[matthewdgreen]

FHE does in principle allow you to do this, but it has the limitation that the outputs of the "Tor node" will themselves be encrypted. That's ok if you have the decryption key and are the one interacting with the Tor node. It's not ok if you want the Tor node to output useful data like network packet headers that anyone can parse.

There is another field called cryptographic program obfuscation that tries to avoid this problem, and actually create "encrypted" programs that can output useful unencrypted outputs that anyone can use. There are a lot of restrictions on that type of program. Here's another long (and very high level) blog post on that: https://blog.cryptographyengineering.com/2014/02/21/cryptogr...