The Development and Application of Fully Homomorphic Encryption (FHE)

Fully Homomorphic Encryption (FHE) is an advanced encryption technology that allows computation on encrypted data without decrypting it. This technology was first proposed in the 1970s, but it was not until Craig Gentry's groundbreaking work in 2009 that true fully homomorphic encryption was achieved.

The core features of FHE include homomorphism, noise management, and infinite operation capability. Homomorphism means that operations performed on ciphertext are equivalent to performing the same operations on plaintext. Noise management is key to ensuring computational accuracy, while infinite operation capability distinguishes FHE from other forms of homomorphic encryption.

In the blockchain field, FHE is expected to become a key technology for solving privacy and scalability issues. It can transform a transparent blockchain into a partially encrypted form while retaining the control capabilities of smart contracts. Some projects are developing FHE virtual machines that allow programmers to write code for operating FHE primitives using Solidity.

FHE can also improve the usability of existing privacy projects, such as addressing wallet synchronization issues through Obfuscation Message Retrieval (OMR). However, FHE does not directly solve the scalability problem of blockchain and may need to be combined with Zero-Knowledge Proofs (ZKP) to tackle this challenge.

FHE and ZKP are complementary technologies, each serving different purposes. ZKP provides verifiable computation and zero-knowledge properties, while FHE allows computations on encrypted data without exposing the data itself.

Currently, the development of FHE is about three to four years behind ZKP, but it is catching up rapidly. The first generation of FHE projects has begun testing and is expected to launch the mainnet later this year. Although the computational overhead of FHE is still higher than that of ZKP, its potential for large-scale adoption is becoming apparent.

The main challenges facing FHE include computational efficiency and key management. The computational intensity of bootstrapping operations is being alleviated through algorithmic improvements and engineering optimizations. In terms of key management, some projects are exploring threshold key management solutions, but further development is needed to overcome the single point of failure issue.

The FHE market is attracting significant investment. Several companies are developing FHE-based solutions, including Zama, Sunscreen, Octra, Fhenix, and Mind Network. These projects cover a wide range of application areas, from FHE compilers to FHE blockchain networks.

In terms of regulatory environment, FHE faces different regulatory attitudes in 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.

With the continuous improvement of theory, software, hardware, and algorithms, FHE is expected to make significant progress in the next three to five years. It is anticipated to drive innovation in various applications within the encryption ecosystem and address critical challenges related to privacy and security.