Phala Network: The AI & Blockchain Gem You're Probably Overlooking
The convergence of AI and blockchain is becoming one of the most promising technological developments.
Together, these two technologies aim to solve some of the biggest challenges of both Web2 and Web3.
In Web2, two key issues stand out:
Centralization: A handful of tech giants control nearly everything, leaving users with little ownership or control.Privacy: Your data is constantly collected, analyzed, and monetized—often without your full knowledge or consent.
In this post, I want to explore Phala Network.
By combining blockchain, AI, and confidential computing, Phala offers a new way forward—one where data remains private, control is decentralized, and AI works for you, not against you.
As always, this is not about advertising the project but analyzing its potential.
Here's what you will learn:
What is Phala NetworkReal-world Use CasesPhala's Revenue ModelInvestors & PartnershipsAll About The PHA TokenAssessment
Ready? Let's dive in!
Oh, but wait.
If you ask why I look at Phala, here's a quick backstory.
AI + Blockchain — The Next Wave
I am genuinely convinced that the convergence of AI and blockchain technology will create the next massive technological wave.
Through this combination, we will be able to discover blockchain's true potential.
This is more than just an educated guess.
Analysts at GMI Research estimate that the Blockchain AI Market was worth USD 8.3 billion in 2022 and forecast to touch USD 335.8 billion in 2030, growing at a significantly higher CAGR of 58.9% from 2023 to 2030.
And this is a very conservative estimate.
Therefore, I consider it essential to identify the most potential projects likely to shape, drive, or at least ride this next technological evolution.
What is Phala Network
At its core, Phala Network is a decentralized cloud computing protocol that powers Web3 applications while keeping your data private.
Here are some of the main features and benefits Phala brings to the table:
Private & Secure Computing
Instead of running everything on public blockchains where anyone can see your data, Phala uses a technology called Trusted Execution Environments (TEEs).
TEEs act like locked boxes, where computations happen securely without exposing the data.
AI Meets Blockchain
Phala acts as a backbone for AI in the Web3 space. Developers can build AI solutions and easily connect to various services (Web2 and Web3). Imagine an AI agent analyzing your data or automating tasks without ever "seeing" your private information.
The Painpoint Phala Cures
Public blockchains are great for transparency but bad for privacy. Phala bridges this gap by combining:
Confidentiality: Keeps sensitive data private.Scalability: Handles heavy computations off-chain.Integration: Connects both Web2 (traditional internet) and Web3 seamlessly.
In short, Phala allows AI and blockchain to work together without sacrificing security or privacy.
Real-World Use Cases
In fact, we are the beginning of a new era that AI and the combination with blockchain will drive.
Therefore, we might not even see all the use cases this duo will enable in the future.
However, Phala Network's infrastructure already enables some powerful real-world applications, including:
Confidential DeFi: Run automated trading bots securely without exposing proprietary strategies.AI Data Privacy: Securely analyze sensitive healthcare or finance data, preserving confidentiality.Decentralized AI Agents: Power AI-driven decision-making for personalized recommendations, automation, or IoT systems.Gaming and Metaverse: Enable off-chain computation for real-time, scalable performance without compromising decentralization.
Example: A DeFi portfolio optimizer can use Phala to securely analyze user wallets, connect to APIs, and execute profitable trades—all while keeping data private.
Revenue Model
Phala's revenue model revolves around its native PHA token (we will have a closer look at it in the next chapter):
Computation Fees: Developers pay PHA to run secure computations on Phala's network.Phat Contracts Fees: Users or businesses pay fees to deploy advanced off-chain contracts interacting with Web3 and Web2 services.Node Incentives: Online workers (nodes) receive PHA rewards for providing computation power and incentivizing long-term network participation.
This creates a flywheel effect: increased usage → higher demand for computational power → higher demand for PHA.
Unfortunately, however, there's revenue data available.
Partnerships and Cooperations
Since connecting Web3 and Web2 services is one of Phala's core features, it isn't surprising to see many integrated services and supported chains on their website.
It starts with Web2 giants like Gmail or Amazon Cloud, continues with some leading AI projects (The Graph) and Web3 projects (e.g., Uniswap), and ends with connectivity to many top blockchains (Ethereum, BNB, Arbitrum, and many others).
