofs (zk) and full confidentiality (FHE), depending on their application’s needs. For many regulated industries or high-value workflows, this flexibility is a game changer.
What’s Next: Ecosystem Impact and Developer Opportunity
Zama’s recent acquisition of KKRT Labs only accelerates this trajectory. By deepening expertise in both scalability (via ZK) and confidentiality (via FHE), Zama is positioning its protocol, and by extension all Conduit-integrated rollups, as the backbone for next-generation privacy infrastructure. Expect to see an explosion of new tooling: confidential oracles feeding encrypted market data into DeFi apps, private indexes tracking sensitive supply chain events, even block explorers that respect user-level secrecy while maintaining network transparency.
For developers building on modular stacks like Celestia or Eclipse, these advancements mean you no longer have to compromise between speed, cost efficiency, and regulatory-grade privacy. The modular paradigm, execution separated from data availability, gets supercharged when paired with universal FHE support across Conduit-powered chains.
The Bottom Line
The Conduit Zama partnership marks a watershed moment for blockchain privacy and scalability in 2025. By fusing practical FHE with high-performance modular rollup architecture, they’re opening doors to applications that were previously impossible, or too risky, to build on public networks. If you’re serious about deploying confidential smart contracts at scale without sacrificing composability or cost efficiency, it’s time to explore what this new stack can do.
Want to dive deeper into how this works under the hood? Check out our technical breakdown here: How Conduit and Zama Bring Fully Homomorphic Encryption (FHE) to Modular Rollups: A Developer’s Guide.
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