Zama SAS, an open-source cryptography startup focused on building fully homomorphic encryption or FHE technology to protect privacy in blockchain and artificial intelligence applications, said today it has closed on a hefty $73 million early-stage round of funding.

The Series A round was led by Multicoin Capital and Protocol Labs, and saw participation from Metaplane, Blockchange Ventures, VSquared and Stake Capital, as well as blockchain pioneers Juan Benet (founder of Filecoin), Anatoly Yakovenko (co-founder of Solana) and Gavin Wood (co-founder of Ethereum and co-creator of Polkadot).

Zama is said to be a pioneer in the field of FHE, which is a novel encryption technique that makes it possible to perform compute on encrypted data. The technology is designed to support the growing demand for robust data protection at a time when organizations are scrambling to find ways to protect consumer data without compromising its utility.

These days, it has become standard practice for companies to encrypt data while its sitting in storage and also while it’s being transferred across networks. They do this to prevent hackers from reading that information should they somehow gain access to it. Because the data is encrypted, it’s basically worthless even if a malicious actor manages to steal it. However, data still remains vulnerable when it’s being put to work.

The problem is that encrypted data has to be unscrambled by the applications that use it, before they can carry out computations on it. This creates a window of opportunity for hackers to access sensitive data while it’s in a readable form. It’s this weak spot that FHE intends to address, making it possible for applications to use data while it’s still encrypted.

Zama reckons that its FHE technology will transform data privacy, and it is focused on building a suite of open-source cryptographic libraries and tools that will make it accessible to developers, so they can build a new generation of privacy-preserving applications.

The startup is focused on applying FHE in the blockchain and AI industries, and has already released a number of products. Its most recent offering, fhEVM, is said to be the first confidential smart contract protocol, designed for Ethereum Virtual Machine-compatible blockchains. FhEVM is said to enable on-chain state and transaction data to be processed while it remains encrypted, solving one of the key data security challenges in the blockchain industry.

Zama Chief Executive Rand Hindi said his team envisions a world in which data privacy is guaranteed by design, and that it intends to make FHE and privacy synonymous and ubiquitous. “This funding gives us the resources to add to the best and brightest cryptography minds we already have on the team, while also continuing to advance the state of the art of what’s possible in data privacy,” he said. “Our investors, Multicoin and Protocol Labs in particular, lend valuable experience as we bring FHE to market in the blockchain sector.”

Besides building blockchain-focused FHE applications, Zama is also trying to build bespoke solutions for the AI, healthcare, financial services and government security industries.

Multicoin Capital Managing Partner Kyle Samani said he believes FHE will become the most important foundational cryptographic primitive for the next decade of computing. “Zama’s technology is the key to build multiplayer, privacy-preserving applications,” adding that its “groundbreaking work on open-source FHE tooling is only the beginning.”

Zama is far from being the only player looking to leverage the cryptographic benefits of FHE technology. Its rivals include some much bigger names, like Intel Corp., which in 2021 said that it’s working with Microsoft Corp. and the U.S. Defense Advanced Research Projects Agency to develop a specialized FHE chip. That will enable applications to work with encrypted data without having to unscramble it first.

IBM Corp., which first conceived the technology back in 2009, has also developed tools for developers to implement FHE. Startups such as Vaultree Ltd. and Cornami Inc. have also closed on sizable funding rounds in an effort to build practical FHE-based technologies

Another potential rival is MongoDB Inc., which has built an alternative technology for encrypting data in use and made it available in its flagship database back in 2022. At the time MongoDB made the case that FHE is too cumbersome to be used by enterprises as it significantly slows down query processes. It says its proprietary Queryable Encryption tech facilitates much faster queries to avoid impacting application performance.

Zama said it will use the funding from today’s round to hire talented engineers, software developers and cryptography researchers to maintain its open-source libraries and work on an entirely new class of FHE applications.