Development and Application Prospects of Fully Homomorphic Encryption Technology

Fully homomorphic encryption ( FHE ) is an advanced encryption technology that allows computation on encrypted data without needing to decrypt it. This concept dates back to the 1970s, but it wasn't until Craig Gentry's groundbreaking work in 2009 that it became feasible.

The core feature of FHE is homomorphism, which means that performing addition or multiplication operations on ciphertext is equivalent to performing the same operations on plaintext. Compared to partial homomorphic encryption and certain types of homomorphic encryption, FHE supports unlimited addition and multiplication operations, allowing it to perform arbitrary computations on encrypted data.

In the blockchain field, FHE is expected to become a key technology for solving scalability and privacy protection. It can transform a transparent blockchain into a partially encrypted form while retaining control over smart contracts. Some projects are developing FHE virtual machines that allow programmers to write smart contract code that operates FHE primitives. This approach can enable use cases such as encrypted payments and privacy-preserving games, while retaining transaction graphs to enhance regulatory friendliness.

FHE can also improve the user experience of existing privacy projects through private message retrieval (OMR), allowing wallet clients to sync data without exposing the accessed content.

Although FHE itself cannot directly solve the blockchain scalability issue, combining it with zero-knowledge proof (ZKP) may bring some breakthroughs. Verifiable FHE can ensure that computations are correctly executed, providing a trustworthy computing mechanism for the blockchain environment.

FHE and ZKP are complementary technologies, each with its own focus. ZKP provides verifiable computation and zero-knowledge properties, while FHE allows computation on encrypted shared states, which is crucial for permissionless smart contract platforms.

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 the mainnet is expected to go live later this year. Although the computational overhead is still higher than that of ZKP, the potential for large-scale adoption of FHE is enormous.

The main challenges facing FHE include computational efficiency and key management. The computational intensity of bootstrapping operations is being alleviated through algorithm improvements and engineering optimizations. In terms of key management, some projects are exploring the use of threshold key management schemes.

In the market, several startups are actively developing FHE-related technologies and applications:

• Zama provides FHE solutions for Web3 projects, such as the TFHE-rs library and fhEVM.
• Sunscreen has developed an open-source compiler that converts Rust functions into FHE functions.
• Fhenix is building an Ethereum Layer 2 that supports confidential smart contracts.
• Inco Network is developing a modular confidential computing Layer 1 blockchain that combines EVM and fully homomorphic encryption.

With the continuous advancements in theory, software, hardware, and algorithms, FHE is expected to achieve significant breakthroughs in the next 3-5 years, bringing revolutionary changes to the blockchain and Web3 ecosystem.