Phala Network Introduction
The Phala Network combines the power required to build complex modern applications with the decentralized trust and transparency features of blockchain, allowing users to provide computing power and earn returns. These users are called "workers."
The network also allows "client" developers to integrate their applications into the Phala network and provide a pre-built low-code experience using templates. It connects dApps to external APIs, stores data on any platform, performs complex calculations, and can even automatically execute smart contract functions based on real-time data.
History and Development Team
Phala Network was founded in 2018 by Marvin Tong, a senior product manager and former employee of Tencent and Didi, and Hang Yin, the lead developer of Bitcoin Gold and a senior developer with about 10 years of coding experience.
The project launched a testnet called PoC-1 in March 2020, which allowed users to issue new confidential tokens and transfer them to other users. In July 2020, the project announced the second testnet phase, PoC-2, which led to the testnet Vendetta or PoC-3, which featured the integration of decentralized TEE nodes and, ultimately, the launch of its mainnet as a parachain on Polkadot.
As of the end of 2020, Phala Network conducted a round of financing and raised more than $10 million. Participating investors include Candaq Group, InfiChain, Blue Mountain Labs, Incuba Alpha Group and Exoplanet Capital.
The project’s native token, PHA, was launched as an Ethereum token in 2020 and as a token on Kusama in 2021.
Core Components
Architecture
Phala Network Introduction
The Phala Network combines the power required to build complex modern applications with the decentralized trust and transparency features of blockchain, allowing users to provide computing power and earn returns. These users are called "workers."
The network also allows "client" developers to integrate their applications into the Phala network and provide a pre-built low-code experience using templates. It connects dApps to external APIs, stores data on any platform, performs complex calculations, and can even automatically execute smart contract functions based on real-time data.
History and Development Team
Phala Network was founded in 2018 by Marvin Tong, a senior product manager and former employee of Tencent and Didi, and Hang Yin, the lead developer of Bitcoin Gold and a senior developer with about 10 years of coding experience.
The project launched a testnet called PoC-1 in March 2020, which allowed users to issue new confidential tokens and transfer them to other users. In July 2020, the project announced the second testnet phase, PoC-2, which led to the testnet Vendetta or PoC-3, which featured the integration of decentralized TEE nodes and, ultimately, the launch of its mainnet as a parachain on Polkadot.
As of the end of 2020, Phala Network conducted a round of financing and raised more than $10 million. Participating investors include Candaq Group, InfiChain, Blue Mountain Labs, Incuba Alpha Group and Exoplanet Capital.
The project’s native token, PHA, was launched as an Ethereum token in 2020 and as a token on Kusama in 2021.
Core Components
Architecture
Phala Network is designed as a trustless cloud computing solution for the blockchain space, aiming to bridge the real world and the digital space by promoting and maintaining powerful dApps. The design includes the Phala blockchain, off-chain runtime (p-Runtime), and bridge relays.
The Phantom blockchain is the central infrastructure of the network that handles communication and verification. Meanwhile, off-chain runtime functions perform complex computations within secure enclaves, allowing the network to process confidential user data and operational information off-chain.
A bridge relay (or Pherry) is a messenger that connects the blockchain with the off-chain secure enclave. It is responsible for translating messages and ensuring data flows smoothly and is executed securely. The hardware-isolated architecture allows the network to remain decentralized while protecting against malicious actors in the crypto space.
Phala Node
Nodes in the Phala network consist of three types: client nodes, worker nodes, and gateway nodes. Client nodes are developers or users who interact with the network to create or launch dApps without the need for special hardware.
Worker nodes are nodes that utilize secure areas within the network infrastructure to execute complex applications and process confidential information. They are the backbone of the network, hidden behind the scenes so they are not exposed to developers or customers. Instead, they are grouped into clusters that serve as dedicated units for contract execution. These clusters provide advantages such as isolation, inter-node collaboration, cross-cluster interaction, and increased efficiency.
Gateway nodes are key managers or authorities in the network. They ensure the smooth operation of the network by validating transactions, managing resources, and maintaining security protocols.
Secret Key Hierarchy
The Phala network draws on the initial work of the Ekiden paper and uses a multi-layer key hierarchy as a security feature. The key hierarchy includes the user's identity key, allowing for secure signing and communication.
The WorkerKey key pair is generated in a secure isolation environment to protect workers individually. The next layer is contract-related keys, which include the ClusterKey and ContractKey for worker clusters. These contract-related keys are generated from the highest level in the key hierarchy, which is the MasterKey owned by the Gateway.
The key hierarchy controls the level of access a hacker or bad actor gains when a node is compromised. A compromised WorkerKey allows an attacker to access the message ClusterKeys and be able to impersonate a worker, potentially providing false data.
A compromised ContractKey will expose historical data, contract state, and potentially sensitive data. Finally, a compromised MasterKey gives hackers full access to the network, but this is mitigated by security features such as key rotation, updating the MasterKey, removing compromised gateways, generating new MasterKeys, and future multi-party computation (MPC) systems that distribute the master key among numerous gateways so that no single gateway has all the components of the MasterKey.
Phat Contract
Phat contracts are programs executed on the Phala Network, similar to smart contracts on the blockchain. The Phala Network is a computational network focused on preserving privacy. Phat contracts do this by performing robust, free computations, resulting in greater dApp efficiency at minimal cost.
Phat contracts can access the internet, integrate with Web2 APIs, securely verify data, and protect user privacy when performing computations. They address the limitations of smart contracts such as interoperability, the cost of executing each event, and the ability to execute functions off-chain or on-chain.
