Research Summary
The report discusses the potential of Fully Homomorphic Encryption (FHE) in the crypto industry, focusing on its application in on-chain confidentiality. It highlights Fhenix, a company pioneering the use of FHE on-chain, and its potential applications in areas such as bridging, governance, and autonomous worlds. The report also compares FHE with other cryptographic approaches like zero-knowledge proofs (ZKP) and discusses the limitations of ZKP in supporting on-chain confidentiality.
Key Takeaways
Fully Homomorphic Encryption (FHE) and Its Potential
- Understanding FHE: FHE is an advanced form of cryptography that allows computation over encrypted data. It can potentially revolutionize confidentiality in crypto by enabling server-side search on encrypted data without decryption.
- Applications of FHE: FHE can be used in various areas such as bridging (storing the private key for one chain on another), governance (enabling confidential on-chain voting), and autonomous worlds (leveraging FHE in on-chain games).
- Impact on the Future: FHE is expected to reshape the fabric of all computing, both in web2 and web3, by preserving the overall logic of a transparent financial system while maintaining confidentiality.
Fhenix and Its Role in FHE
- Introduction to Fhenix: Fhenix is pioneering the use of FHE on-chain, aiming to unlock confidential payments and fully-generalizable, confidential DeFi.
- Compatibility with EVM: Fhenix is EVM compatible, allowing developers to port their existing EVM code to Fhenix and make their existing code FHE-native with minor tweaks.
- Team and Timeline: Led by Guy Itzhaki and Guy Zyskind, Fhenix launched a private devnet in July 2023 and is expected to open its public testnet, “Renaissance,” to developers in the first half of 2024.
Comparison of Cryptographic Approaches
- Limitations of ZKP: Zero-knowledge proofs (ZKP), despite their name, were not naturally designed to support confidentiality in on-chain DeFi. They cannot support shared, encrypted state, which is a fundamental requirement for most DeFi.
- Advantages of FHE: FHE overcomes the limitations of ZKP by allowing the overall logic of a transparent financial system to be preserved while maintaining confidentiality. It enables computation over the state of the system as a whole as if it’s transparent, even though no one can see the current state of the system.
Actionable Insights
- Exploring FHE Applications: Developers and businesses in the crypto industry should explore the potential applications of FHE in their operations, especially in areas like bridging, governance, and autonomous worlds.
- Adopting FHE in DeFi: DeFi platforms should consider adopting FHE to enable confidential transactions while preserving the overall logic of a transparent financial system.
- Investigating Fhenix’s Offerings: Developers should investigate Fhenix’s offerings, including its compatibility with EVM and its potential to make existing code FHE-native with minor tweaks.
