Recently, I've been exploring new security solutions in the blockchain industry. I came across @FhenixIO, offering a solution for confidential smart contracts on public blockchains. It uses Fully Homomorphic Encryption (FHE) to process data without decrypting it.

Let's dive into it 👇🏻

Blockchain's transparency is a strength, but when it comes to smart contracts, this feature raises a dilemma:

How can we keep sensitive smart contract details confidential?

Smart contracts on blockchains, as you probably know, are like open books - anyone can read them. This exposure risks leaking personal data, trade secrets, and strategic moves.

A real concern for businesses!

In blockchain, enhancing privacy often means sacrificing scalability. More private solutions can slow down the network, making it a tough balancing act for developers.

That's why technologies like Zero-Knowledge Proofs and Homomorphic Encryption joined the market - promising to keep smart contracts confidential without losing blockchain's essence.

Now we won't get lost on ZKPs, in fact I want to focus on so-called Fully Homorphic Encryption (FHE). The novelty brought by @FhenixIO in the first place.

FHE employes an optimistic rollup, a type of Layer 2 scaling solution for blockchains. Which means that it operates under the assumption that transactions are valid unless proven otherwise.

Avoiding significant computational penalties associated with verifiable FHE techniques. Which tends to overload the system compared to traditional plaintext computation.

Optimistic rollups are thus not just a solution but a necessity for FHE in blockchain environments​​.

What are the advantages over ZK-based rollups?

• Simplicity and Compatibility

• Lower Computational Overhead

• Developer Friendly

• Cost Efficient

Fhenix framework integrates Ethereum, enhancing his ecosystem significantly while maintaining the integrity of its base layer. How?

• Cryptoeconomic Solution → it addresses the challenge of arbitrating non-EVM native fraud proofs.

Without necessitating any modifications to Ethereum's base layer, preserving EVM's structure and functionality.

• Optimistic FHE Rollups → as I have already explained, this type of rollup is used to ensure greater efficiency and scalability for smart contracts.

• Scalability and Security → thanks to the optimistic rollup approach they can scale without congesting the Ethereum Layer 1.

They achieve this by executing transactions outside the primary chain and posting back state updates along with proofs of correct execution.

• Efficiency in Handling Confidential Data → the strongest point of Fhenix, that thanks to the L2 Rollup structure improves the efficiency of executing transactions and managing confidential data on-chain.

Traditional methods require FHE to be replicated across all nodes in a blockchain network. So how does Fhenix do?👇🏻

Fhenix.io's structure avoids this, reducing the computational cost and making the solution more efficient and practical.

While the approach is specifically tailored for the EVM, it holds independent value as a system that enables verifiable FHE.

This focus ensures that the solution is not only efficient but also highly relevant and adaptable to the most widely used blockchain ecosystem.

The architecture of the FHE rollup system, including its various components and layers, is designed to enhance efficiency through his innovative approach, that also contributes to the development of a new wave of privacy-centric dapps.

This is made possible by enhancing user confidence, expanding potential use cases, and increasing the overall security and utility in the EVM ecosystem.

It acts as the core engine of the Fhenix nodes, empowering smart contracts with robust encryption capabilities. When these contracts require encrypted computations, they seamlessly integrate with the fheOS precompiles, which are tailored for Fully Homomorphic Encryption (FHE) operations.

fheOS's design ensures full compatibility with the Ethereum Virtual Machine (EVM), bridging the gap between advanced encryption technologies and existing Ethereum-based applications.

The fheOS library, therefore, stands as a testament to Fhenix.io's commitment to enhancing blockchain privacy and security, offering a comprehensive suite of encrypted operations (like arithmetic operations i.e. addition, multiplication and number comparisons) essential for the next generation of smart contracts.

It serves as a bridge between the Rust-based core FHE mathematical operations library (tfhe-rs) and blockchain applications, especially those written in Go.

This integration is achieved through a Go-based API, designed specifically for executing complex FHE mathematical operations. Additionally, a specialized Rust wrapper adapts the TFHE.rs library for seamless use in blockchain contexts.

