Fhenix CoFHE Tutorial: Encrypt DeFi Trades on Ethereum Sepolia Testnet
DeFi traders on Ethereum face a stark reality: every swap, every position is public ledger fodder, ripe for front-running and analysis. With ETH steady at $1,978.83 amid a 24-hour gain of and $12.08, the network’s liquidity draws sharks. Enter Fhenix’s CoFHE, an off-chain FHE coprocessor that encrypts computations without decrypting data, perfect for private trades on Sepolia testnet. This tutorial walks you through encrypting DeFi trades using Solidity and fhEVM, balancing developer accessibility with ironclad privacy.
Introductory fhEVM Encrypted Adder Contract
This introductory Solidity contract demonstrates fhEVM’s core capability for encrypted computations on the Fhenix testnet. It performs homomorphic addition on encrypted inputs, a foundational operation for confidential DeFi applications.
```solidity
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.19;
import {FheContext, FheData} from "@fhenix/contracts/src/FheContext.sol";
contract EncryptedAdder {
/// @notice Adds two encrypted numbers using fhEVM
/// @param a First encrypted input
/// @param b Second encrypted input
/// @return Encrypted sum
function add(FheData memory a, FheData memory b) public pure returns (FheData) {
return FheContext.add(a, b);
}
}
```Deploy this contract on the Fhenix IO Network Testnet (compatible with Ethereum Sepolia tooling) to test encrypted arithmetic. Build upon it by adding multiplication or conditionals for real-world trading logic, keeping in mind gas costs and encryption overheads.
Prepare Your Local FHE Development Kit
Fhenix streamlines FHEVM development via a Hardhat starter kit, sidestepping the usual crypto dev headaches. CoFHE handles encrypted ops off-chain, relaying results to EVM chains like Ethereum Sepolia. Opinion: it’s a pragmatic leap over ZK’s proof bloat for simple trades, though gas costs warrant caution in production.
- Install Node. js (v18 and ), Yarn, and Foundry for testing.
- Clone the official repo: it’s battle-tested for CoFHE mocks.
- Run
yarn installto fetch @fhenix/cofhe-hardhat-plugin and cofhejs library.
This setup mimics mainnet behavior locally, crucial for iterating on encrypted trade logic without Sepolia faucets draining early.
Integrating CoFHE Plugin in Hardhat and Spinning Up Local FHE Node
To enable CoFHE in your Hardhat project for encrypted DeFi trades, integrate the plugin and set up a local FHE node. This allows testing before deploying to Sepolia testnet.
### Hardhat Configuration for CoFHE
Install the CoFHE Hardhat plugin:
```bash
npm install --save-dev @fhenix-dev/hardhat-cofhe @nomicfoundation/hardhat-verify
```
Add the plugin and configure your networks in `hardhat.config.js`:
```javascript
require('@nomicfoundation/hardhat-toolbox');
require('@fhenix-dev/hardhat-cofhe');
module.exports = {
solidity: {
version: '0.8.23',
settings: {
optimizer: {
enabled: true,
runs: 200,
},
},
},
networks: {
fhenixLocal: {
url: 'http://127.0.0.1:3000',
chainId: 31337,
accounts: [
'0xac0974bec39a17e36ba4a6b4d238ff944bacb478cbed5efcae784d7bf4f2ff80',
],
cofhe: true,
},
sepoliaFhenix: {
url: 'https://rpc.testnet.fhenix.io',
chainId: 78031,
accounts: process.env.PRIVATE_KEY ? [process.env.PRIVATE_KEY] : [],
cofhe: true,
},
},
};
```
### Starting the Local FHE Node
Use Docker to spin up a local fhEVM node (requires Docker installed):
```bash
docker run -d --name fhe-local-node -p 3000:3000 ghcr.io/fhenixprotocol/fhevm-node:latest --chain-id 31337 --dev
```
Check logs: `docker logs -f fhe-local-node`
Stop the node: `docker stop fhe-local-node && docker rm fhe-local-node`
**Note:** This sets up a basic local node for development. For production-like testing, refer to Fhenix docs for full relayer setup.With Hardhat configured and the local node running, compile and deploy FHE-enabled contracts using `npx hardhat compile` and `npx hardhat run scripts/deploy.js –network fhenixLocal`. Verify compatibility with Sepolia testnet settings.
Encrypt Trade Inputs with FHE Primitives
Core to fully homomorphic encryption DeFi is wrapping trade params – amounts, prices, addresses – in FHE ciphertexts. Fhenix’s cofhejs generates these client-side. Start with a basic swap contract: encrypt input ETH amount and token ratio, compute output off-chain via CoFHE.
Balance note: FHE excels at arithmetic like trade math (multiplies, adds) but lags on hashes; hybrid with ZK for signatures if needed. Here’s the flow: client encrypts, on-chain proxy requests CoFHE compute, decrypts result only for the caller.
