After waiting for seven years, the coin is finally issued. Aztec returns with a privacy narrative but gets caught up in new controversy.

Author: Nancy, PANews

As the signs of a bear market in the crypto market become increasingly apparent, more and more projects such as Monad, MegaETH, and Meteora are vying to issue tokens in an attempt to seize the last liquidity window. Recently, the once-celebrated project Aztec Network announced a token issuance to take advantage of the rising interest in privacy solutions, making a comeback to the market after seven years, but it has sparked controversy due to its token sale.

TGE airdrop absence, over 70% valuation discount public offering faced dissatisfaction

After years of waiting, Aztec has finally announced the issuance of its token after going through multiple cycles of iteration.

On November 13, Aztec disclosed its token economic model, with a total genesis supply of 10.35 billion AZTEC tokens. Among them, 27.26% is allocated to investors and early supporters, 21.06% to the core team, 11.71% to the foundation, 10.73% to ecosystem grants, 4.89% to future incentives, 2.41% to Y1 Network Rewards, and the remaining 21.96% (approximately 2.273 billion tokens) is for token sales, including Phase 2 public auction (14.95%), Uniswap V4 liquidity pool (2.64%), Phase 1 genesis sorter sales (1.93%), and Bilateral reserves (2.44%). The tokens will mainly be used for sorter staking, network governance, and payment network fees, with a future annual inflation cap not exceeding 20%, to be determined by governance.

As announced by Aztec, it will launch the TGE through the sale of AZTEC tokens. The Genesis Sorter Round sale will start from November 13th 22:00 to December 1st 22:00, and the open auction will take place from December 1st 22:00 to December 6th 22:00.

This token sale will be based on the Continuous Clearing Auction (CCA) recently launched by Uniswap. This scheme aims to guide liquidity and conduct public price discovery for newly issued or low liquidity tokens on Uniswap v4, operating entirely on-chain, setting a single clearing price per block, with higher bids prioritized for execution, and proportional allocation for bids at the same price, where successful bidders pay the same price. After the auction ends, the proceeds are automatically pooled in v4. Aztec is the first project to adopt this mechanism and has the option to use the ZK Passport module for private, verifiable participation certification.

However, the token sale plan of Aztec has been criticized by the community. As a privacy project with considerable fundraising scale and high attention, Aztec was initially a key target for those looking to profit from it, but the official announcement stated that there would be no airdrops, which rendered the time and financial investment of long-term participants worthless. Instead, Aztec emphasizes community priority and opens the qualification for early bidding to network contributors, including testnet node operators, Aztec Connect users, zk.money users, and active community members. Currently, the number of whitelisted addresses has exceeded 300,000.

What is more concerning are the valuation and lock-up conditions. The initial FDV of the Aztec token is $350 million, with a public sale ratio of 14.5%. Although the official statement claims that this price represents a discount of about 75% compared to the implied valuation from the latest round of equity financing, many community members still believe that the valuation does not match the project’s current output. Meanwhile, the Aztec new token offering has been criticized for having a long lock-up period; the genesis sale (with a minimum staking requirement of 200,000 AZTEC) and proceeds from the open auction must be locked for 12 months, during which tokens from the public auction will require governance voting 90 days after the auction to decide whether to unlock them immediately. Current market sentiment is sluggish, and most projects have underperformed after their TGE, making such lock-up conditions exacerbate the financial risks for participants. Notably, the white paper indicates that 0.12% of the tokens (approximately 12.42 million) will be allocated to “non-internal early contributors, community members, and related interests”, the majority of which will be distributed before the token sale begins.

In addition, due to compliance requirements, Aztec requires participants to complete KYC and mint NFTs before entering the auction process. However, this requirement has become another focal point of community discussion as it contrasts with its privacy narrative.

After over $100 million in financing, business transformation occurs, issuing tokens by leveraging the privacy track for recovery.

The once-popular project Aztec has been dedicated to creating privacy solutions on Ethereum since its launch in 2018. Public information shows that Aztec completed four rounds of financing between 2018 and 2022, with a total amount exceeding $119 million. Investors include heavyweight institutions in the industry such as Vitalik Buterin, ConsenSys, Paradigm, a16z, Ethereal Ventures, and Coinbase Ventures.

However, despite the large scale of financing and high market attention, Aztec's ecological construction progress has not been ideal. Especially after Tornado Cash was sanctioned by the US OFAC in 2022, the regulatory risks for the entire privacy project have significantly increased. In March 2023, Aztec announced a business transformation, gradually shutting down its DeFi privacy bridge project Aztec Connect and stopping the deposit function of zk.money. The official statement indicated that they were not contacted by regulatory agencies, and this move was based on commercial considerations, shifting the focus to the zero-knowledge general-purpose language Noir and the research and development of the next generation of encrypted blockchain. This decision had a significant impact on the Aztec ecosystem, as Aztec Connect and zk.money had accumulated tens of millions of dollars in transaction volume and hundreds of thousands of users at that time.

After a period of weakness in privacy narratives, despite Aztec's continuous product updates, market enthusiasm has noticeably declined. According to DeFi Llama data, Aztec's total value locked (TVL) has dropped from a peak of $21 million to a low of about $4 million.

However, signs of recovery in the privacy sector began to emerge at the end of last year. In November 2024, a U.S. court ruled that the “OFAC sanctions on Tornado Cash” were illegal, and in March of this year, it was removed from the sanctions list, bringing positive signals for crypto privacy projects.

Seizing this opportunity, Aztec announced the establishment of a foundation in February this year, and the market immediately began to speculate on its token issuance plan. Subsequently, Aztec launched a public testnet, attracting user interaction and driving the recovery of TVL. In just four weeks, the platform added over 30 new application developments, with the number of node connections exceeding 17,000. After that, Aztec also completed a series of tasks, including network upgrades, expansion of the developer ecosystem, as well as cross-chain and performance optimizations.

Recently, with the significant rise in the prices of privacy coins such as Zcash, the market's attention to the privacy track has increased again, providing a relatively favorable window for Aztec's token issuance. However, the current environment in the crypto market is sluggish, and narratives are changing rapidly. After Zcash gains short-term attention and liquidity stimulation from its token issuance, whether it can continue to promote ecological construction and attract developers and users for long-term participation still needs to be tested over time.