This strategic amalgamation significantly enhances Ethereum's go-ethereum (geth) capabilities, paving the way for more advanced and secure smart contract applications.

TSN operates as a distinct network layer, separate from the L1 blockchain or other rollup components. A vital separation for its functionality and security. It gives smart contracts running on the network the ability to utilize FHE primitives.

This means dapps using Fhenix can integrate encrypted data directly into their smart contract logic. It manages a secret-shared network key. This network key is essential for threshold decryption processes.

Central to TSN's operation is the management of a secret-shared network key. Unlike traditional systems where a single entity might hold a key, this network key is collectively entrusted to the TSN, a design choice that bolsters security.

Fhenix.io innovatively employs Shamir's secret-sharing method in this context. This method involves dividing the key into multiple parts, or 'shares.' To reconstruct the key, a predetermined number of these shares (n + 1) are required, ensuring that no single entity can unilaterally access the key.

Crucially, TSN oversees the threshold decryption and re-encryption processes. This ability is pivotal in safeguarding the confidentiality of data, while still allowing it to be effectively processed and utilized within smart contracts. Such a mechanism ensures that while data remains private and secure, its utility in smart contracts is not hindered

At the heart of optimistic rollups is the fraud proofs mechanism, ensuring transaction integrity on blockchain networks.

This mechanism becomes particularly vital when dealing with encrypted data in smart contracts, such as those facilitated by Fhenix.io. Fhenix.io empowers users to independently re-run and verify transactions off-chain, ensuring their accuracy. If discrepancies are detected, what's the next step?

Users can submit a fraud-proof directly on-chain, where Ethereum serves as the ultimate arbiter, ensuring fairness and rectitude. This vigilant process is crucial for upholding the pillars of trust and security in the blockchain ecosystem.

Fraud proofs are essential for accurate state updates. The system's design ensures chain integrity, even amid malicious attempts to alter transactions.

Fhenix utilizes Arbitrum’s Nitro fraud prover, cleverly adapting FHE logic to WebAssembly. System that, surprisingly, hasn't seen any fraud proof submissions since its mainnet launch in August 2021 according to Cointelegraph (at least until Sept 11th).

This innovative move allows Fhenix.io to seamlessly integrate its cryptographic smart contracts into the Ethereum ecosystem.

Guy Zyskind, the founder and a pivotal figure in the blockchain industry. Zyskind combines deep technical expertise with a visionary approach to blockchain technology. His entrepreneurial spirit is further exemplified through his role as the founder of SCRT Labs, a company dedicated to advancing decentralized technologies. Known for Secret Network, a protocol that offers scalable permissionless smart contracts. Some of the projects built on it are: Tarantino NFTs, Secret Bridge, Sienna Network and Shade Protocol.

Joining him in this venture is Guy Itzhaki, has a strong blend of technical acumen and leadership. Itzhaki's experience in software development (worked at Intel Corp. for +7 years) and management positions him as a key asset in driving Fhenix's innovative solutions.

The recent acquisition of $7 million in funding by Fhenix is a resounding affirmation of the burgeoning interest and investment in the realm of blockchain privacy solutions. This influx of capital not only underscores the faith investors place in Fhenix's innovative technology but also reflects a broader industry recognition of the critical need for enhanced privacy in blockchain applications.

In a world where privacy concerns are increasingly paramount, particularly in various industries and for individuals alike, Fhenix stands at the forefront of addressing these challenges. Their approach uniquely balances the imperatives of security and data protection with the fundamental principles of transparency and decentralization that are hallmarks of blockchain technology. This alignment ensures that blockchain's core values are not just preserved but also strengthened in the face of evolving digital landscapes.

Central to Fhenix's ethos is their dedication to democratizing access to their pioneering technology for developers. By demystifying and simplifying the intricacies of advanced cryptographic techniques, Fhenix empowers developers to harness the full potential of their platform.

This focus on accessibility and user-friendliness, as articulated by founder Guy Zyskind, ensures that developers can channel their efforts towards innovation and creativity, unencumbered by the daunting complexities of underlying cryptographic mechanisms.