However, Phat contracts are not intended to replace smart contracts, but to reduce the compactness of on-chain smart contracts as much as possible while implementing more task calculations off-chain. This is possible because Phat contracts can also interact with smart contracts on different blockchains (such as EVM or Substrate) without the need for bridging.
Phala Ecosystem Features: Phala Dashboard, SubBridge, and Phala World
Phala Dashboard
Phala Dashboard is used to access the functionality of the Phala network. It includes a developer section and a network user section.
The developer section consists of no-code and native code features for developers to build using the no-code Phat contract suite or create their own Phat contracts. It also has a program to provide grants and technical guidance to developers who want to make the most of Phat contracts. The network user section provides features such as staking, governance, calculating returns, bridging, and learning.
This applies to holders of PHA tokens and participants in the Phala ecosystem, whose goal is to earn passive income by providing hardware to the network, staking tokens to determine the network, making decisions in the ecosystem, and exploring the network while bridging tokens to other chains.
SubBridge
SubBridge is a cross-chain router developed by Phala Network for parachains in the Polkadot ecosystem. It is designed to enable seamless transfer or bridging of assets and information between parachains, Ethereum, and other blockchain networks.
To use the bridge, the user must first ensure that there is a router available to transfer assets and that the assets to be transferred can be recognized and processed in the target chain. The bridge is an EVM-compatible cross-chain protocol that handles uint32 type assets.
By integrating into the Polkadot ecosystem, any parachain built on the Substrate framework can easily integrate with SubBridge, thereby expanding its interoperability with other blockchains. Projects such as SygmaBridge have already integrated with the SubBridge protocol.
Phala World
Phala World is a gamified version of the Phala Network blockchain that tracks user activity and network participation through a play-to-build architecture using soul-bound NFTs. The network tracks levels of delegation, voting, and social media engagement, which are converted into properties of the user's soul-bound NFTs.
Phala World is set in the period after the end of the AI War, with four surviving species: Robots, Pandroids, AI Spectres, and X-Genes. Users can choose professions such as Druids, Warriors, etc. The platform aims to provide an immersive gaming experience through quests and interactions, allowing users to upgrade through stack activities on or off-chain.
What is PHA Coin?
PHA tokens are the native tokens of the Phala network, and workers who provide computing services will receive rewards in the form of PHA tokens. It allows users to participate in staking activities as developers to run their Phat contracts and programs, or obtain governance privileges to make decisions in the ecosystem.
Like most decentralized autonomous organizations (DAOs), users can stake PHA directly or delegate PHA to stakers and receive rewards. The total supply of the token is 1 billion PHA tokens, with a circulation of approximately 672 million and a total market value of $84 million.
Risk Analysis
Advantages
The Phala network architecture allows users to calculate complex data off-chain while maintaining security in a secure enclave that protects sensitive data. The platform provides related infrastructure and tools such as the Phala Contract SDK and Phala Node to help developers and users.
The platform also enhances interoperability by integrating with Polkadot and SubBridge to facilitate seamless transfer of assets and data between chains. Finally, the gamified Phala World will attract and retain users who want an immersive experience.
Disadvantages
Although the project provides important functionality, it can be challenging for new users who don’t understand how to interact with blockchain.
Additionally, the key hierarchy in the project’s architecture gives gateway nodes tremendous power. Although the project is decentralized, the MasterKey feature gives the architecture a degree of centralization that can cause concern among more experienced DeFi users.
challenge
A significant challenge facing the project is that it is relatively new and under development. This means that Phala Network’s dApp ecosystem and user base are still relatively small compared to mature projects. This also means that the future success of the project depends on how many users and developers adopt its technology.
Additionally, the uncertainty and volatility of the cryptocurrency space could also affect the project. The changing regulatory environment for cryptocurrencies, coupled with the price volatility of PHA tokens, could make the project unattractive to future users.
Competitive product analysis
Like the Phala Network, a general-purpose off-chain computing platform that is addressing privacy and scalability issues, the Aztec Network is a privacy-focused Ethereum network focused on scalable smart contract computing power for DeFi use cases.
Phala Network uses Secure Enclave (SGX) as a worker node. Meanwhile, zero-knowledge (ZK) proofs ensure data verification without compromising confidentiality, while Aztec Network uses Aztec Sandbox combined with ZK roll-ups to ensure privacy.
Although the Aztec Network is a layer 2 protocol, it relies on zk-SNARK technology, which will have higher costs compared to Phala, which relies on Polkadot blockchain fees. The Phala Network is a general-purpose network that is not limited to a specific industry and is more accessible to users than the Aztec Network, which is limited to financial dApps and cannot meet the broader needs of the crypto space.
Is PHA worth investing in?
The main value proposition of the PHA token is to provide developers with access to decentralized cloud services and provide users with earning opportunities.
Holders of PHA tokens can stake and earn, contribute computing power, earn profits, delegate, and participate in governance activities. As the project grows, they can interact with other dApps and features such as Phala World built on the Phala Network, and enjoy cross-chain activities through SubBridge.
The project can build a strong and active community by encouraging gamified social interactions, making its token viable in the long run.
How to get PHA Coins?
To obtain PHA tokens and become part of the Phala Network ecosystem, users can follow this simple process:
Setting up your wallet
One way to get PHA tokens is to buy them through an exchange. A good option is the reputable Gate.io. To do this, users must create a Gate.io account, complete the KYC verification process, and top up the account to purchase tokens.
Using PHA Tokens
After users obtain PHA tokens, they can explore the Phala Network ecosystem by participating in staking, bridging, contributing computing power, participating in governance, etc. to obtain passive rewards.
