This article will first explore what Aztec is and then test its unique value proposition by combining privacy and zk rollups.

Aztec Network is a privacy-oriented project and a zero-knowledge aggregation on Ethereum.

It's like an enhanced version of Tornado Cash. Same main function - money mixer. But Aztec allows users to interact with other smart contracts like Aave or Lido Finance while their funds are in Aztec. Aztec also develops zero-knowledge technology and provides a suite of tools, including SDKs and programming languages.

While Tornado Cash is slowly fading, Aztec has raised $100 million in funding led by a16z, not to mention Paradigm, who led the previous round.

Aztec  

Aztec's vision is "Coding for Everyone." Based in London, it was founded in 2017 by Zac Williamson and Thomas Walton-Pocock. Zac is currently the CEO, but Thomas has resigned to shift his focus to other businesses. Other key team members include co-founders and chief product officer Joe Andrews and Ariel Gabizon.

Aztec was originally founded as an institutional finance platform on the blockchain and later developed around zk technology. It launched PlonK in 2019, zk.money in 2021, Aztec Connect in 2022, and plans to launch Noir in the second quarter of 2023.

PlonK

PlonK is a SNARK ZK technology. There's also STARK, which is theoretically more scalable and flexible, but also older. Their relationship is similar to optimistic rollups and zero-knowledge rollups. Optimistic rollups may not be technically as good as zk, but they have gained more attention and the technology has been tested more in the field.​

zk.money

Following the release of PlonK, Aztec developed zk.money, an application that provides Ethereum DeFi users with complete privacy and up to 100x cost savings.

Users send funds to zk.money and create private notes on Layer 2. Private notes can be traded, staked, and used for profit just like regular Ethereum assets. But all transactions are protected by zero-knowledge proofs to protect privacy.

The entire system takes over user assets on the Ethereum mainnet through a fully encrypted state system. When a user deposits money into Aztec, Aztec creates a cryptographic note through its offline UTXO state system, just like cash. As transactions are sent and executed, the state tree is updated with new cryptographic tickets. Only the owner can see the contents of the note. Therefore, user identities and account balances are fully preserved.

zk.money splits user transactions into batches, executes them on the Ethereum mainnet, and returns funds to users proportionally on Layer 2, effectively allocating gas costs among users.​

The current version relies on Aztec as the sole provider of totals. Aztec is responsible for relaying transactions between the Ethereum mainnet and Layer 2. But zk.money plans to integrate more general suppliers to make the system more decentralized.

zk.money was already gaining trading volume and regular users even before the Tornado Cash sanctions, but the sanctions increased its deposits in the short term. zk.money experienced an influx of other users after its fundraising announcement, but deposit volumes didn’t increase much. New users deposit small amounts of money in hopes of receiving future airdrops and are likely not regular users of the platform, which is reflected in user deposit amounts. Almost 90% of users have deposited less than $1 in ETH, and 49.5% have deposited less than $0.1 of ETH.

As of December 28, 2022, zk.money has sent a total of $69,779 US ETH from 93,889 users. The average deposit is $0.37 ETH, with the highest user depositing $1,236 ETH.

Because zk.money allows users to mix coins, there is a serious risk that what happened to Tornado Cash will happen to Aztec. And it happens on a smaller scale.

Aztec Connect

Aztec Connect is an SDK (Software Development Kit) that allows any Ethereum protocol to be integrated into Aztec’s own compilation. It allows users to create and send transactions to Aztec fusion, and enables Aztec fusion to talk to Ethereum smart contracts.

Aztec Connect is like a proxy service for DeFi. Anyone can send money to Aztec and still interact with the main Ethereum network protocol while enjoying additional privacy and lower costs.

When a user sends money to another zk.money account, the recipient receives protected ETH. If the recipient is a normal Ethereum address, the wallet will receive normal ETH and Etherscan will show the amount sent from the Aztec contract.

Noir 

Noir is a Rust-based programming language for the generation and verification of zero-knowledge proofs.

Now, zk developers need to understand cryptography, which is a challenge. Noir plans to solve this problem and allow any developer, not just those with cryptography knowledge, to build zero-knowledge applications.

Noir does not directly affect Aztec UI/UX. But it helps drive a strong developer community around its zero-knowledge technology. More developers building more applications is a prerequisite for attracting more users.

Aztec in the context of privacy

Users can achieve privacy at three levels: cryptocurrency, blockchain, Rollup, and smart contracts.​

Zcash and Monero are pioneers, but they need more smart contract functionality. Other sovereign blockchain solutions have yet to gain much traction. For all sovereign blockchain solutions, users, both senders and receivers, must be on the blockchain. They can only transact in their local currency and pay for gas in that currency, which limits interoperability, impacts user experience, and increases security risks from bridge hacks.

Aztec leads the way in privacy aggregation. Competitors include Polygon Nightfall, Obscuro, and Intmax. Rollup solutions enable private transactions while reducing costs. Rollup is the most promising solution, although it is limited to the Layer 1 ecosystem.

Smart contract solutions offer more native interoperability with other contracts but incur gas costs during times of high usage. Tornado Cash is the most famous solution at the smart contract level. It can be used on Ethereum and other chains such as BNB Chain, Polygon, Avalanche…

Aztec in the context of Rollup

In terms of rollups, Aztec is a smart contract rollup. It interacts with the Ethereum mainnet through smart contracts deployed on the Ethereum mainnet. There is currently only one application on Aztec, zk.money, whose functionality needs improvement. With the release of Aztec Connect and Noir, more developers can build on Aztec. Aztec will earmark dedicated funds, such as an ecosystem fund, to incentivize developers to use the platform.

Smart contract rollups are by far the most popular. But there are other solutions. For example, the Ethereum Foundation has a team working on so-called enshrined rollups, which have built-in interaction with Layer 1. Aztec can invite developers to build another layer on top of it, where Aztec will act as a settlement layer and perform on top of layer 3. Aztec can also move data availability off-chain to further speed up transactions and reduce transaction costs.

generalize

Aztec has not issued a token yet. But given its decentralization roadmap, it may do so. If you want to become an early user, visit its official website and set up a new account to try it out.

The popularity of virtual private networks is exploding. Aztec acts as a virtual private network for encrypted users. They can have Aztec running in the background while privately interacting with DApps on the front end. Aztec’s unique value proposition, Ethereum Layer 2, sets the team apart, which is likely why Paradigm and a16z came on board. Privacy has always been a hot topic in the crypto world, and Aztec is well positioned to make it happen.