Recently, I’ve been paying attention to a pretty interesting technological direction—Fully Homomorphic Encryption (FHE). This thing might really change the way blockchain privacy works.

The CEO at Zama discussed a key point: currently, public blockchains are basically “running naked”—transaction data and smart contract execution processes are almost completely transparent. So, what can FHE achieve? Simply put, it allows direct computation on encrypted data without the need to decrypt it. This means you can run confidential transactions on chains like Ethereum or Solana—others can’t see your holdings or your transaction amounts, but on-chain verification still works as usual.

There are actually quite a few specific use cases. For example, confidential stablecoins—when you transfer funds, the amount is encrypted; the recipient can verify the transaction but can’t see the precise number. Or in DeFi protocols, the amount of collateral you have in a lending pool can remain private, but the liquidation logic will still trigger when it should. The key is that this system can also be combined with other privacy solutions. Unlike ZK proofs, which can only prove “I know a certain secret,” or MPC, which requires multi-party collaborative computation, FHE enables native encrypted computation directly on-chain.

On the technical side, FHE’s approach is completely different from that of zero-knowledge proofs or multi-party secure computation. Instead of working on the proof layer, it allows the computation itself to happen directly in the ciphertext space. With this architecture, privacy applications are much more composable, and there’s no need to design custom proof circuits for every scenario.

Of course, there are still performance overhead issues right now, but this direction is definitely worth watching.