CoFHE brings confidential smart contract execution to both networks, with Fluton and Alpha Engine among its first design partners

Fhenix has switched on its encrypted computation infrastructure on Ethereum and Arbitrum, moving its CoFHE coprocessor into production and enabling smart contracts to process data without publicly exposing the underlying information.

The launch addresses a longstanding challenge for decentralized finance: how to support private balances, trading positions, and investment strategies on public blockchains without sacrificing the transparency of contract execution or the ability to interact with existing applications.

CoFHE relies on fully homomorphic encryption (FHE), a cryptographic technique that allows computations to run directly on encrypted data. Rather than requiring information to be decrypted before processing, the system lets contracts enforce rules and return results while the underlying data stays confidential. Fhenix says its infrastructure handles computationally intensive operations offchain and returns the outcomes to contracts on Ethereum and Arbitrum.

The company also says the system features dynamic throughput that scales with demand, rather than imposing a fixed processing limit. Developers can integrate encrypted computation into Solidity smart contracts using an SDK and encrypted data types designed to work similarly to conventional variables.

Confidential Transactions Without Leaving the Network

A key component of the launch is Fhenix's dual-mode token design, which allows an asset to operate in either public or confidential mode. According to the company, holders can switch a balance between the two modes in a single transaction, without wrapping the token or moving it to another blockchain.

The approach is designed to make confidentiality available at the asset level while preserving compatibility with existing wallets, exchanges, and decentralized finance protocols.

The technology could prove relevant to applications in which participants need to keep financial information private, including institutional trading, strategy execution, and other onchain financial activities. Its practical adoption, however, will depend on how developers integrate the infrastructure and how its performance and security hold up in production.

First Applications Go Live

Two design partners are launching alongside CoFHE. Fluton is developing a confidentiality engine intended to support private-by-default interactions across blockchains, applications, and assets using encrypted intents. Alpha Engine is building a confidential network for onchain finance where strategists can submit encrypted strategies and compete for liquidity without disclosing their approaches.

Fhenix said both teams completed technical and security reviews ahead of the launch. The system was also audited by Consensys Diligence before going live. In a statement provided by Fhenix, a representative of the security firm described the review as centering on questions of what smart contracts can know at each stage of execution and how they can act on results they cannot directly read.

The company has not yet identified the Consensys Diligence representative quoted in its announcement.

Institutional Use Cases Remain a Focus

Confidentiality has been a persistent obstacle to broader institutional participation in blockchain markets, where positions and trading strategies can be visible to other market participants. Privacy infrastructure that preserves interoperability with existing decentralized finance applications could help address that concern.

Steven Goldfeder, co-founder and CEO of Offchain, which backs Fhenix through Tandem by Offchain, said the technology could allow Arbitrum developers to offer confidentiality without giving up the composability of onchain markets.

“Confidentiality is one of the biggest barriers between institutions and public blockchains,” Goldfeder said. “They need to keep positions and strategies private, and until now that meant giving up the composability that makes onchain markets worth using.”

Fhenix founder Guy Zyskind said the launch marks a milestone for the company, which he started three years ago. He also noted that Fhenix is working with Tandem on a confidential stablecoin, though the company did not provide further details in the announcement.

More Applications Planned

Fhenix expects three additional decentralized applications to launch on CoFHE in the fourth quarter of 2026 and plans to announce two institutional partnerships in the coming weeks. The team is also participating in theosseum hackathon to explore demand for confidential applications on Solana.

Founded to build confidential computation infrastructure for Ethereum and other Ethereum Virtual Machine-compatible networks, Fhenix is backed by Tandem by Offchain, Multicoin Capital, Hack VC, HashKey Capital, GSR, and Amber Group, among others.

Source: Metaverse Post