Fully Homomorphic Encryption: The New Frontier of Privacy and Security in Blockchain

Fully homomorphic encryption (FHE), as an advanced form of encryption, allows computation on encrypted data without decryption, and is gradually becoming a key technology in the Blockchain field. Since its first proposal in the 1970s, FHE has undergone a long period of theoretical exploration, until the breakthrough work of Craig Gentry in 2009 that achieved true fully homomorphic encryption.

The core feature of FHE lies in its homomorphism, which means that performing addition or multiplication operations on ciphertext is equivalent to performing the same operations on plaintext. This property allows FHE to support an unlimited number of addition and multiplication operations, enabling arbitrary computations on encrypted data. However, FHE also faces challenges such as noise management and computational efficiency.

In blockchain applications, FHE is expected to address the privacy and scalability issues faced by current systems. It can transform a fully transparent Blockchain into a partially encrypted form while retaining the control capabilities of smart contracts. This approach enables applications such as encrypted payments and privacy-preserving games, while maintaining transaction graphs to meet regulatory requirements.

The combination of FHE and Zero-Knowledge Proofs ( ZKP ) and other technologies may bring more innovation to Blockchain. Although both serve different purposes, their combined use can provide more comprehensive privacy protection and verifiable computation solutions. However, this combination will also significantly increase computational complexity, requiring a trade-off in usage.

Currently, the development of FHE is about three to four years behind ZKP, but it is rapidly catching up. The first generation of FHE projects has begun testing and is expected to launch the mainnet later this year. Although the computational overhead is still higher than ZKP, the potential for large-scale adoption of FHE is enormous.

The FHE market has attracted numerous innovative projects and investments. Companies such as Zama, Sunscreen, and Fhenix are developing FHE tools and infrastructure to provide privacy-preserving solutions for areas like Blockchain and AI. Venture capital firms are also actively investing in the FHE space, recognizing its potential.

However, the adoption of FHE still faces challenges, including issues of computational efficiency and key management. With algorithm improvements and engineering optimizations, these challenges are expected to be gradually overcome. In terms of regulatory environment, FHE has the potential to enhance data privacy, but there remains uncertainty in the field of financial privacy.

Looking to the future, FHE is expected to make significant progress in the next 3-5 years, transitioning from theoretical research to practical applications. As the technology matures, FHE will bring innovative opportunities to the blockchain ecosystem, driving new developments in privacy protection and security.