Confidential Payment

The feasibility of processing encrypted transaction data makes zkFHE naturally suitable for creating confidential transactions on the blockchain. There are a couple of technical solutions to doing so by recuriting FHE as a building block.

An auditable anonymous and confidential payment (AACP) system uses zkFHE to provide necessary features including:

Confidentiality: meaning the payload data of the transaction cannot be revealed.
Anonymous: meaning the sender and the receiver of the transaction are not identified in the financial system.
auditability: meaning the transaction shall be fully administrable to a specific entity, to facilitates comprehensive compliance audits while ensuring the security of user funds.

Such a payment system can be deployed on programmable blockchains, and it is particularly suitable for B2B payment. A rough idea of deploying such a sysytem is as the following.

confidential_payment

System setup The auditor generates a global FHE key pair (PK,SK), where PK is used as the global parameter, and SK is used for auditing.
User registration: The user chooses a uniformly random address secret key a_sk. The auditor can also requre KYC of the user for registration.
Mint: Two ways can be used for mint, either the auditor initial a special transaction to mint the token for the user, or the user sends a public transaction to the smart contract.
Transfer: The sender requests a credential from the auditor. The addresses, amount, and balance information will be encrypted. The encrypted transaction will be processed under off-chain FHE computation.
Audit: The auditor have the ability to uncover the payment transactions and balances of all users within the system. However, the auditor can not steal the assets from the users.