Fhenix, a privacy-focused Ethereum Layer 2 startup, raises $15M Series A round for confidential blockchain

Fhenix, an Israeli tech startup building a confidential blockchain platform, has scored big with a $15 million Seriea A round led by Hack VC. Other backers include Dao5, Amber Group, Primitive Ventures, GSR, Collider Ventures, and Stake Capital.

This latest round follows Fhenix’s $7 million seed round raised less than a year ago, with Multicoin Capital and others joining the funding. Speaking to The Block, Fhenix CEO Guy Itzhaki said that the fundraising journey commenced in March, culminating in the recent closure of the round.

This latest funding, which brings Fhenix’s total funding to $22 million, will be used to fuel the launch of the Fhenix Network’s public testnet in the early months of next year, as well as bolstering ecosystem application development efforts.

Itzhaki added that due to significant investors’ interest in Fhenix, the decision was made to raise the Series A round. However, details regarding the round’s structure, valuation, and board seat offerings remain undisclosed.

In conjunction with the funding, Fhenix announced the launch of its open testnet, named Helium (originally planned as Renaissance). This development milestone allows developers to deploy “confidential” smart contracts on the Fhenix Layer 2 network for the very first time.

Fhenix aims to revolutionize the Ethereum ecosystem with its innovative approach, leveraging fully homomorphic encryption (FHE) to create a confidential smart contract platform. For those unfamiliar, FHE is a cryptographic scheme that enables computations over encrypted data without compromising the data itself. Fhenix’s mission is to introduce data encryption and computation to smart contracts, transactions, and on-chain assets, all while maintaining the highest level of security.

Itzhaki emphasized the critical role of confidentiality in Ethereum’s journey toward mainstream adoption, highlighting FHE as the most elegant solution for encryption challenges. While declining to comment on the launch of a token alongside the mainnet, he confirmed expectations for the Fhenix mainnet to go live in the first quarter of the upcoming year.

“After scaling, confidentiality is the next major hurdle Ethereum needs to solve in order to reach mainstream adoption,” Itzhaki said. “FHE is the most elegant solution to the problem of encryption because, unlike existing confidentiality solutions based on zero knowledge technology, it allows for end-to-end computation of encrypted data.”

Founded in 2023 by CEO Guy Itzhaki and Guy Zyskind, Fhenix is the first private blockchain to employ fully homomorphic encryption. Their use of fhEVM facilitates Ethereum developers in writing encrypted smart contracts and performing encrypted data computations, all within the familiar Solidity environment.

Fhenix relies on fully homomorphic encryption (FHE) technology from Zama to bolster confidentiality across its network. Considered the “holy grail” of cryptography, FHE ensures end-to-end data encryption, even during processing stages. Notably, other crypto projects, such as modular blockchain developer Inco and creators of the Shiba Inu memecoin, also leverage Zama’s FHE technology.

In a bid to attract developers to its testnet, Fhenix has initiated a grants program. Itzhaki hinted at substantial support for this program, buoyed by the Series A funding. Furthermore, Fhenix’s ambitions extend beyond its Layer 2 launch, with plans to embed data confidentiality “everywhere.” A recent collaboration with EigenLayer aims to develop an FHE co-processor, serving as a stateless rollup to provide FHE services seamlessly across Layer 1s and Layer 2s, with robust security measures in place.

“The co-processor is a stateless rollup that enables Layer 1s and Layer 2s to get FHE services with minimal modifications on their behalf,” Itzhaki said. “The key challenge is — how do you trust the response from the co-processor? The solution is using EigenLayer crypto economics, securing the response of the co-processor.”