Paradigm led the funding round, which also included A.Capital Ventures, Ethereal Ventures, Libertus Capital, Variant Fund, Scalar Capital, IOSG and others.
In addition to developer grants and product development, the funds will go toward legal work. The area of private blockchain transactions remains a new and undefined space when it comes to regulations.
Aztec co-founder and chief technology officer Zac Williamson told CoinDesk in an interview that the company wants to provide thought leadership on how to create a compliant regulated payments network.
Read more: Aztec Launches Privacy Network on Ethereum
Aztec offers privacy-first zero-knowledge rollups (ZK-rollups). Rollups aim to solve key scalability challenges of Ethereum, including slow transaction speeds and high fees for users. ZK-rollups run computations off the Ethereum mainnet and later submit transaction data to the main chain through a validity proof.
The Aztec Network essentially allows users to privately access their favorite layer 1 apps in a faster, cheaper way. Layer 1 refers to blockchains that run independently of other blockchains – as contrasted with layer 2 solutions that aim to speed up transactions on existing blockchains like Ethereum.
“Everything on the blockchain is public,” Aztec co-founder Joe Andrews told CoinDesk. “You need each node to be able to verify the state of another node and transactions. Everything needs to be public for that to occur. Aztec is effectively end-to-end encryption for those public messages. Instead of posting public transaction data, you post encrypted transaction data and the blockchain can still verify the correctness of that data using zero-knowledge proofs.”
Andrews added: “We basically enable the same or better privacy guarantees that you would expect from a Web 2 bank but running on completely decentralized infrastructure.”
Aztec’s first product was the private transfer protocol zk.money, which the company says has had over 20,000 registered users, 50,000 transactions and $35 million in total deposits. In January, the company is set to launch Aztec Connect, a way for users to privately access Ethereum’s decentralized finance (DeFi) ecosystem.
At launch, Aztec Connect will add functionality for a select group of blue chip DeFi partners. The company will then launch the Connect software development kit (SDK) to allow any Ethereum project to integrate Aztec’s privacy and cost savings.
“Aztec’s rollup ... solves privacy while enabling access to Ethereum DeFi,” Paradigm Chief Technology Officer Georgios Konstantopoulos said in an announcement post.
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