Fhenix brings encrypted smart contract computing to Ethereum and Arbitrum

What happened

Fhenix said its CoFHE coprocessor is now running in production on Ethereum and Arbitrum. Before this launch, the system had only been available on public test networks. The company announced the mainnet deployment on Oct. 21.

CoFHE uses fully homomorphic encryption, a method that lets a computer perform calculations on data without first decrypting it. Fhenix says the coprocessor does the heavy encrypted work off-chain and returns results to contracts on both chains. Developers add it through a single Solidity import and encrypted data types that the company says act like ordinary variables.

The launch also puts Fhenix's dual-mode token design into production. Under the company's standard, a token carries a confidential mode alongside its public one. A holder can move a balance into confidential mode in one transaction and switch it back later. Fhenix says these tokens stay on their home chain, are not wrapped or bridged, and continue to work with existing wallets, exchanges and DeFi apps.

Fhenix said Consensys Diligence audited the system before launch. Unchained reported that it could not find a public copy of the audit report.

Two design partners went live on day one, according to Fhenix. Fluton is described as a confidentiality engine built on encrypted intents. AlphaEngine lets strategists compete for users' liquidity with strategies that stay encrypted, so their methods remain private.

Why it matters

Public blockchains show wallet holdings by default, so anyone with an address can see what it owns and trades. Fhenix says its system lets contracts enforce their rules while balances, positions and trading strategies stay encrypted onchain. The company frames this as a way for institutional users and developers to transact without publishing sensitive strategies to the public ledger.

Steven Goldfeder, co-founder and CEO of Offchain Labs, which develops Arbitrum, said in the announcement that confidentiality is one of the biggest barriers between institutions and public blockchains. He said institutions need to keep positions and strategies private, and that until now this meant giving up the composability that makes onchain markets worth using.

Fhenix is not alone in applying this kind of cryptography to stablecoins. In late May, a court order led Circle to freeze about $12.6 million held in a confidential USDC contract run by Zama, another FHE developer, which locked funds of users unconnected to the case.

What is still unclear

• Unchained reported that it could not find a public copy of the Consensys Diligence audit report that Fhenix says preceded the launch.
• Fhenix says three more apps will launch on CoFHE in the fourth quarter and that it plans to name two strategic partnerships with institutions in the coming weeks, but the company has not identified them.

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