Unlocking Encrypted Computation on Arbitrum: CoFHE Is Live on Testnet

At Fhenix, our mission is to make encrypted computation a first-class primitive onchain. Today, we’re proud to announce a major milestone in that journey: CoFHE is now live on Arbitrum Sepolia.

In our previous blog post  we introduced CoFHE – an FHE processor that leverages Fully Homomorphic Encryption (FHE) to enable confidential smart contracts on any EVM-compatible blockchain. CoFHE enables EVM developers to get access to encrypted computation with a single line of code. 

Today, we are announcing the first practical integration of Fully Homomorphic Encryption (FHE) with an L2 EVM-compatible chain, unlocking powerful privacy capabilities for builders across the Web3 stack.

“Privacy can no longer be ignored.”  

In a recently published blog post, Vitalik Buterin stated: “..I have been increasingly focusing on improving the state of privacy in the Ethereum ecosystem. Privacy is an important guarantor of decentralization: whoever has the information has the power, ergo we need to avoid centralized control over information.” and that “Today, privacy can no longer be ignored” 

Vitalik is right. Blockchains were created with transparency by design, but today, with advancements in FHE and other confidential computing technologies, we can reap the benefits of blockchain without its drawbacks, unlocking adoption for institutional DeFi, on-chain identity, private governance, confidential stablecoins, and much more.

Why Arbitrum?

Two weeks ago, we released CoFHE on Ethereum, lowering the barriers to entry for FHE-based confidentiality. After mapping the market, it was clear that Arbitrum would be the next in line – it’s the most FHE-ready chain in Web3, being scalable, active, developer-friendly, and forward-thinking. Arbitrum checks all the boxes — and then some.

Using Arbitrum’s fraud-proof system, we were able to compile FHE logic into WebAssembly (WASM), making encrypted computation both secure and performant. This wouldn’t be possible on Ethereum alone, which doesn’t natively support FHE.

More importantly, Arbitrum is fast, battle-tested, and beloved by developers. It was the obvious place to launch real encrypted computation.

What Can You Build with CoFHE on Arbitrum?

Arbitrum’s speed, low fees, and massive DeFi ecosystem make it the perfect launchpad for confidential smart contracts. 

Private Lending Markets – Enable borrowing based on encrypted credit scores or reputation, without exposing sensitive user data. Under-collateralized lending becomes viable without compromising privacy.

Confidential Trading Strategies – Build DEXs where positions, slippage tolerances, and strategies are encrypted, eliminating front-running and MEV 

Privacy preserving onchain gaming that brings encrypted game states to trustless environments, enabling strategy, fairness, and unpredictability — without sacrificing decentralization.exploits, while still being fully auditable on-chain.

Encrypted Vaults & Yield Aggregators –  yield strategies that remain private until executed — protecting user alpha from copy trading and strategy sniping.

Confidential Private Payments –  preserve transactional privacy while remaining composable with the broader DeFi stack. Encrypted balances, decrypted only by the user.

Sealed-Bid Auctions & Dark Pools with true price discovery, where bids remain hidden until settlement, leveling the playing field for all participants.

Confidential AI Agents that process sensitive data while maintaining privacy and compliance, enabling private on-chain inference.

And the best part: All of this can be done within Solidity, using standard workflows.

What’s Next

Ethereum and Arbitrum are just the beginning. In the next weeks, we will expand CoFHE across the EVM to new chains, with additional dev tools, support and collaboration with protocol teams to bring encrypted DeFi, gaming and more into production. If you’re building privacy-first dApps — let’s talk.

🔗 Learn more at cofhe-docs.fhenix.zone
📬 Contact us: [email protected]