Confidential Incentives for DeFi with Zama and Merkl

This week, Zama opened confidential access to 16 vaults on Morpho.

The point of confidential deposits is simple: users don't want to expose their strategy or their position. But if the same user claims incentives in a cleartext token, the confidentiality breaks. Anyone can look up the claim, see the amount, and reverse-engineer the position that earned it.

That's why we worked with Merkl to distribute rewards in confidential tokens. Rewards are computed on encrypted balances and delivered through confidential transfers when users claim. Position private. Reward private. Strategy private.

What's live

Confidential incentive campaigns are running today on a first set of confidential vaults on Morpho, powered by a new integration between Merkl and the Zama Protocol. Each shows up on Merkl with a visible APR, like any other campaign. Everything else stays private: no public leaderboard, no visible reward amounts, no way to look up what an address holds or earns.

Why this integration matters

Every incentive engine in DeFi does the same three things: read a user's balance, weight it over time, split a budget across participants. Zama's confidential tokens break that primitive on purpose. Balances are encrypted. There is no per-user state to read, which is exactly what makes the underlying position private.

That mismatch made confidential assets structurally incompatible with public incentive rails. Any vault accepting confidential deposits faced a choice: skip incentives, or expose the balances confidentiality was meant to protect.

Neither is acceptable. Confidential DeFi cannot bootstrap without incentives. Confidential assets cannot expose balances to earn them.

What Merkl shipped

Merkl now supports ERC7984, Zama's confidential token standard. In practice:

• Depositors delegate balance viewing to Merkl, per position. Without delegation, a position does not earn the extra yield from Merkl.
• Merkl reads delegated balances and computes rewards on its standard time-weighted cycle. Leaderboards, reward amounts, and per-address data never surface publicly.
• Rewards accrue from day one. When claiming opens in the weeks following launch, users claim through confidential ERC7984 transfers. What they earned stays as private as what they deposited.

For the full technical breakdown, read Merkl's blog post.

What this unlocks

Every team building on the Zama Protocol can now run incentive campaigns without exposing what their users hold or earn. Confidential RWA, confidential payments, confidential trading. The whole roadmap becomes bootstrappable.

Merkl is one piece of a bigger effort. For a user's journey to stay confidential end-to-end, every layer of the stack needs to support confidential tokens natively: wallets, explorers, custodians, aggregators, market makers, and now incentive engines. Zama is onboarding them all. That's what makes confidentiality practical, not just possible.

Get started

• Depositors: the first confidential incentive campaigns are live (see all campaigns here). Deposit in a qualifying vault at app.zama.org/earn and delegate to Merkl to start earning. Rewards accrue from day one. Follow your accrued rewards on your dedicated Merkl page. Claim opens in the weeks following launch.
• Teams building on Zama: if you plan to run incentive programs on confidential assets, Merkl now supports it. Talk to us.

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