FHE-OTC: Private Over-the-Counter Token Swap

Privacy-First P2P Token Exchange powered by Fully Homomorphic Encryption (FHE)

🎯 Overview

FHE-OTC is a decentralized over-the-counter trading platform that enables private peer-to-peer token swaps using Fully Homomorphic Encryption. All sensitive trading data—prices, amounts, and order details—remain encrypted on-chain, providing unprecedented privacy for institutional and retail traders.

Key Features

• 🔒 Encrypted Order Book - Prices and amounts never exposed on-chain
• 🛡️ MEV Protection - No front-running possible without price visibility
• 🤝 P2P Matching - Direct counterparty settlement without intermediaries
• 🌐 EVM Compatible - Works on Arbitrum, Base, and any EVM chain with CoFHE

🏗️ Architecture

┌─────────────────────────────────────────────────────────────────┐
│                        Frontend (React)                          │
│  ┌─────────────┐  ┌─────────────┐  ┌─────────────┐             │
│  │   Wallet    │  │   Order     │  │   Trade     │             │
│  │ Connection  │  │   Form      │  │   History   │             │
│  └─────────────┘  └─────────────┘  └─────────────┘             │
│                         │                                        │
│                   cofhejs SDK                                    │
│              (Client-side Encryption)                            │
└─────────────────────────────────────────────────────────────────┘
                          │
                          ▼
┌─────────────────────────────────────────────────────────────────┐
│                   Smart Contracts (Solidity)                     │
│  ┌─────────────────────────────────────────────────────────┐   │
│  │                    FHE-OTC.sol                            │   │
│  │  ┌─────────────┐  ┌─────────────┐  ┌─────────────┐       │   │
│  │  │ Encrypted   │  │   Order     │  │ Settlement  │       │   │
│  │  │ Order Book  │  │  Matching   │  │   Engine    │       │   │
│  │  └─────────────┘  └─────────────┘  └─────────────┘       │   │
│  └─────────────────────────────────────────────────────────┘   │
│                         │                                        │
│                   CoFHE Coprocessor                              │
│              (FHE Operations on Encrypted Data)                 │
└─────────────────────────────────────────────────────────────────┘
                          │
                          ▼
┌─────────────────────────────────────────────────────────────────┐
│                    Blockchain Layer                              │
│         Arbitrum / Base / Ethereum (with CoFHE support)         │
└─────────────────────────────────────────────────────────────────┘

🔐 Privacy Guarantees

Data Type	Traditional DEX	FHE-OTC
Order Price	Visible to all	Encrypted
Order Amount	Visible to all	Encrypted
Order Direction	Visible to all	Encrypted
Counterparty Identity	Visible after match	Optional anonymity
MEV Exposure	High risk	Protected

🚀 Quick Start

Prerequisites

• Node.js 20+
• Bun or npm
• Foundry (for contract development)
• MetaMask or compatible wallet

Installation

# Clone the repository
git clone https://github.com/buffedgecko/fhe-otc.git
cd fhe-otc

# Install dependencies
bun install

# Setup environment
cp .env.example .env

Deploy Contracts (Testnet)

# Deploy to Arbitrum Sepolia
forge script script/Deploy.s.sol --rpc-url $ARBITRUM_SEPOLIA_RPC --broadcast

# Or deploy to Base Sepolia
forge script script/Deploy.s.sol --rpc-url $BASE_SEPOLIA_RPC --broadcast

Run Frontend

cd frontend
bun install
bun run dev

📁 Project Structure

fhe-otc/
├── contracts/
│   └── src/
│       ├── FHEOTC.sol          # Main OTC contract
│       ├── EncryptedOrder.sol  # Order data structures
│       └── interfaces/         # Contract interfaces
├── frontend/
│   ├── src/
│   │   ├── components/         # React components
│   │   ├── hooks/              # Custom hooks for FHE
│   │   ├── pages/              # Next.js pages
│   │   └── lib/                # Utilities
│   └── package.json
├── docs/
│   ├── ARCHITECTURE.md         # Detailed architecture
│   ├── SECURITY.md             # Security considerations
│   └── TUTORIAL.md             # Step-by-step guide
├── test/
│   └── FHEOTC.t.sol            # Foundry tests
├── foundry.toml
├── package.json
└── README.md

🧪 Testing

# Run all tests
forge test

# Run with verbosity
forge test -vvv

# Run specific test
forge test --match-test test_CreateOrder

📊 Use Cases

1. Institutional Trading

Large token swaps without market impact or front-running risk.

2. Private Settlements

OTC deals between parties who want to keep terms confidential.

3. MEV-Sensitive Trades

Execute trades without exposing your intentions to searchers.

4. Whale Protection

Trade large amounts without triggering price manipulation.

🔧 Smart Contract API

Create Order

function createOrder(
    address tokenA,
    address tokenB,
    InEuint64 calldata encryptedAmountA,
    InEuint64 calldata encryptedAmountB,
    bytes calldata encryptedPrice
) external returns (bytes32 orderId);

Match Orders

function matchOrders(
    bytes32 orderA,
    bytes32 orderB,
    Permission calldata permission
) external;

Cancel Order

function cancelOrder(
    bytes32 orderId,
    Permission calldata permission
) external;

🔑 FHE Operations

FHE-OTC uses the following encrypted operations:

Operation	Description
FHE.add()	Add encrypted amounts
FHE.sub()	Subtract encrypted amounts
FHE.mul()	Multiply encrypted values
FHE.eq()	Check equality (encrypted result)
FHE.lt()	Less than comparison
FHE.gt()	Greater than comparison
FHE.select()	Conditional selection

🌐 Network Configuration

Network	Chain ID	RPC	Faucet
Arbitrum Sepolia	421614	https://sepolia-rollup.arbitrum.io/rpc	Alchemy Faucet
Base Sepolia	84532	https://sepolia.base.org	Alchemy Faucet
Ethereum Sepolia	11155111	https://rpc.sepolia.org	Alchemy Faucet

📜 License

MIT License - See LICENSE for details.

🙏 Acknowledgments

• Fhenix - FHE Infrastructure
• Zama - TFHE Library
• CoFHE - Solidity FHE Library
• cofhejs - JavaScript SDK

📞 Community

• Telegram: Fhenix Community
• Discord: Fhenix Discord
• Twitter: @FhenixIO

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