# Fully Homomorphic Encryption (FHE)

Zaïffer's privacy system relies on Fully Homomorphic Encryption (FHE), a cryptographic breakthrough allowing computation directly on encrypted data. FHE enables additions, multiplications, and other processing on encrypted values without decryption. The result remains encrypted, accessible only to the key owner.

Analogy: FHE is like "magic safes." Normally, adding numbers requires decrypting (opening the safes), adding, and re-encrypting. FHE lets you add the contents of two locked safes to get a new locked safe with the sum, *without ever opening them*.

This is real mathematics, based on lattice cryptography, which is believed to be quantum-resistant.

**FHE vs. Mixers**: Mixers like Tornado Cash provide on-chain privacy by pooling and redistributing deposits, breaking the link between senders and receivers. However, they fail to hide transaction amounts, allowing inference of financial patterns. Furthermore, mixers undermine auditability by severing input-output connections, leading regulators to classify them as high-risk due to associations with money laundering.

Zaïffer’s FHE-based approach avoids these issues. It preserves the transaction graph by keeping sender/receiver addresses visible while encrypting only the amounts. This maintains confidentiality for balances and swaps without compromising compliance. Zaïffer also enables selective disclosure for auditors and regulators, offering both privacy and verifiability that mixers lack.

**FHE vs. Zero-Knowledge Proofs:** Zero-Knowledge Proofs (ZKPs) and Fully Homomorphic Encryption (FHE) offer different cryptographic approaches to blockchain privacy.

ZKPs allow proving a statement's validity (e.g., "transaction is correct") without revealing the underlying data. Used in Zcash and zk-rollups, ZKPs efficiently prove correctness but often require specialised circuits and new L2s, creating composability issues with existing DeFi. Most ZK-based systems hide participant links, not transaction amounts, in a way compatible with standard ERC-20 tokens.

In contrast, FHE enables computation on encrypted values. With Zaïffer, balances and amounts stay encrypted, yet transfers and swaps execute seamlessly in the existing EVM environment. FHE requires no new wallets or L2s; confidential tokens (cTokens) work like standard ERC-20 assets.

From a compliance view, ZKPs, by obscuring amounts and identities, complicate auditing. FHE takes the opposite approach: Zaïffer encrypts only amounts, preserving sender/receiver visibility. This, combined with selective disclosure, allows authorised access for regulators/auditors while protecting user privacy by default.


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