What Is AZTEC and How It Works: Inside Ethereum’s Privacy-First Layer 2
A decade into public blockchains, privacy remains one of the sector’s most unresolved challenges. Transparency enabled trustless verification, but it has also become a structural barrier: without confidentiality, real-world assets and institutions will never fully move on-chain.
Privacy is essential for finance, identity, and real-world applications — yet today’s solutions fall short. Many rely on centralized sequencers, trusted execution environments, or superficial add-ons that offer pretend privacy rather than true end-to-end protection.
Real privacy needs to be native, programmable, practical, and decentralized from day one. It must allow developers to define what is public or private and function without any central party capable of violating those guarantees. This is the gap the Aztec Network was built to solve.
Aztec is a privacy-first Layer 2 for Ethereum, designed to deliver true end-to-end confidentiality through client-side proofs, programmable privacy, and a new alt-VM for private–public composability.
With XT Exchange now supporting AZTEC on Pre-Market, early participants can gain exposure to one of the most anticipated privacy protocols.
TL; DR for Busy Readers
- Aztec is a privacy-first Layer 2 for Ethereum, enabling programmable privacy through a custom alt-VM, encrypted UTXO state, and client-side proofs.
- It supports seamless private–public composability, letting developers choose exactly what data stays confidential.
- The $AZTEC token powers staking, proving, fees, and governance, with flexible fee abstraction for smoother UX.
- Together, Aztec delivers true end-to-end privacy and a decentralized foundation for real-world, high-volume applications.
What Is Aztec?
Aztec is a privacy-first Layer 2 blockchain for Ethereum, purpose-built to solve the privacy problem that existing networks could not fully address. While Ethereum exposes every transaction, address, and contract state to the world, Aztec reintroduces a fundamental element of real-world systems: the right to keep information private—without sacrificing transparency where it matters.
Aztec does this by redesigning the execution model from first principles. Rather than relying on the EVM, Aztec introduces a custom alt-VM capable of handling private and public execution, private and public state, and seamless composability between them. Key features include:
- Private functions, executed and proven cryptographically on the user’s device
- Public functions, executed in the Aztec Virtual Machine
- Private state stored as encrypted UTXOs, visible only to the owner
- Public state recorded in a transparent Merkle tree
- Cross-composability between private/public logic and data
- Private and public message passing with Ethereum
Aztec was founded in 2017 by Zac Williamson, Joe Andrews, Tom Pocock, and Arnaud Schenk. It began as CreditMint, a platform for issuing onchain corporate debt, but the team soon realized that the true barrier to broader blockchain adoption was the lack of programmable privacy.
After raising a $2.1 million seed round in late 2018 and another round in 2019, Aztec launched its mainnet in January 2020. The project later accelerated with a $17 million Series A in 2021 led by Paradigm, with participation from Vitalik Buterin and other notable investors, followed by a $100 million Series B led by a16z in 2022.
In total, Aztec has raised over $119 million, underscoring strong confidence in its mission to build a fully private, programmable Layer 2 for Ethereum.
How AZTEC Works: Core Mechanisms Explained
This architecture enables a new programming model Aztec calls programmable privacy. Using Noir, a Rust-inspired domain-specific language, developers can specify privacy at the level of users, data, metadata, transactions, or full contract logic. Instead of choosing between full transparency or full secrecy, builders can target exactly the layers their applications require.
Aztec also introduces client-side proofs, ensuring sensitive data never leaves the user’s machine. Instead of exposing plaintext inputs to the network, users generate zero-knowledge proofs locally and only submit the proof on-chain. This eliminates a major attack surface: if data is never revealed, it cannot be compromised.
And unlike earlier privacy systems, Aztec is decentralized from day one. Sequencing, proving, and governance are embedded directly into the protocol to ensure no centralized party can overrule the privacy guarantees. Privacy is only meaningful if no one—not even Aztec—can violate it.
AZTEC Token: Utility, Economics, and Role in the Network
The $AZTEC token is the native asset of the Aztec Network, supporting its proof-of-stake security model, governance system, and economic incentives. Issued as an ERC-20 on Ethereum, $AZTEC is immutable and has no privacy preserving features.
Core Functions and Utility
- Network Security (Staking)
$AZTEC secures the network through staking by independent Sequencers on Ethereum L1.
- Minimum stake: 200,000 $AZTEC
- Staking provides Sybil resistance and protects the pending chain before finality
- Misbehavior results in slashing
- Users may delegate Sequencer operations while retaining custody and voting rights
- Block & Proof Incentives
$AZTEC is minted to reward:
- Sequencers proposing blocks
- Provers generating validity proofs Rewards derive from transaction fees and block rewards. Aztec incentivizes multiple Provers per epoch to maintain competition and liveness.
- Transaction Fees
While fees are ultimately paid in $AZTEC, native fee abstraction allows users to pay with assets like ETH or USDC via Fee-Paying Contracts (FPCs), enabling smoother UX.
- Governance Power
$AZTEC represents voting power in Aztec’s on-chain governance. Tokenholders can:
- Approve parameter changes and upgrades
- Adjust inflation, rewards, and fee mechanics
- Mint new tokens within defined limits
Sequencers initiate proposals; tokenholders ratify them by locking tokens.
