Building Encrypted Smart Contracts with FHE on Fhenix Testnet: Developer Tutorial

In the evolving landscape of blockchain development, privacy remains a critical gap. Traditional smart contracts expose all data on-chain, inviting scrutiny and exploits. Enter Fhenix testnet, where Fully Homomorphic Encryption (FHE) enables encrypted smart contracts that compute on ciphertexts without decryption. This tutorial guides you through building FHE-powered contracts using Solidity, leveraging Fhenix’s CoFHE coprocessor on Ethereum and Arbitrum testnets. As a blockchain economist with over a decade in risk management, I see FHE as essential for confidential DeFi and secure apps.

Grasping FHE Fundamentals for Blockchain Privacy

Fully Homomorphic Encryption lets you perform operations on encrypted data, yielding an encrypted result that, when decrypted, matches the outcome of plaintext computation. Unlike partial schemes, FHE supports unlimited operations, ideal for privacy-preserving smart contracts. Fhenix integrates this via fhEVM, their EVM-compatible layer, and CoFHE, a coprocessor that offloads heavy FHE math while maintaining Ethereum composability.

Why does this matter? Public blockchains leak sensitive inputs like balances or bids. With Fhenix, your contract logic stays private, enabling use cases from sealed-bid auctions to confidential lending. Recent launches on Ethereum Sepolia and Arbitrum Sepolia testnets make experimentation free and straightforward, backed by $22M in funding.

Essential Prerequisites Before Diving In

Ensure your machine meets these specs to avoid setup snags. Node. js powers the Hardhat environment, pnpm manages dependencies efficiently, and Git clones the starter kit. A funded wallet connects to testnets for deployment. Fhenix’s tools, including the cofhe-hardhat-starter template and cofhe-hardhat-plugin, streamline integration.

Configuring Your Local FHE Development Environment

Start by cloning the official starter repository. This scaffold includes contracts, tests, and configs tailored for CoFHE. Run these commands in your terminal:

git clone https://github.com/fhenixprotocol/cofhe-hardhat-starter
cd cofhe-hardhat-starter
pnpm install
pnpm cofhe:compile

After installation, explore the project structure: contracts/ holds your Solidity files with FHE imports, test/ for encrypted assertions, and hardhat. config. ts with CoFHE plugin setup. The cofhejs library aids frontend encryption, while Solidity libs provide operations like eadd (encrypted add) and emul (encrypted multiply).

Next, configure your Hardhat network for Fhenix testnets. Update hardhat. config. ts with RPC endpoints from Fhenix docs and your private key. Acquire testnet ETH from faucets, then shield tokens using Fhenix’s tools for encrypted transfers.

This foundation positions you to write functional FHE contracts. In practice, I’ve optimized portfolios where privacy shields strategies from front-running; Fhenix delivers that at scale.

Crafting a Basic Encrypted Counter Contract

Let’s build a simple encrypted counter, demonstrating core FHE ops. Create EncryptedCounter. sol inheriting from Fhenix’s base contract. Import FHE. sol for operations.

Key snippet:

//SPDX-License-Identifier: MIT import "fhevm/lib/TFHE. sol"; contract EncryptedCounter { uint256 public count; bytes32 public encryptedCount; function increment(bytes32 encryptedInput) public { encryptedCount = TFHE. add(encryptedCount, encryptedInput); } function decryptCount(bytes32 encryptedValue, uint32 quote) public view returns (uint256) { return TFHE. decrypt(encryptedValue, quote); } }

Here, TFHE. add computes on ciphertexts. Users encrypt inputs off-chain with cofhejs, submit ciphertexts, and decrypt outputs privately. Deploy via pnpm hardhat run scripts/deploy. js --network fhenixTestnet.

Test it: encrypt a value, increment, verify decrypted result matches. This pattern scales to complex logic like private voting or AMMs.

Scale this foundation by testing locally with Hardhat. Write a test script in test/EncryptedCounter. test. ts using Chai and ethers, incorporating cofhejs to generate encrypted inputs. Assert that decrypted outputs reflect correct increments, confirming FHE ops execute flawlessly on ciphertexts.

Testing and Debugging FHE Contracts Locally

Local simulation catches issues before testnet costs kick in. Fhenix’s Hardhat plugin emulates CoFHE, letting you run full encrypted flows. Generate a quote for decryption with TFHE. decrypt, encrypt increments via JavaScript, and chain operations. Common pitfalls include mismatched encryption schemes or overlooked gas limits for FHE instructions; debug by logging ciphertext sizes and operation traces.

