Analysis of FHE Fully Homomorphic Encryption Technology Expanding the Imaginary Space of Crypto Privacy Transactions

Exploring the Boundless Potential of FHE Fully Homomorphic Encryption Technology in Revolutionizing Crypto Privacy Transactions

After listening to the Epicenter podcast interview with ZAMA CEO, I’m once again worried about my brain capacity. In simple terms, FHE is an advanced encryption technology that is more advanced than ZKP zero-knowledge proofs. It can achieve data privacy transmission in a larger range of areas, such as cloud storage, genetic prediction, biometric identification, and crypto privacy transactions. Coincidentally, VCs have also been particularly interested in FHE recently. Allow me to share my understanding:

1. FHE stands for Fully Homomorphic Encryption. It allows people to perform operations on encrypted data without decrypting and exposing data privacy. It is a technology concept that has been around for a long time, but recently gained attention in the crypto field due to Fhenix Network integrating FHE functionality into Ethereum and launching the fhEVM solution. Any developer can add FHE functionality to transactions in the form of pre-compile binaries.

2. What possibilities does this unleash? For example, in gaming scenarios, platforms can perform calculations on players’ cards without exposing them, promoting fairness in these games. In DAO voting scenarios, whales can participate in governance voting without revealing their voting numbers, while still influencing the protocol’s voting results.

In privacy transaction scenarios, users can submit fully encrypted transactions to the mempool without exposing private information such as transaction amounts. In regulatory compliance scenarios, the government can monitor transactions involving funds flowing overseas, deducting assets involving blacklisted addresses without viewing the details of legitimate transactions, and so on. The possibilities are even greater than those of ZKP.

• OpenAI farce A technology war with no winners
• CoinFLEX Accuses OPNX of Taking Assets for a Joyride Crypto Exchange Creditors Seek Justice
• CZ’s Lawyers Shut Down Flight Risk Fears with a Brilliant Countermove

3. What are the differences between FHE and ZKP? In simple terms, ZKP solves the problem of consistent transmission of data under encryption. The submitting party can prove the authenticity of the data to the receiving party without revealing the specific data, making it a point-to-point encryption solution. Lightweight zk-SNARKS, in particular, have been widely used in layer2 Rollup.

FHE, on the other hand, aims to solve the problem of recomputation under encrypted data transmission, making it a many-to-many encryption solution with broader applications. Its limited adoption so far is due to the high computational cost and low efficiency involved.

4. ZAMA has established the fhEVM solution, which allows FHE to be applied to the blockchain field. Phenix Network, in a similar approach, integrates FHE in a modular form as a pre-compile processing step into more blockchain networks. However, it is currently more suitable for OP-rollup, and there is even an option to selectively apply FHE functionality to specific transactions through pipelines.

This means that users can choose to initiate transactions with FHE on layer2 to protect their privacy. Compared to native transactions, it may incur slightly higher costs, but it adds security and privacy. This will undoubtedly attract market makers and institutional users who prioritize privacy transactions.

The demand and scenarios are already in sync. The key lies in finding a comprehensive trade-off between efficiency, performance, and cost.

I personally believe that privacy transactions will be the next refined trend after solving the scalability issue. The core of the scalability problem is no longer infrastructural technology, but rather the lack of necessary conditions such as regulation and market mass adoption. Privacy transactions, by further optimizing the technological infrastructure, further segment users, transactions, and use cases, and to some extent, will have a wide application similar to ZKP technology.

We can imagine that with the support of FHE technology, the trading experience gap between DEX and CEX is reduced. Some layer3 privacy application chains can have a more closed and secure trading experience. Some games can solve the security issues that exist randomly on the chain. Even regulation can be involved in a more compliant and less intrusive manner. The possibilities are vast. However, the current TPS is indeed very low, with a level of 2-5 transactions per second, which is barely close to the mainnet level of the EVM. To achieve a transaction processing capacity of tens of thousands with rollup, there is still a long way to go.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!