What Is Crypto Phala Network (PHA)?

Phala Network is a decentralized cloud computing network built on blockchain technology with the goal of providing cloud computing services securely and privately. The network uses the trusted execution environment (TEE) technology found in computer processors to provide secure and private cloud computing capabilities for users of the network. Phala Network is built as the Polkadot blockchain as one of Polkadot’s parachains.

Phala Network was launched in 2018 by Marvin Tong, Zhe Wang, Jun Jiang, and Hang Yin. The network’s development is overseen by the Phala Network Foundation as well as users participating in the network’s governance. Phala Network is built to be a blockchain-based alternative to centralized cloud service providers like Google Cloud and Amazon Web Services (AWS). By utilizing blockchain technology to provide cheap and efficient cloud service, and focusing on user privacy, Phala Network aims to offer a superior service to its centralized competitors.

What Is Phala: Quick facts

  • Phala Network is a blockchain-based decentralized cloud computing service provider. It is the blockchain equivalent of big cloud service providers like Amazon Web Services (AWS), Oracle, and Google Cloud.
  • Phala Network is very focused on privacy and security. Using the network’s services without anyone knowing is a big selling point.
  • Phala Network allows anyone to join the network and rent their computer’s computing power and storage space to those who need them at a fee.
  • Phala Network runs on the Polkadot blockchain as one of its several parachains.

Now, let’s look at how does Phala network work.

 

How Does Phala Network Work?

Phala Network works by letting individuals join the network using their computer as a node on the network. The computers that are nodes on the network can be used by clients to meet whatever cloud computing needs they have.

For example, a client who wants to carry out some computation on Phala Network will have those files encrypted and sent to the computer of someone who runs a node with his computer on the network. Once on the person’s computer, the file is decrypted in the trusted execution environment (TEE) and the computation is carried out, the results are then encrypted and sent back to the client.

The trusted execution environment (TEE) is a secure part of a computer’s main processor. Computations carried out in the trusted execution environment of a processor are secure and private so much so that even the owner of the computer on which the computation is running does not have access to the data in it.

There are two types of nodes on the Phala Network, Miner nodes, and Gatekeeper nodes. Miner nodes are run by people who want to put up their computer hardware on Phala Network for use by clients on the network. Gatekeeper nodes ensure that there is end-to-end encryption on Phala Network between clients using the network and the computers of the miner nodes on which instructions are executed. Gatekeeper nodes make sure that information on the network is encrypted once outside the TEE of Miner node processors to ensure that the information is private at all times.

This way code run on Phala Network is private at all times seen only by the client who runs the code. People and blockchain platforms typically use Phala Network to run code for smart contracts executing transactions that need to be private. Both Miners and Gatekeepers have to stake PHA tokens with the network for the privilege of running a node. In the case of any wrongdoing, the tokens staked with the network are slashed and their value decreases.

 

Providing Services on Phala Network

Miners who provide their computer hardware for use on the Phala Network as well as Gatekeepers who secure the network need to have PHA tokens to be able to carry out their duties. They both need to stake PHA tokens to be able to provide their services on Phala Network. Staking PHA tokens is a financial incentive for them to do their jobs well as any default on their part will result in some part of the tokens that have been staked being slashed. Both Miners and Gatekeepers also get rewarded with PHA tokens.

Transaction Payments

The PHA token is used to pay for all transactions carried out on Phala Network. Users who want to use the network’s cloud computing capabilities pay for the services they receive in PHA tokens. While the Miners who put up their computer hardware capabilities for use on the network get paid in PHA tokens when users make use of their hardware capabilities.

Network Governance

Another thing about PHA is that the PHA token is used to participate in the governance of the network. Like many other blockchain-based organizations, Phala Network is governed by the Phala Network community and by PHA token holders in particular. Community members can put proposals forward regarding changes that they want to see on the network and PHA token holders vote on the proposals. Proposals that receive more than 50% of the total votes cast get executed on the network.

 

Phala Network History & Founders

Phala Network was founded in 2018. Marvin Tong founded the network along with three other people Zhe Wang, Jun Jiang, and Hang Yin. All co-founders had previously worked at big technology companies like Google, DiDi Chuxing, and Tencent.

They all came together to launch Phala Network because they wanted to create a cloud infrastructure for the blockchain that would enable blockchain-based organizations to carry out computations and run code privately.

Phala Network continues to be run by a team consisting of the four original co-founders with the addition of Ruby Wang as the Chief Marketing Officer of the platform.

 

Phala Network Partnerships & Investors

To raise money to develop Phala Network properly, the founders raised money from investors by having a private token sale. The network held two rounds of private token sales and raised a total of $1.68 million over both rounds. The investors in the rounds received 15% of the total amount of PHA tokens in exchange for their investments.

The network also received grants from the Web3 Foundation an organization founded by Ethereum co-founder Gavin Wood to support the development of innovative blockchain-based projects. Phala Network has also entered into partnerships with other blockchain-based organizations to enhance its platform and product offerings. Phala Network’s partnerships include those with Chainlink, SubQuery, and Amara Finance.

 

Phala Network SWOT Analysis

Phala Network Strengths

Phala Network makes it possible for blockchain-based organizations to access cloud-based computing resources on the blockchain easily and seamlessly. This could be anything from storing files on the cloud to using Phala Network to carry out confidential transactions using TEE technology.

Phala Network Weaknesses

Phala Network depends on bridges between other platforms to provide integration of Phala Network into other platforms. This is a weakness because bridges in crypto are highly susceptible to attacks by hackers looking to steal funds and some of the biggest exploits in the crypto ecosystem have been on bridges. Such attacks, if successful, could destroy Phala Network.

Phala Network Opportunities

Phala Network provides something that is not a common feature of blockchain-based platforms and that is the ability to carry out transactions privately. Phala Network has the opportunity to offer that to blockchain organizations that need private transactions for their

Phala Network Threats

Privacy-focused blockchain platforms run the risk of becoming a haven for people carrying out illegal transactions on the blockchain. Phala Network could become used by hackers to move stolen crypto funds for example. This might then attract some repercussions like a government sanction on the network. This would be much like how Tornado Cash, a crypto project focused on helping people move funds anonymously and privately, was sanctioned by the United States government.

What is Token Phala Network (PHA)?

PHA is the native utility token of the Phala Network and is used for its cloud-based economy. The PHA token, which has a maximum supply of 1 billion PHA, helps secure the network and maintain the network’s governance mechanism.

Any participant wishing to purchase computing resources and services can do so with PHA, whether it is an external blockchain needing to add resources or an individual looking to confidentially store data. In turn, those who provide resources to secure the network can be paid in PHA.

PHA is also used by gatekeeper and miner nodes, who must stake their PHA to perform their duties. Staking ensures that if they act maliciously, their staked PHA will be slashed as a penalty. Last, anyone who acquires PHA can become a stakeholder and participate in the on-chain governance of the parachain, meaning they can vote on any proposed changes to the Phala network.

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