What is homomorphic encryption and what are its benefits for blockchain?

What is homomorphic encryption?

In the field of cryptography, It is crucial to encrypt sensitive data in order to secure itwhich is why they are kept encrypted when stored and transmitted.

This is a common practice among companies concerned about the safety of their customers, and most of the time it is effective, especially thanks to modern encryption standards that are impossible to break with today's computing and storage capacity.

However, a major limitation is the inability to perform calculations on encrypted data. To do this, First, they must be deciphered, and that's when they become vulnerable..

Homomorphic encryption aims to solve this problem.. Conceived in 1978 by Ronald Rivest, Leonard Adleman and Michael Dertouzos, and first brought to fruition by the American Craig Gentry in 2009 in his thesis at Stanford entitled “Fully Homomorphic Encryption using ideal lattices”.

Unlike traditional encryption methods, Homomorphic encryption allows computations to be performed directly on encrypted data without the need for a secret key.The results of these calculations remain encrypted and can be decrypted later by the holder of the secret key.

This helps maintain data confidentiality while sharing it with third parties for processing.. This is made possible by mathematical operations. Indeed, the term “homomorphic” describes a correspondence between elements of two algebraic systems, coming from the Greek meaning “similar form”.

Now, both the public and private sectors are embracing this new security paradigm and are actively working to make homomorphic encryption more practical and accessible. The benefit is that it helps organizations comply with strict privacy regulations such as the General Data Protection Regulation (GDPR).

Enjoy exclusive crypto analysis by joining Cryptoast Research

What are the different types of homomorphic encryption?

To date, there are 3 types of homomorphic encryption.

1 – Partially Homomorphic Encryption (PHE)

In the case of PHE, only one operation is possible (an addition or a multiplication) with an unlimited number of possible iterations on the encrypted data.

For example, the RSA cryptosystem is partially homomorphic and used to encrypt and decrypt messages using a private/public key scheme.

With RSA, multiplying two ciphertexts with the same key is equivalent to raising the product of the plaintext data to the power of the public key. In practice, RSA is used with a padding mechanism, i.e. filling in data according to specific rules, thus making this homomorphic property unusable.

2 – Somewhat Homomorphic Encryption (SHE)

Addition and multiplication operations are allowed, but with a limited number of times.

3 — Fully Homomorphic Encryption (FHE)

FHE differs from PHE and SHE in that it allows unlimited operations, both for addition and multiplication.s.

This makes it possible to perform complex computations on plaintexts, including machine learning and secure multiparty computation (MPC). However, FHE implementations are currently computationally intensive, making them unviable for many use cases.

Simplified operation of FHE compared to classic data analysis

Enjoy exclusive crypto analysis by joining Cryptoast Research

What are the possible uses for blockchain and cryptocurrencies?

Homomorphic encryption solves significant data privacy issuess.

For example, in the supply chain, which is often the target of hacking, it reduces the risk of sensitive data leaks. Similarly, in cloud computing, which has become the norm in recent years, it allows users to entrust their data to cloud companies without having to place blind trust in them.

In the medical field, where securing patient data is not always up to par, homomorphic encryption ensures that all data remains encrypted while it is being processed, minimizing the risk of plaintext data theft.

But then, what are the use cases of homomorphic encryption, and especially of the FHE type, for blockchain and cryptocurrencies?

Private Smart Contract: For example, the user transmits an encrypted transaction along with a zero-knowledge proof (ZK Proof) proving that the conditions necessary for the transaction are satisfied. Then, miners or validators verify these proofs and perform computations directly on the encrypted data.

Moreover, it is possible to hide the amount of tokens and on-chain states, which is also made possible by private smart contracts.

Confidential Voting: In a classic Decentralized Autonomous Organization (DAO), votes are publicly accessible, disclosing each user's token holdings and voting choices.

On the other hand, a confidential DAO that uses homomorphic encryption can use private tokens that preserve the confidentiality of both quantities and individual votes.

Trustless Gaming: Many video games require certain elements to be hidden from opponents, while still allowing data to be calculated. For example, the fully on-chain Mafia Game was launched with privacy mechanisms such as hidden roles and attacks, votes, and player statistics.

Decentralized Private Identity: This opens up new possibilities for on-chain private identity coupled with ZK Proof, as demonstrated by the collaboration between Galactica, a company that wants to revolutionize identity processing in Web3, and Zama.

In addition to proving certain characteristics of identity, such as fingerprint, by disclosing only selected information, it is possible to perform calculations on this data privately. This would allow the creation of trusted environments for peer-to-peer markets or even improve the concept of decentralized society (DeSoc).

Note that most use cases of homomorphic encryption in the blockchain are also possible thanks to the ZK Proof encryption system.

👉 Learn all about ZK Proof technology and its applications

Some blockchain projects using homomorphic encryption

Zama: This Parisian startup, which recently raised $73 million in a Series A funding round co-led by Multicoin Capital and Protocol Labs, with the participation of Gavin Wood, co-founder of the Ethereum blockchain, as well as Anatoly Yakovenko, co-founder of Solana, focuses its strategy on the development of open source FHE cryptographic systems.

She has developed several solutions, including confidential smart contracts using fhEVM technology, as well as a system called “Concrete ML” intended for training machine learning models.

As CEO Rand Hindi points out, blockchain is just an entry point into the market. Zama’s long-term goal is to become a leader in homomorphic encryption in AI and the cloud.

Fhenix: Tel Aviv-based startup Fhenix was founded by Guy Itzhaki, former head of Intel's blockchain and homomorphic encryption department. This Optimistic Rollup type layer 2 solution is based on fully homomorphic encryption based on Zama's open source fhEVM technology.

Fhenix allows Ethereum developers to create encrypted smart contracts and perform computations on encrypted data, all while using Solidity and other familiar tools. The goal of Fhenix is ​​to advance the development of applications in the blockchain ecosystem using the enhanced privacy provided by FHE.

Inco: This modular Layer 1 solution, built on the Cosmos SDK, combines FHE, ZK proof and MPCand is designed to be easy to use for developers, as it is programmable with Solidity, the most widely used programming language for smart contracts.

It allows the creation of dApps that closely resemble Web 2 and is distinguished by its ability to generate private on-chain randomness. using public keys to produce a secure bitstream via FHE. Inco aims to solve complex challenges, such as facilitating on-chain gaming, to eliminate issues such as eavesdropping, deduction, sabotage, etc.

Recently, their collaboration with EigenLayer, the leader in retaking on Ethereum, has strengthened their notoriety.. This collaboration aims to increase privacy on Ethereum and strengthen the connection between Cosmos and Ethereum. Last February, Inco managed to raise over $4.5 million from well-known ecosystem funds such as Matter Labs, Circle Ventures, Polygon Ventures, and others. In addition, the project benefits from experienced advisors, including the CEO of Zama and the CEO of Polygon.

🤔 Do you want to enrich your knowledge of Web3 and identify opportunities? Join our premium Cryptoast Research community 👇

Enjoy exclusive crypto analysis by joining Cryptoast Research

Sharing the knowledge I accumulate on the technologies of tomorrow is what drives me alongside my computer science studies.