Development and Application of Fully Homomorphic Encryption Technology

Fully homomorphic encryption ( FHE ) is an advanced encryption technology that allows computations on encrypted data without decrypting it. This technology was first proposed in the 1970s, but it wasn't until 2009 that significant breakthroughs were made. The core features of FHE include homomorphism, noise management, and support for unlimited addition and multiplication operations.

Compared to some homomorphic encryption ( PHE ) and a certain type of homomorphic encryption ( SHE ), FHE supports arbitrary computations on encrypted data, making it an extremely powerful but computation-intensive technology. The main advantage of FHE lies in its ability to protect data privacy and security throughout the entire computation process.

In the blockchain field, FHE is regarded as a key technology to address scalability and privacy protection issues. It can transform a fully transparent blockchain into a partially encrypted form while retaining control over smart contracts. Currently, some projects are developing FHE virtual machines that allow programmers to write smart contract code that operates on FHE primitives. This approach is expected to resolve current privacy issues on the blockchain, making applications such as encrypted payments, slot machines, and casinos possible.

FHE can also improve the usability of privacy projects. By using privacy message retrieval technology (OMR), FHE can address issues such as long balance information retrieval times and synchronization delays faced by projects like Zcash and Tornado Cash.

However, FHE cannot directly solve the scalability issues of blockchain. Combining FHE with zero-knowledge proof (ZKP) technology may be one of the directions to address this challenge. Verifiable FHE can ensure that computations are executed correctly, providing a trustworthy computing mechanism for blockchain environments.

FHE and ZKP are complementary technologies that address different issues. ZKP provides verifiable computation and zero-knowledge properties, while FHE allows computations on encrypted data without revealing the data itself. Combining the two, although it significantly increases computational complexity, may be necessary in certain use cases.

Currently, the development of FHE is about three to four years behind ZKP, but it is catching up quickly. The first generation of FHE projects has begun testing, and the mainnet is expected to be launched later this year. Although FHE still has a higher computational overhead than ZKP, its potential for large-scale application has already become apparent.

The adoption of FHE faces some challenges, including computational efficiency and key management. The bootstrapping operation in FHE is computationally intensive, but it is being improved with advances in algorithms and engineering optimizations. Key management is also a problem that needs to be addressed, especially in projects that require threshold key management.

Many companies are developing FHE-related technologies and applications in the market. These companies include Arcium, which focuses on confidential computing; Cysic, which offers ZK computing as a service; Zama, which develops FHE solutions; Sunscreen, which builds private applications; Octra, which proposes the HFHE concept; Fhenix, which develops FHE Rollups; Mind Network, which constructs the FHE re-staking layer; and Inco Network, which develops confidential computing blockchains. These companies have all received support from venture capital, demonstrating market confidence in FHE technology.

In terms of the regulatory environment, FHE has the potential to enhance data privacy, allowing users to retain ownership of their data and possibly profit from it, while maintaining social benefits. With continuous improvements in theory, software, hardware, and algorithms, FHE is expected to make significant progress in the next three to five years, gradually transitioning from theoretical research to practical applications.

Overall, FHE, as a revolutionary technology, is bringing transformation to the encryption field by providing advanced privacy and security solutions. With the maturation of the technology and ongoing capital interest, FHE is expected to play a significant role in addressing blockchain scalability and privacy protection issues, promoting the development of various innovative applications within the crypto ecosystem.