Background

As public concern over data storage and security grows, public and private entities urgently need effective online verification mechanisms to safeguard information. However, these organizations also encounter increasing security threats when protecting data. Statistics from 2022 indicate that, on average, one in every 40 organizations experienced a ransomware attack, with the frequency of such attacks continually rising.

In response, the United States, the European Union, and other countries have implemented relevant laws and regulations. While these measures have contributed to data protection to some extent, the risk of data breaches remains persistent. This necessitates continuous investment in data security by organizations, placing significant pressure on them. Both everyday users and governments or enterprises providing digital services are actively seeking a more secure and reliable digital environment.

What is Aleo?

Aleo is a Layer 1 privacy blockchain project based on zero-knowledge proofs, designed to provide developers with a platform for building private and verifiable decentralized applications. Utilizing zero-knowledge proofs, Aleo effectively safeguards user privacy by concealing participant identities, transaction amounts, timestamps, and smart contract interaction details. Users can choose to exit the privacy mode, deciding independently which information to disclose or hide, thus ensuring control over personal data.

Moreover, Aleo leverages zero-knowledge proofs to offload smart contract execution off-chain, supporting a variety of decentralized applications with high transaction throughput (TPS). Compared to other blockchains, Aleo boasts significant advantages in privacy protection and on-chain scalability. It effectively addresses the limitations of current blockchain smart contracts, such as the privacy loss caused by full transparency, scalability challenges for large user bases, and the inability to support real-time online interactions. Aleo can process massive data in real-time, addressing current internet data leakage issues while compensating for blockchain’s shortcomings in data transparency.

Resource: aleo

Technical Advantages of Aleo

Aleo is a privacy-centric blockchain platform that offers several key technical advantages:

• Performance Advantage: Aleo employs zero-knowledge proof encryption technology to offload smart contract execution off-chain. This enables the support of fully private and highly scalable decentralized applications, capable of processing thousands of transactions per second.
• Scalability: By developing an optimized blockchain architecture, Aleo enhances scalability and increases Ethereum’s flexibility. Miners are only required to verify the correctness of transactions without re-executing each one, thereby improving overall network efficiency.
• Programmability: Aleo provides a full-stack zero-knowledge proof solution, allowing applications to achieve programmability at all levels.
• Ease of Use: The Aleo platform offers end-to-end development tools that support the development, deployment, and continuous operation of privacy-preserving applications, thereby reducing development complexity.
• Privacy Protection: Aleo can prove asset ownership and addresses privacy issues associated with transaction transparency on blockchain platforms like Bitcoin.
• Security: Built on cryptographic designs using zero-knowledge proofs, Aleo establishes secure, compliant, and fair network standards.
• Economic Model: Aleo has established a stable token economy and predictable pricing mechanism, providing a robust foundation for next-generation computing based on zero-knowledge proofs.
• Programming Language: Aleo developed the Leo programming language, which simplifies the development and integration of applications. Developers can write and manage private files more intuitively.
• Cost Advantage: Transaction fees on the Aleo network can be calculated in advance, with each transaction bearing only the cost of zero-knowledge proof verification. This significantly reduces transaction fees and enhances TPS.

Aleo aims to build a blockchain network that balances privacy, security, and transparency, offering both privacy and limitless scalability.

Resource: aleo

Team Background

The Aleo team comprises seasoned professionals with experience from renowned companies such as Google, Amazon, and Facebook, as well as prestigious academic institutions like the University of California, Berkeley, Johns Hopkins University, New York University, and Cornell University. The team includes world-class cryptographers, engineers, designers, and operations experts. Founded in 2019, Aleo’s current Chief Technology Officer, Howard Wu, co-authored a foundational paper titled “Zexe: Enabling Decentralized Private Computation,” which explores the application of zero-knowledge technology in Web3. The company’s CEO, Alex Pruden, is a former partner at a16z (Andreessen Horowitz).

Funding Institutions

• Series A Funding: Aleo secured $28 million in Series A funding, led by Andreessen Horowitz (a16z), with participation from PlaceHolder VC, Galaxy Digital, Variant Capital, and Coinbase Ventures.
• Series B Funding: The company raised $200 million in Series B funding, co-led by Kora Management LP and SoftBank Vision Fund 2, with additional investments from Tiger Global, Sea Capital, Samsung Next, Slow Ventures, and Andreessen Horowitz (a16z).
• Series B+ Funding: Aleo raised an additional $70 million in Series B+ funding. The involvement of these prominent investment institutions provides robust support for Aleo’s technological development, ecosystem construction, and market expansion.

Date Resource: rootdata

Application Areas

Aleo’s applications span a wide range of sectors, including decentralized finance (DeFi), non-fungible tokens (NFTs), GameFi, decentralized autonomous organizations (DAOs), and social finance (SocialFi). The platform aims to address issues of information leakage and data privacy, striving to build a truly personalized and privacy-preserving network.

Wallet Applications

LeoWallet

An official wallet project emphasized by Aleo, LeoWallet integrates zero-knowledge proof technology, allowing users to easily create highly confidential proofs directly in their browsers, ensuring complete information confidentiality. In June 2023, the project secured $4.5 million in funding to advance the development of zero-knowledge blockchain infrastructure.

FoxWallet

As Aleo’s first decentralized mobile wallet, FoxWallet supports private transactions and secures them through local private keys. It is the world’s first wallet to support Aleo’s public transfers, join, and split records.

Domain Name Service (Aleo Name Service, ANS)

Users can register memorable domain names for their blockchain addresses, facilitating identity recognition and asset management in the blockchain environment. This feature transforms complex addresses into easy-to-remember names, simplifying and securing user interactions.

