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The advent of blockchain technology has been met with both excitement and concern. The transparency inherent in blockchain design has given rise to concerns about data privacy and security, including potential threats such as theft, surveillance, and malicious bots. However, blockchain's versatility and decentralised nature have made it an ideal platform for a wide range of applications, including blind auctions, encrypted tokens, and private NFTs. In order for blockchain to realise its full potential, we need to fix the inherent privacy issue.
Efforts to address concerns around privacy have led to an ongoing debate around the role of transparency in blockchain technology. On one hand, the transparency of blockchain enables real-time payments and greater visibility in the banking sector, facilitating fraud prevention and analysis. In sustainability circles, blockchain has also been hailed for its ability to trace the provenance of goods and validate circular economy credentials, helping to combat greenwashing. However, the transparency of blockchain also poses significant risks to individual privacy, prompting calls for enhanced data protection measures.
Can Fully Homomorphic Encryption address blockchain’s privacy problem?
One might assume that because blockchains are built with transparency as a core tenet of their design, privacy is unattainable. And, while privacy is something blockchain both wants and needs, there is, as yet, no single solution that ensures privacy when using data from multiple sources. However, Fully Homomorphic Encryption (FHE) offers a promising solution.
FHE enables the processing of data without decryption, providing privacy and confidentiality to end-users while maintaining the core tenets of blockchain design. With FHE, private smart contracts can be built on public, permissionless blockchains, enabling specific users to view transaction data and contract state while keeping data privacy intact.
To ensure the effectiveness of FHE in protecting individual privacy, questions about key management and misuse prevention must be addressed. One solution involves splitting the private key amongst different validators to restrict malicious users from decrypting other users' encrypted states. Such threshold secret-sharing systems enable multiple users to work on the same chain without compromising data privacy.
The open-source framework TFHE-rs, written in Rust for enhanced performance and security, serves as the backbone of this solution, allowing for accessibility, adaptability, and transparency in design. With the continuous improvement of TFHE-rs and ongoing research in this area, FHE can unlock multiple use cases in a variety of sectors, expanding the horizons of blockchain technology beyond its traditional applications.
One of the downsides of FHE (at the moment) in terms of commercial viability is that transaction speed is very slow. However, experts are confident that blockchain could well be one of the early adopters of FHE - one, because of the innovative nature of blockchain and its communities and two, because there is a more generalised acceptance of friction when trialling technology.
In fact, it’s not too far-fetched to believe that FHE will be used as an effective solution to enhance privacy and security in blockchain applications, without imposing a significant burden on system resources or requiring specialised knowledge or expertise to implement. At Zama.ai, our tech is built to work seamlessly with code already being used, almost acting as an API to add a secure layer to transactions.
Potential to revolutionise industries
With many avenues yet to be explored, FHE represents a promising approach to reconciling the transparency and privacy concerns that have risen in the field of blockchain tech and has the potential to revolutionise numerous industries, including healthcare.
Another example might be GDPR. FHE could help with the GDPR ‘loophole’ that blockchain might pose, i.e. storing information in a blockchain may mean you can’t meet the requirement to be able to execute the right to be forgotten. While this is of course up to whoever writes the smart contract, the possibilities are truly endless. With the effective deployment of FHE, there’s no reason why the full potential of blockchain can’t be realised in a way that is both safe and secure, respecting individual privacy and enabling users to customise their experience with confidence.