Fully Homomorphic Encryption, the Holy Grail of Computing

Key Insights

• Zero-knowledge proofs (ZKPs), as a privacy tool, face two key issues: 1) Most applications require third parties to generate proofs, exposing users’ private data. 2) ZKPs are not suitable for applications requiring both global and private state simultaneously.
• Fully homomorphic encryption (FHE) is gaining traction in the blockchain space as a privacy solution due to its ability to compute on encrypted data without decryption. Through FHE-integrated Layer-1s, end-to-end encryption on public blockchains becomes possible, elevating both security and privacy.
• FHE R&D has surged recently, driven by tech giants responding to stringent data laws like GDPR and government agencies boosting funding amid rising cyber threats.
• FHE is not a silver bullet. Combining it with multi-party computations (MPC) and ZKPs can create a more efficient and comprehensive privacy solution.

Blockchains are public by design, meaning each user's assets and transactions are visible to all. This transparency poses significant challenges for enterprise adoption, as most businesses require a level of privacy and are unwilling to publicize every aspect of their operations onchain.

Recognizing the importance of privacy for blockchain's wider acceptance, the crypto community initially rallied around zero-knowledge proofs (ZKPs) as a potential solution. However, over time, it's become evident that ZKPs, while powerful, fall short as a comprehensive privacy solution. Instead, their primary utility gravitated towards enabling verifiable offchain compute, establishing ZKPs more as a scaling solution than a privacy solution.