Fhenix, an Ethereum-based blockchain that's described as “confidential,” has announced it closed a $7 million seed round led by Multicoin Capital and Collider Ventures.
Alongside other big backers such as Bankless, Node Capital, and HackVC, the funds will be directed towards taking the network into its public testnet phase during the beginning of next year.
While the public nature of blockchains is touted as one of its benefits, it also sparks debates over privacy. Fhenix focused on this dichotomy by building a developer-focused project that implements a novel form of cryptography dubbed fully homomorphic encryption (FHE).
Essentially, FHE enables computations to be performed with data while that data is encrypted. Instead of requiring information to be decrypted first, FHE allows for workflows to remain encrypted from input to outcome, ensuring information remains private during transactions and smart contract implementations.
Guy Itzhaki, CEO of Fhenix, told Decrypt that the relatively new approach is now a “mature cryptographic technology to use.”
The lack of confidentiality in the blockchain space is one of the biggest challenges currently confronting the Web3 environment, Itzhaki said. Without native encryption, he said enterprises will continue to be slow to build in the space.
The public testnet build that will receive most of the funding follows a private devnet launched in July. It attracted 60 developers, said Idzhaki, and proved the company’s hypothesis: “FHE is the right tool.”
He positioned FHE opposite its main technological rival, Zero-Knowledge (zK) proofs, which Guy thinks are insufficient. “They are great for scalability but too complex in terms of privacy with very limited use cases.”
By contrast, he said his firm will bring with it EVM-compatibility, enabling a wide array of use cases. These include private voting in DAOs, blind auctions, on-chain identity attestations for KYC, confidential real-world asset tokenization, and more.
Spawned from a collaboration that includes the already existing Secret Network, Fhenix’s long-term goal is to be an extension that will allow for optional confidentiality.
“The beauty of what we are introducing is that it enables developers to decide what they want to encrypt,” Itzhaki said.