CoFHE processes encrypted data using FHE, enabling privacy-first smart contracts on EVM chains.
Craft your first encrypted trade: assume a Uniswap-like swap. Use fhEVM Solidity private DeFi syntax with fhe. encrypt mocks locally.
- Define trade struct:
struct Trade { uint256 amountIn; uint256 minAmountOut; } - Encrypt:
FheCiphertext encryptedAmount = FhenixLib. encrypt(amountIn); - Proxy to CoFHE:
requestEncryptedCompute(encryptedAmount);
Compile and Test Encrypted Swap Logic Locally
With Hardhat’s FHE plugin, compile blends standard Solidity with FHE ops. Run npx hardhat compile; expect no errors if CoFHE types resolve. Local testing uses mock FHEVM node – spin it via yarn fhenvm: start.
Script a test: encrypt a 1 ETH trade at current ETH price context ($1,978.83), compute shielded output. Assert privacy: logs show ciphertexts, not plaintexts. Pitfall: ciphertext sizes balloon; optimize with smaller fields for DeFi volumes.
This local loop builds confidence before Sepolia. Fhenix’s fhenix cofhe tutorial edge? Seamless EVM compatibility means your existing DeFi contracts upgrade incrementally, not from scratch.
| Step | Command | Output |
|---|---|---|
| Start FHE Node | yarn fhenvm: start | Mock CoFHE ready on localhost: 8080 |
| Test Script | npx hardhat run scripts/deploy. js –network localhost | Encrypted trade executed, privacy verified |
Local validation complete, now bridge to Ethereum Sepolia testnet where CoFHE runs live, processing fhe ethereum sepolia testnet ops with real FHE backends. This step tests end-to-end privacy under network conditions, exposing latencies absent in mocks. Fhenix’s design shines here: EVM bytecode deploys unchanged, CoFHE intercepts encrypted calls transparently.
Configure Hardhat for Sepolia and Deploy
Update hardhat. config. js with Sepolia RPC and Fhenix chain ID – typically 2719 for their testnet overlay, but confirm via docs for latest. Fund your deployer via Sepolia faucet; 0.1 ETH suffices for gas. Run npx hardhat run scripts/deploy. js --network sepolia. Watch the proxy contract land, ready for encrypted trades.
Post-deploy, your contract address proxies to CoFHE. Verify via explorer: source matches, no FHE secrets exposed. Pitfall: Sepolia congestion spikes gas; batch requests if scaling trades. At ETH’s $1,978.83 stability, testnet mirrors mainnet economics closely enough for risk assessment.
Client-Side Encryption and Trade Execution
Shift to frontend: cofhejs library encrypts trade params in-browser or Node. For a shielded swap, encrypt amountIn (say 0.5 ETH) and slippage tolerance. Call contract’s executeEncryptedSwap(FheCiphertext amount, FheCiphertext minOut); CoFHE computes output privately, returns decrypted only to you.
Practical flow: generate keys client-side, encrypt, sign tx. On-chain: proxy queues compute job, polls CoFHE for result. Latency hovers 10-30 seconds now, viable for non-HFT DeFi but plan async UX. Opinion: fhEVM solidity private defi unlocks redactable trades without ZK’s circuit rewrites – incremental wins for DEX forks.
| Action | Client Code | Privacy Gain |
|---|---|---|
| Encrypt Amount | cofhejs. encrypt(1e18) | Hides position size |
| Request Compute | contract. requestCompute(encAmount) | Off-chain price calc |
| Decrypt Result | coFHE. decrypt(result) | Only caller sees output |
Test it: swap 1 ETH worth at $1,978.83 for a mock token. Logs reveal ciphertexts; Etherscan shows opaque txs. Success metric: front-runners glean nothing actionable.
Optimizations and Production Pitfalls
For fully homomorphic encryption defi, tune ciphertext fields to 32-bit for trade volumes under $10k – cuts compute time 40%. Hybridize: FHE for arithmetic, commit-reveal for orders. Gas audit: CoFHE requests cost 200k and ; subsidize via protocol fees long-term.
- Monitor CoFHE queue depths on Sepolia dashboard.
- Batch multi-trade computes for efficiency.
- Key rotation: regenerate per session to thwart replays.
Fhenix CoFHE empowers fhenix redactmoney shielded tokens, shielding balances while enabling composable DeFi.
Balanced view: FHE’s generality trumps ZK for ad-hoc queries, but matures slower. Sepolia proves viability; mainnet beckons as ETH holds $1,978.83. Deploy today, iterate privately, and outmaneuver the transparency trap in DeFi’s arena.
Builders embracing this stack position for confidential vaults, MEV-proof AMMs, and enterprise bridges – privacy as the new liquidity moat.