Testing EncryptedCounter: Encrypt, Deploy, Increment & Verify on Fhenix

1. Generate Encrypted Input with cofhejs

In your Hardhat test file (e.g., test/EncryptedCounter.test.js), import cofhejs and generate an encrypted input. Use `const fheContext = await FheContext.load(‘path/to/context’); const encryptedInput = await fheContext.encrypt(1n);`. This creates an encrypted value for the counter starting at 1.

2. Deploy EncryptedCounter Locally

Run `pnpm hardhat node` to start a local fhEVM node. Then deploy using `pnpm hardhat run scripts/deploy.js –network localhost`. Note the deployed contract address. Ensure your hardhat.config.js includes the cofhe-hardhat-plugin for FHE support.

3. Call the Increment Function

In your test, connect to the deployed contract: `const contract = await ethers.getContractAt(‘EncryptedCounter’, address);`. Call `await contract.increment(encryptedInput);`. This performs homomorphic addition on encrypted data without decryption.

4. Decrypt Result and Assert

Fetch the updated counter: `const encryptedResult = await contract.counter();`. Decrypt with `const result = await fheContext.decrypt(encryptedResult);`. Assert `expect(result).to.equal(2n);` to verify the increment worked privately.

PreviousStep 1Step 2Step 3Step 4Next

Once verified, prepare for testnet deployment. Fund your wallet with Sepolia ETH and Fhenix test tokens from faucets like Chainlink or Alchemy. Shield plain tokens into encrypted equivalents using Fhenix’s shielding contracts, a prerequisite for Fhenix testnet shielding guide compliance in private apps.

Deploying to Fhenix Testnet and Shielding Assets

Update your deployment script to target Fhenix’s Ethereum Sepolia or Arbitrum Sepolia endpoints. Execute pnpm hardhat run scripts/deploy. js --network fhenixSepolia. Monitor via block explorers adapted for fhEVM, verifying contract address and initial state.

Shielding transforms public tokens into encrypted ones for contract interaction. Off-chain, use cofhejs or Fhenix CLI to encrypt transfer amounts, then call the shield function on Fhenix’s token contracts. This enables privacy-preserving smart contracts FHE that handle confidential balances. For our counter, extend it to increment shielded user scores in a private game, decrypting only for verified owners.

Interact post-deployment: connect MetaMask to Fhenix RPC, encrypt inputs, submit transactions, and decrypt results client-side. Gas optimization matters; batch FHE ops and minimize decryption calls to keep costs pragmatic on testnets.

Advanced Patterns: Confidential DeFi and Beyond

Push further with homomorphic encryption blockchain contracts for real stakes. Build a private order book where bids stay encrypted until matched via TFHE. cmp (compare) and TFHE. select (conditional). Or craft confidential AMMs computing yields on shielded liquidity without exposing positions, shielding from MEV bots.

In my risk management practice, such privacy thwarts adversarial inference attacks common in public DeFi. Fhenix’s composability shines: call existing protocols from FHE contracts, blending private logic with Ethereum’s liquidity. Ecosystem partners already prototype confidential lending and gaming, hinting at scalable private DeFi.

Security demands vigilance: audit encryption keys, enforce access controls on decryption quotes, and simulate attacks. Fhenix’s 50x decryption speedup, paired with CoFHE’s off-chain heavy lifting, positions it for mainnet viability.

Experimenting on testnet uncovers nuances like ciphertext expansion impacting storage. Profile with Hardhat traces, iterate ruthlessly. This hands-on path equips you to deploy production-grade encrypted smart contracts Fhenix, fortifying apps against data leaks while unlocking novel economics.

Master these tools, and you’ll lead in the privacy-first blockchain era. FHE isn’t hype; it’s the pragmatic shield for tomorrow’s DeFi, where risk stays managed and potential soars unexposed.

About the Author

Isabella Monroe

Author

Isabella Monroe is a DeFi researcher and market analyst with a passion for secure contract deployment and privacy innovation. With 5 years in the crypto ecosystem, she specializes in evaluating privacy protocols and emerging blockchain trends. Isabella's approachable style makes complex topics accessible to all readers. 'Privacy is not a luxury, it's a necessity.'

Author's website Author's posts