Aztec Labs has acquired Obsidion, the company behind the open-source, privacy-preserving identity verification tool ZKPassport.

The Obsidion team, including co-founders Michael Elliot and Theo Madzou, will join Aztec Labs to continue developing ZKPassport and contribute to additional products. Other aspects of the deal were undisclosed.

In December, Aztec raised some $60 million worth of ETH through its AZTEC token sale, extending its runway after raising about $125 million in previous venture capital funding from notable investors like a16z, Paradigm, and Ethereum co-founder Vitalik Buterin.

The move comes amid a wave of consolidation in the crypto industry. Some well-established firms have been scooped up by legacy institutions, like Deloitte's recent acquisition of Blocknative, while other projects that have more recently raised funds expand through buyouts. With crypto markets on somewhat unstable footing, some projects have also elected to shut down, often citing revenue concerns, or reduce their headcount.

Aztec Labs is developing an eponymous privacy-preserving, decentralized Layer 2 zk-rollup on Ethereum. The Aztec Network aims to provide programmable privacy for smart contracts, enabling developers to build hybrid applications that reveal some information while shielding some data, user identities, and even computation from public view.

The project unveiled its Ignition Chain in mid-November, calling it the "first fully decentralized L2 on Ethereum” with about 136 nodes as of Wednesday powering a "private world computer." Aztec supports some privacy applications like StealthNote, a messaging tool leveraging Aztec's ZK-programming language, Noir, and zero-knowledge proofs.

ZKPassport is a privacy and identity solution that enables users to prove things like their age, nationality, and "proof of humanity" cryptographically without revealing other aspects of their identity. Users scan their passport or government ID via the NFC chips on their phone to generate a unique cryptographic signature on their device.

The tool has seen limited, though notable, adoption, including as a Devconnect conference ticket processor option. Aztec also tapped ZKPassport for its community token sale for identity verification. The firms claim to have verified 17,000 participants’ nationalities as part of the token sales compliance process, according to the announcement.

Aztec said it plans to maintain the ZKPassport protocol and iOS mobile app as an open-source project.

"The Obsidion team has built something rare: a privacy product that meets real-world verification requirements without exposing user data," Aztec Labs CEO Joe Andrews said. "Proving attributes without revealing personal data is what verification infrastructure should look like everywhere, especially with the growing desire from governments to implement age verification standards online."