Multicoin Capital: Why We Invested in Fhenix.

Original Title: "The Dawn of On-Chain FHE"

Original Author: Kyle Samani, Co-founder of Multicoin Capital

Translated by: cryptonaitive, Jinse Finance

For the past decade, the two most challenging technical issues in the cryptocurrency field have been scalability and confidentiality. Most of the industry's discussions have focused on scalability, while a few teams have quietly been building various advanced encryption technologies to achieve confidentiality.

Today, I am pleased to announce that Multicoin has led a $7.5 million investment in Fhenix, who are pioneering a fundamentally new approach to achieving on-chain privacy.

全同态加密（Fully Homomorphic Encryption，FHE）

Fully Homomorphic Encryption (FHE) is a type of encryption that allows computations to be performed on ciphertext, producing an encrypted result which, when decrypted, is the same as if the computation was performed on plaintext.

What is FHE? FHE is an advanced form of encryption that allows for arbitrary computation on encrypted data. To understand what FHE can achieve, let's consider one of the most popular applications in the world: Telegram.

Telegram has over 800 million monthly active users. The performance of the application is excellent; it is very smooth to use.

In order to achieve this level of performance, Telegram made an important trade-off: no encryption. This means that Telegram's servers store all of your message copies in plaintext (which means that Telegram's servers, employees, and any hackers can read them). Storing messages in plaintext is crucial for performance, and it is also crucial for one of the most important features of any text-based application: search. When you search on Telegram, the servers search through all of your previous messages to return search results. Running such a search locally would be very slow, especially on low-end Android devices (which represent the majority of Telegram users).

Now, let's consider an alternative version of Telegram where encrypted messages are stored on the server. Intuitively, server-side search would not work. If the server can only see encrypted data blocks, how can it search?

By using FHE, Telegram can perform server-side searches on a user's encrypted data without decrypting or reading the content of the messages.

This is too crazy. It doesn't even sound possible. But it is possible.

FHE is the holy grail of cryptography. Over time, FHE will reshape the foundation of all computations, whether in Web2 or Web3.

Fhenix

Fhenix is pioneering the development of FHE on the blockchain, which will not only unlock secure payments, but also enable universal and confidential DeFi, as well as a range of other applications. We are excited about the following areas:

1. Cross-chain - Using FHE, the private key of chain B can be stored on chain A. The same can be done in reverse. This can reduce the overall complexity of cross-chain by 100 times or more.

2. Governance - Currently, the voting process for cryptocurrency governance has always been public, which means that the voting results will gradually be displayed during the voting process. This may lead to voter bias and groupthink, which goes against the original intention of voting. FHE has implemented confidential on-chain voting.

3. Autonomous World - Many blockchain games can utilize FHE, especially those involving location and business strategy.

Fhenix is compatible with Zama's fhEVM technology, which has custom opcodes for advanced FHE-specific operations. This has two main effects:

Developers will be able to easily port their existing EVM code to Fhenix. They will also be able to turn their existing code into FHE native code with only minor adjustments. Developers will be able to select the data portion they want to encrypt and perform calculations between encrypted and plaintext data.

Encryption Methods Comparison

Previously, in terms of confidentiality on the chain, it was almost at the "impossible" end of the difficulty spectrum.

Almost all previous attempts to achieve on-chain confidentiality have used zero-knowledge proofs (ZKP). However, despite the name "zero-knowledge", ZKP is not inherently designed to support confidentiality in on-chain DeFi. To explain why, let's start with the simplest on-chain zkp application, Zcash.

When a user sends a shielded transaction in Zcash, it constructs a proof that roughly demonstrates the following:

1. On-chain privacy conceals the entire transaction history in an encrypted data block.

2. There are some unspent transaction outputs (UTXOs) that have been sent to hidden addresses.

3. The total value of these UTXOs is greater than 0, even when the value of all sent UTXOs, including those in the current transaction, is added together.

or in short: prove that its balance remains greater than 0 after this transaction.

One basic limitation of this method is the inability to execute any logic on the system state in a top-down manner; by definition, the current state of the system (as it is a series of ZKP functions) cannot be seen, and therefore no one - including the system itself - can apply any logic on the current system state. Therefore, even simple questions such as "how many tokens are in the private pool?" cannot be answered, let alone more complex ones.

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