Decentralized Finance

ZeFi: Utilizing zero-knowledge proof technology, ZeFi protects user privacy while offering decentralized financial services, including lending, trading, and asset management. The platform aims to provide users with more secure and convenient financial options. On ZeFi, users’ transaction records and identity information are encrypted, ensuring the inviolability of personal privacy.

ZeFi also balances regulatory compliance by allowing regulatory bodies to access necessary transaction information when required, enhancing user trust in financial services, and offering new compliance solutions for the financial industry.

Tools

Obscura: This platform provides direct RPC endpoints, APIs, and SDKs to simplify application development on Aleo and reduce zkDApp setup time.

Staking.xyz: Aleo’s official staking portal, where users can manage and monitor staking positions, receive updates, and detailed reports on validator performance.

Additionally, the Aleo ecosystem includes other projects such as the official identity verification protocol Zpass, which uses zero-knowledge encryption for secure online data sharing, and Bandio, a children’s privacy protection project aimed at providing a safe internet experience without compromising parental and child privacy.

Tokenomics

The core of the Aleo network lies in its community members who are committed to learning, building, and believing in the power of zero-knowledge proofs (ZK), with the goal of creating a more secure and private world.

What is the Aleo Token?

The Aleo token is the native asset of the Aleo network. Holders can use the token to pay service fees to various institutions, companies, or individuals for transaction services.

Why are Tokens Needed?

• Security Assurance for Users and Developers: Tokens enable users and developers to benefit from secure verification and data services.
• Compensation Mechanism for Service Providers: Service providers can receive compensation for their limited time and computational resources.
• Abuse Prevention: The Aleo network is a competitive and mutually beneficial ecosystem. The token design aims to prevent spam and malicious use, such as bot attacks.

Token Utility

Aleo tokens serve multiple purposes within the Aleo network, including:

• Granting Access: Tokens are used to access block space and computational resources on the network. Users must pay tokens to submit and process transactions.
• Creating Incentive Mechanisms: The protocol rewards provers and validators with tokens to ensure protocol security, incentivizing the establishment of a robust decentralized network.
• Enabling Staking: Tokens can be staked to validators for block generation and network security, with stakers receiving proportional network rewards.
• Driving Governance: Post-mainnet launch, Aleo token holders can participate in decentralized governance, voting on protocol upgrades and changes.

How Does Aleo’s Tokenomics Operate?

Similar to Bitcoin, the Aleo network is secured through economic incentives. At the Token Generation Event (TGE), the total supply of Aleo tokens is set at 1.5 billion. Subsequently, tokens are automatically generated by smart contracts to reward miners and stakers. Specifically, the protocol distributes new Aleo tokens algorithmically to participants who adhere to the protocol. Validators earn Aleo tokens by verifying transactions and creating blocks, while provers earn tokens by contributing computational resources to generate proofs, thereby ensuring the security and efficiency of transactions.

Resource: Aleo Official Blog

Aleo Token Distribution

The distribution of Aleo tokens is roughly as follows:

• 34% to early supporters
• 25% to fund ecosystem contributors and education
• 17% to employees and project contributors
• 16% allocated to the Aleo Foundation and Provable
• 8% to strategic partners

PoS and PoW Reward Relationship

In the latest incentive adjustments, the Aleo team has modified the reward ratio between Proof of Stake (PoS) and Proof of Work (PoW) protocols. The share of block rewards from mining for validators has been adjusted from 1/2 to 1/3, while validator nodes now receive 2/3 of the block rewards.

During the initial phase of the mainnet, PoW will play a significant role in the Aleo network. However, over time, the block rewards released through mining will gradually decrease, while the weight of block rewards for validator nodes will increase relatively, maintaining a constant issuance of 23 Aleo credits per block.

The following chart illustrates the changes in the amount and proportion of Aleo credits released through PoS and PoW consensus over the next decade:

Resource: Aleo Official Blog

Project Roadmap

Resource: Aleo Official Blog

Aleo Launch Ceremony — August 2021
The launch of Aleo is considered a significant milestone in blockchain history. More than 2,200 participants from around the globe collaborated to ensure the security of Aleo’s foundational zkSNARK, laying a solid groundwork for decentralized private computation (DPC) capabilities. This setup bolstered Aleo’s versatility and its internal and external configurations and ensured network security.

Validator Incentive Program — January 2023
In January 2023, Aleo completed the Testnet 3 program, focusing on incentivizing validators to participate in generating ZK proofs. During this period, Aleo introduced a new consensus protocol, AleoBFT, attracting over 44,000 validators from 94 countries to join the network. The network’s difficulty peaked, processing approximately 750 million proofs per second (PPS). This achievement allowed validators to scale their computational resources flexibly based on demand, and the presence of multiple proof pools facilitated easier proof generation.

Prover Incentives II Program — July 2024
The Prover Incentives II program aims to validate the coinbase reward mechanism. The Aleo Network Foundation plans to run this event on the Testnet Beta network from July 1 to July 15, 2024, offering participants 1 million credits as rewards.

Mainnet Launch — 2024
Over the past five years, the developer community has been dedicated to realizing the vision of a zero-knowledge network, with privacy and security as top priorities. The much-anticipated mainnet launch is set for 2024, marking a significant milestone.

Conclusion

The zero-knowledge proof sector has long been seen as a field with immense potential but high implementation challenges. Since 2019, Aleo has been strategically positioning itself, and after five years of effort, the mainnet launch has finally arrived. This not only signifies a major technological breakthrough for Aleo but also means it will undergo comprehensive evaluation by miners, developers, ecosystem builders, and investors. Whether Aleo can stand out in the fiercely competitive blockchain privacy sector and become a rule-maker is something the industry eagerly anticipates.