Last year, 82% of breaches involved data stored in the cloud, IBM reports. The global average cost of a data breach in 2023: almost $4.5 million.

Nigel Smart and his colleagues at Zama aim to do something about that—and ultimately, help businesses build trust. Smart is chief academic officer of the Paris-based cryptography startup, which specializes in fully homomorphic encryption (FHE).

Let me try to explain that mouthful, with help from Smart. Typically, data is encrypted in transit and in storage—say, on a hard drive. But then that data—for instance, a batch of sensitive customer information—must be decrypted for processing. That leaves it vulnerable to theft. By contrast, FHE is end-to-end encryption that secures data while it’s in use. The data itself is accessible only to the holder of the decryption key.

In principle, a superior FHE engine could encrypt a query you type into Google, Smart says: “Google would do the search for you, not know what the response was, send the response to you, and you would decrypt it.”

Zama, which recently raised $73 million in Series A funding, builds FHE solutions for blockchain, the online ledger used to record transactions. Smart gives the example of a blockchain showing client activity for various banks. To prevent them from seeing one another’s accounts, Zama would add a layer on top of the chain that encrypts all the important stuff, while still allowing data processing. 

Given its ability to encrypt what people do online, FHE has many potential uses. Confidential credit scoring is one. To combat money laundering, banks could use FHE to share information on criminal transactions without revealing anything sensitive. This encryption method would also make facial recognition secure by removing the need to surrender your biometric data.

Homomorphic encryption belongs to a group of what are known as privacy-enhancing technologies, a term Smart doesn’t like. Of the uses we’ve discussed, the only one that’s really about privacy is biometrics, he notes: “Everything else is about merging data together.”  

That’s why Smart and others are promoting “partnership-enhancing technologies” as a better handle. “It’s about enabling new business models or new ways of doing business,” he says, “by encouraging partnerships in a way that you can pool data [so] you get the benefit of pooling data without the negativity.”

It’s a trust thing, Smart adds: “I want to get over that trust barrier, in a way which enables us both to make money, make a decision that is beneficial to society, or whatever.”

Great. So when will homomorphic encryption go mainstream?

We’ll have to wait and see.

The blockchain companies that Zama works with are among the early adopters. Microsoft’s Edge browser also uses homomorphic encryption, to check if the new password you’ve chosen matches one compromised in a breach. 

But for now, there’s a big obstacle to broader use. Computing on encrypted versus unencrypted data is maybe 100,000 times slower, Smart explains. This year or next, though, companies could produce accelerator chips that will make encryption tools like Zama’s run much faster.

“Those two things together will enable widespread adoption,” Smart says of the hardware-software combo. “You’ll see it deployed in more and more applications, as these hardware accelerators come on board and get deployed into cloud infrastructures.”

Sounds like a worthwhile partnership.

Nick Rockel
nick.rockel@consultant.fortune.com

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TRUST EXERCISE

“Sports leagues are more immersed in the sports betting ecosystem than ever before, with the NFL in the middle of a $1 billion agreement with Caesars, DraftKings, and FanDuel while the NBA now allows active players to endorse sports betting or daily fantasy sports services, as long as the endorsement is general in nature and concerns betting on non-NBA action. Earlier this year, LeBron James signed a deal with DraftKings to promote gambling on football.

For sports leagues, it is easy to make assumptions about the public perception of sports betting. Given the omnipresence of gambling, from TV commercials and shows to billboards along the highway, one might assume that the overwhelming majority of Americans are familiar and comfortable with sports betting, if not enthusiastically supportive. The NBA, NFL, and other leagues are making a wager that a stronger alliance with sports betting outfits will bring millions of new fans into the fold and increase the engagement of existing fans, without the potential downsides coming to bear.”

Pro sports’ partnership with the betting industry is a gamble, maintains Will Johnson, CEO of The Harris Poll. He’s got the numbers to back it up. As Johnson points out, sports betting remains divisive, with just half of U.S. adults viewing it in a positive light. It doesn’t help that gambling addiction is at an all-time high. About three-quarters of American adults believe widespread legalization of sports betting will only make that problem worse.

A stark reminder of the controversy that pro sports is courting: Baseball star Shohei Ohtani's translator was recently charged with stealing some $16 million from his boss’s account to make illicit bets. While noting that people's perception can unfairly tarnish legal gambling, Johnson urges sports leagues to acknowledge the backlash and keep a close eye on public opinion. The last thing they want is a duel with their fans.