Funding and Investors
Ok, let's move on with some data and numbers.
Phala Network has raised a total of $11.43M across strategic and private funding rounds:
Strategic Round (Sep 2020): $10M raised from investors like IOSG Ventures, SNZ Holding, and Waterdrip Capital.Private Rounds (Jan-Feb 2021):Private 2: Raised $1.4M at $0.01 per PHA token (15.79x ROI).Private Round: Raised $28K at $0.0028 per PHA token (56.39x ROI).
All the strategic investors are companies massively involved in blockchain investments and have founded dozens of top projects.
Roadmap and Development Activity
Phala Network's 2024 roadmap paints an ambitious picture of the project's future.
Compared to many other projects, Phala has a thorough and clearly defined path for the year.
The roadmap highlights five major core streams that align with Phala's mission of enabling confidential and programmable computing for Web3.
Trustless & Transparent Coprocessor Network: Enhancing scalability, security, and seamless interconnections for decentralized computing.User-Friendly & Programmable Coprocessor: Expanding developer tools with Phat Contracts and broader programming language support.Performance Improvements: Optimizing cross-chain execution and boosting overall system efficiency.Coprocessor Adoption: Driving ecosystem growth through partnerships, hackathons, and real-world use cases.Success DAO & Community: Building a DAO-led governance model, expanding treasury plans, and strengthening Phala's community initiatives.
All About the PHA Token
Yes, it's time to dive into the token. Let's start with the basics.
Token Basics
The PHA token has three primary purposes:
Computation Fees: Developers pay PHA to run computations.Staking: Users can stake PHA to secure the network and earn rewards.Incentives: Node operators (the people running Phala) are rewarded in PHA for providing computing power.
Key Numbers
Phala Network ranks #440 on CoinMarketCap with a capitalization of 140M.
Max Supply: 1 billion PHACirculating Supply: ~77% already in circulationTeam Allocation: 6.22%Staking Rewards: 65%Private Sale: 18.67%Slot Auctions & Airdrops: ~10% combined
Token Assessment:
Majority Circulating: Around 77% of the total supply is already in circulation, reducing the risk of sudden large unlocks disrupting the price. The remaining tokens are gradually released over time, ensuring sustainable growth.Staking Rewards (65%): This significant allocation incentivizes active network participation and token utility, which is crucial for long-term ecosystem sustainability.65% of tokens are held by long-term "Holders" — a healthy (though not exceptional) figure indicating solid investors' conviction.The remaining split between "Traders" (4%) and "Cruisers" (30%) reflects active market activity and gradual distribution.Unlock Schedule: The vesting curve shows a smooth and gradual release, minimizing sudden token dumps. By early 2025, most remaining tokens will be unlocked for staking rewards, airdrops, and long-term utility.
Assessment and Outlook
Let's put everything together and start with the most essential part. Phala Network is well-positioned to capitalize on two booming trends:
Confidential Computing: As privacy concerns rise, Phala's TEE-based architecture makes it indispensable for secure Web3 applications.Blockchain AI Growth: The Blockchain AI market is forecast to grow from $8.3B in 2022 to $335.8B by 2030 (CAGR: 58.9%), creating massive opportunities for Phala's AI coprocessor role.
A couple of unique strengths drive these opportunities:
Unique confidential cloud infrastructure.Growing adoption across Web3 and AI sectors.Robust tokenomics with strong staking incentives.
While Phala has clear strengths, there are some notable challenges:
Lack of revenue data: No official revenue numbers make it hard to assess real traction and profitability.Competitor pressure: Phala faces competition from similar projects like Oasis Network, which offers overlapping decentralized cloud and privacy services.
Final Assessment
Based on the overall potential and specific use cases, Phala's market cap is currently undervalued.
With just 130m, you will find tons of memecoins with a much higher valuation—and I am not talking about the cults that are likely to survive the cycle.
However, even when you look at projects in the same niche (OASIS, for example), Phala's market cap is (almost) six times smaller.
Therefore, with increasing demand for secure and scalable AI integrations, Phala's infrastructure positions it as a key player in the post-web era.
Ultimately, based on its current (low) capitalization, Phala represents an interesting investment opportunity with a 5x-10x potential in the long run.
