The transparent nature of open blockchains makes everything on-chain, including transaction data and accounts, publicly accessible. However, this transparency comes with data security concerns. Homomorphic encryptions (HE) help to overcome this limitation by opening up new possibilities for computing data on the blockchain without decryption.

This article covers everything you need to know about homomorphic encryptions, how they work, the different types, and their roles in crypto.

What Are Homomorphic Encryptions?

Homomorphic encryptions (HE) are advanced cryptography techniques that allow the computation of encrypted data without decrypting it. That means encrypted data can be processed and analyzed without impacting user privacy, even when using third parties. 

HE preserves confidentiality and protects sensitive data better than traditional encryption schemes, which require data decryption during computation. It’s a system that can improve blockchain privacy even when it runs publicly.

Homomorphic encryption systems were theoretical until 2009, when computer scientist Dr. Craig Gentry fully constructed them. 

How Do Homomorphic Encryptions Work?

Cryptography assumes that sensitive data is being transmitted between two people. In homomorphic encryption, when you send data, there is information that will be public and some that will be private. The data that is public to the server is the encryption, while your sensitive data will only be accessible to you. Nevertheless, homomorphic encryption allows the server or third parties to compute your encrypted data like its plaintext without knowing its exact content.

For instance, when you send data on a blockchain network, you will encrypt your raw data into ciphertext using a public key. The ciphertext is the data accessible to everyone publicly. Homomorphic encryption allows blind mathematical computation of encrypted data by third parties without the server decrypting the ciphertext. 

In blockchain networks, miners act as servers that process your transaction without decrypting the data involved, with the data being private. Therefore, participants won’t be able to use MEV bots to prioritize transactions for profit. Only the ciphertext will be public and stored on-chain, maintaining your privacy and that of other transactions on a network.

HE mathematical computation can range from addition and multiplication to more complex operations. Once the computation is completed, the encrypted results are sent to the owner and can only be decrypted using a private key.

HE can maintain blockchain transparency while keeping user information like account balance and transaction amounts confidential through encryption. It also introduces privacy-enhancing solutions that can aid in complying with regulatory frameworks, which can potentially push blockchain toward mainstream adoption.

Types of Homomorphic Encryptions

Homomorphic encryptions are classified depending on what operations of mathematical computation they can execute on the ciphertext. There are three categories of homomorphic encryptions.

  • Partially homomorphic encryptions (PHE): Supports one specific operation to be executed on ciphertext indefinitely. PHE carries out addition or multiplication operations on encrypted data but not both.
  • Somewhat homomorphic encryptions (SHE): Supports the execution of one specific operation, either multiplication or addition on ciphertext for a limited number of times.
  • Fully homomorphic encryptions (FHE): Indefinitely supports both multiplication and addition operations on ciphertext. FHE allows arbitrary computation on encrypted data.

Advantages and Disadvantages of Homomorphic Encryptions

Fully homomorphic encryptions are a fairly new development compared to traditional encryption schemes and come with their limitations and benefits. Let’s look at some prominent ones below.


  • Homomorphic encryption allows you to leverage third-party computing while preserving your privacy.
  • The complex cryptography used in homomorphic encryption is virtually impenetrable and can withstand attacks from quantum computers.
  • HE supports the processing and mathematical computing of encrypted data using multiple operations.
  • It overcomes the security limitations of existing cryptography solutions without compromising on computing.


  • Homomorphic encryptions are complex, making them neither user-friendly nor beginner-friendly.
  • HE is more resource-intensive and slower than traditional encryption systems, which can increase computational costs.
  • Partially Homomorphic Encryptions and Somewhat Homomorphic Encryptions are limited in functionality and don’t support all computations.

Role of Homomorphic Encryptions in Crypto

Homomorphic encryption has the potential to unlock many exciting use cases in blockchain-based financial systems. It can allow miners to process your transactions while maintaining your privacy and keeping your account balance and transaction amount confidential. 

HE can promote on-chain privacy without compromising blockchain decentralization or security. It can also reduce cases of fraud since hackers won’t know which accounts to target based on on-chain data.

Additionally, homomorphic encryptions can be used to create smart contracts on permissionless blockchains that use encrypted data that can only be decrypted by authorized parties. 

HE is showing a lot of promise as a way of leading blockchain’s mainstream adoption. However, it’s still an emerging technology and requires more research to be scalable and cost-effective.