ELI5: What is Aztec?

TL;DR: AZTEC is a privacy engine for Ethereum. The team is on a mission to enable data, user, and code privacy on public blockchains. The protocol is live with private DAI transactions, with more assets (ETH, BTC) launching soon.

What problem does AZTEC solve?

In CeFi, we’re accustomed to a certain level of transaction privacy.

Transaction privacy is a problem on public and transparent blockchains — AZTEC enables privacy for on-chain transactions.

How does it work?

First, some quick terminology: public assets become “notes” in the AZTEC system. In AZTEC, a note is the “private version” of a public asset:

DAI → zkDAI (note).

To understand how notes work, a useful analogy is to think of them as Bitcoin UTXOs.

Executing a private transaction on Aztec:

1. A user creates a zk-proof of the transaction notes she wishes to keep private.
2. She sends the proof and the transaction notes to the AZTEC privacy engine (ACE) for verification of no double-spend.
3. If the proof is OK, the ACE will execute the transaction as outlined in the proof.

An example of a private transaction:

The privacy engine or ACE executes a transaction only when it can be certain that a transaction’s input notes equal its output notes:

AZTEC supports many different proofs:

Different proofs, different use cases.

For example, dividend proofs enable private interest payments by proving that one note (10) represents a set ratio (1/10) of another note (100). The ratio represents the known interest rate (10%).

Does AZTEC have a native token?

Not yet, but the protocol could launch a governance token where tokenholders have the right to determine which proofs are supported and how much fees are charged for private transactions on the AZTEC protocol.

In summary:

Through AZTEC, digital assets can finally leverage the security of a public blockchain like Ethereum, without having to compromise on confidentiality — a necessity for an Internet-based financial system.

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