Token’s Community Access
The Aztec Foundation is conducting a continuous clearing auction on Ethereum to distribute $AZTEC broadly to node operators, contributors, and community participants.
- Up to 14.95% of total supply for sale
- Floor valuation: $350M FDV (≈75% below prior implied valuation)
AZTEC Token Distribution
The total supply of 10.35 billion $AZTEC is allocated across community participants, node operators, governance-managed reserves, ecosystem growth initiatives, and early supporters. Distribution is structured to ensure broad community ownership at launch while preserving long-term incentives for network security, development, and ecosystem adoption.
A total of 21.96% of supply (2.27B tokens) is allocated to the Token Sale, conducted by the Aztec Foundation around Ignition.
- Phase 1 – Genesis Sequencers Sale (1.93%) brings early Sequencers on board with 200M tokens.
- Phase 2 – Open Auction (14.95%) allocates 1.547B tokens to broaden participation among current and future Aztec users.
- In connection with Phase 2, 2.64% (273M tokens) will be transferred autonomously into a Uniswap V4 liquidity pool governed by Aztec governance.
- Bilateral Sales (2.44%)—252.5M tokens—are reserved for strategic investors at the Foundation’s discretion, with no bilateral sales expected in 2025.
To support ecosystem development, 10.73% (1.11B tokens) is designated for Ecosystem Grants, primarily allocated to non-insider contributors and community members, with most grants distributed by the Token Sale date. A further 4.88% (505M tokens) is allocated to Future Incentives, controlled by Aztec governance, which may include boosted staking rewards or liquidity programs over the 24 months after Ignition.
Network security is reinforced through Year-1 Network Rewards, comprising 2.41% of supply (250M tokens), pre-minted to compensate Sequencers and Provers during the first year.
The Aztec Foundation receives 11.71% of supply (1.21B tokens) to support protocol operations, research, partnerships, and ongoing ecosystem growth.
Long-term supporters and builders collectively hold a significant portion of supply, including Investors & Early Backers with 27.25% (2.82B tokens) and Team Members with 21.06% (2.18B tokens), reflecting their foundational role in developing the network.
How to Buy $AZTEC｜Ways to Participate
The earliest way to gain exposure to the Aztec Network is through the $AZTEC Pre-Market listing on XT Exchange, where users can trade allocation rights ahead of the token’s official launch.
Beyond Pre-Market trading, users can also participate directly in the Aztec ecosystem’s early opportunities. This includes the Foundation’s continuous clearing auction, which allocates up to 14.95% of total supply to the community, as well as future staking programs, Sequencer participation, and governance engagement once the network launches. Community members can earn influence in the network by staking $AZTEC, supporting block production, contributing to the ecosystem through grants.Together, these channels allow early adopters to secure exposure, contribute to decentralization, and take part in shaping the long-term evolution of the Aztec Network.
AZTEC Token’s Competitive Edge
AZTEC benefits from a robust technical foundation and a wide range of token utilities, creating strong momentum for future ecosystem expansion. Its core advantage lies in delivering true end-to-end privacy—a challenge public blockchains have struggled with for more than a decade. By generating proofs directly on the user’s device, Aztec ensures sensitive data never leaves local control, enabling practical and programmable privacy across users, data, metadata, and full contract logic. This positions Aztec as one of the few networks capable of supporting real-world applications—finance, identity, and RWAs—without exposing user activity or transactional patterns.
Another competitive edge is Aztec’s commitment to credible decentralization from day one. Sequencing, proving, and governance are distributed at launch, ensuring no single party can censor transactions or undermine privacy guarantees. The $AZTEC token strengthens this neutrality by powering staking, incentives, and governance, while fee abstraction allows users to benefit from private applications without needing to hold the token directly.
Key Risks and Challenges of the AZTEC Token
One key risk for $AZTEC stems from the complexity of Aztec’s privacy-first architecture. The network introduces a new alt-VM, dual private–public execution, and client-side proving—features that expand capability but also increase technical uncertainty. Bugs in the proving system, performance bottlenecks, or unexpected interactions between private and public state could affect network stability.
A second challenge lies in Aztec’s decentralized launch model and token-driven governance. The network relies on broad Sequencer and Prover participation, sufficient staking, and active governance to maintain security and neutrality. If staking becomes concentrated or governance participation remains low, the system’s decentralization and economic guarantees could weaken.
Aztec’s Outlook: Future Vision
Aztec’s vision extends far beyond simple anonymous payments. The project aims to become the default global marketplace for programmable assets—where not just synthetic tokens but real-world property, credentials, and financial instruments can be traded and automated without exposing sensitive information. In this future, identities can be linked to blockchain accounts securely; credentials and attestations can be stored on-chain in encrypted form; and developers can build high-volume financial and social applications without forcing users to sacrifice confidentiality.
By rebuilding Ethereum’s smart contract model around privacy rather than transparency, Aztec offers what the industry has been missing: a practical, flexible, composable, and truly end-to-end privacy system capable of bringing real-world activity on-chain.
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