The Development and Application Prospects of Fully Homomorphic Encryption ( FHE ) Technology

Fully Homomorphic Encryption ( FHE ) is an advanced form of encryption that allows computation on encrypted data without decryption. This technology was first proposed in the 1970s, but it wasn't until 2009 that substantial breakthroughs were achieved. The core features of FHE include homomorphism, noise management, and unlimited operational capability, enabling it to perform arbitrary computations while protecting data privacy.

FHE has broad application prospects in the blockchain field. It can transform a transparent blockchain into a partially encrypted form while retaining the control capability of smart contracts. This provides new ideas for solving current privacy issues on the blockchain, making encrypted payments, privacy games, and other applications possible. In addition, FHE can also improve the usability of privacy projects through private message retrieval (OMR), addressing issues such as synchronization delays.

Although FHE itself cannot directly solve the blockchain scalability problem, combining it with Zero-Knowledge Proof (ZKP) may provide a solution. FHE and ZKP are complementary technologies that serve different purposes. ZKP provides verifiable computation and zero-knowledge properties, while FHE allows computation on encrypted data without exposing the data.

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 launch later this year. Although the computational overhead of FHE is still higher than that of ZKP, its potential for large-scale adoption has already emerged.

The application of FHE faces several challenges, such as computational efficiency and key management. The computational intensity of bootstrapping operations is a bottleneck, but it is improving with advancements in algorithms and engineering optimizations. Key management also needs further development to overcome single points of failure.

In the market, many companies are actively developing FHE solutions. Companies like Zama, Sunscreen, and Fhenix have made progress in this field and have received support from venture capital. These companies focus on different FHE application scenarios, such as blockchain, artificial intelligence, and privacy protection.

The regulatory environment for FHE varies across different regions. While data privacy is generally supported, financial privacy remains a gray area. FHE has the potential to enhance data privacy while maintaining social benefits.

Looking ahead, the theory, software, hardware, and algorithms of FHE are continuously improving, and significant progress is expected in the next three to five years. As the technology matures, FHE is expected to drive innovation in the encryption ecosystem and unlock new application possibilities.