From games, the metaverse, and Web 3, how Phala is opening up a new battlefield for decentralized Web 3 cloud computing

Author: Hu Tao, Chain Catcher

Let's take a moment to rewind 16 years, when Jeff Bezos still had a bit of hair on his head.

On November 24, 2006, the e-commerce giant Amazon experienced the craziest "Black Friday" in its history, with website traffic skyrocketing several times over. However, Jeff Bezos had proactively purchased a large amount of computing equipment and network bandwidth, successfully managing the surge in traffic.

But when the transactions calmed down, a significant amount of computing resources began to sit idle, undoubtedly leading to huge operational costs for Amazon. However, this problem did not stump Jeff Bezos; he quickly decided to lease out these idle computing resources to improve asset utilization, thus giving birth to a brand new concept of "cloud computing" known as AWS!

However, as the industry scale continued to expand, issues of market monopoly began to emerge. According to data from British research firm Canalys, today the cloud computing market share is almost divided among a few companies: Amazon, Google, Microsoft, and Alibaba. The dangers of monopoly need not be elaborated upon; it has already brought a series of negative impacts to the cloud computing industry, such as reduced competition leading to price increases, low utilization of computing resources, lack of security and transparency, and concerns over user privacy. So, how can we solve these problems? Phala Network might provide us with a satisfactory answer.

1. A Brief Introduction to Phala Network

The low utilization rate of computing resources in traditional data centers is an undeniable fact. Data shows that the cloud computing infrastructure has only provided an average of no more than 6% of its maximum computing power to the market each year, with as much as 30% of cloud servers still in a "sleeping" state. It is estimated that 96% of cloud servers in the world's 8.4 million data centers are not fully utilized. Meanwhile, in the traditional cloud computing market, giants like Amazon, Google, Microsoft, and Alibaba play the role of "intermediaries," controlling the formulation of the entire industry's "rules of the game," which has caused significant dissatisfaction among users, especially when personal and corporate information is "stored" on cloud service providers' servers, leading to concerns over data privacy.

Some industry experts have indicated that the major cloud service providers in the market have not done enough in terms of telemetry and transparency, needing to disclose the situation regarding the collection of metadata behind the scenes. Fortunately, this situation is changing. With the continuous development of blockchain technology, privacy cloud computing projects like Phala Network are addressing these issues.

Many people may have learned about Phala Network through Polkadot, but its founding team was established back in 2018 and has been dedicated to the implementation of trusted computing technology. After communicating with the Polkadot team to determine the development roadmap, they embarked on the journey of encrypted computing, receiving support from the Web 3 Foundation and successfully joining the first batch of Substrate Builder's Program members, becoming one of the shared underlying infrastructures in the Polkadot ecosystem.

In 2021, Phala Network became the first Polkadot project to be listed on trading platforms such as Binance, OKeX, and Huobi, and at the beginning of 2022, it ventured into the metaverse and NFT fields, initiating the construction of a "global Web 3.0 computing cloud."

It must be acknowledged that by aggregating the excess computing capacity from around the globe through a consensus protocol, Phala Network has brought disruptive innovation to the traditional cloud computing field, while utilizing a unique hybrid architecture based on Substrate and Secure Enclaves to make high-performance computing clouds possible.

Phala Network ensures the stable operation of this cloud computing network through two types of "worker nodes": one is the "Gatekeeper" node, which mainly organizes interactions between users and across chains and is responsible for maintaining the blockchain state and consensus rules; the other is the mining node, which mainly fulfills various computing tasks and responsibilities by renting computing power from the network.

The following diagram shows the distribution of Phala Network's nodes, from which it can be seen that the network nodes basically cover various parts of the globe, and the degree of decentralization is relatively high.

Image source: Polkadot official website

In Phala Network, the native token PHA plays a significant role (the allocation ratio is shown in the diagram below). First, Phala provides a variety of infrastructures, including cross-chain data confidentiality layers, multi-party privacy computing protocols, and decentralized general computing platforms, all of which use the network's native token PHA for the purchase of trusted computing power, on-chain resources, and off-chain data storage. Secondly, the Phala network requires Gatekeepers to be online as security assurance nodes, and to run for Gatekeeper, one must stake PHA as collateral. If a Gatekeeper acts maliciously, their collateral will be forfeited. Additionally, PHA token holders above a certain threshold have the right to participate in the governance and voting of the Phala DAO, contributing to community stability.

2. From Games and the Metaverse to Web 3, Phala Network's Layout of "Global Web 3.0 Decentralized Computing Cloud"

If 2020 was a year of buildup and 2021 was a year of readiness, then 2022 will undoubtedly be the year of Phala Network's full explosion. After years of accumulation in the privacy track, Phala Network is beginning to expand its more strategically significant vision—building a "global Web 3.0 decentralized computing cloud," becoming the largest P2P computing network in the world, and opening up "new battlefields" in the fields of gaming, DApps, and the metaverse.

In fact, many people have encountered experiences of server shutdowns or video graphics rendering failures while gaming. Companies have also faced business outages affecting millions of users due to cloud service issues that arose without warning. These interruptions are indeed frustrating, and their root cause is that centralized cloud computing infrastructure can no longer keep pace with the needs of a technology-driven society.

For example, the first stock in the metaverse, Roblox, experienced widespread downtime in October 2021 due to a so-called "internal system issue" (a failure in cloud infrastructure), and it took three days to resume operations, resulting in a loss of about $15 million in revenue and a market value evaporation of $1.5 billion.

It is no exaggeration to say that both public cloud computing service providers based on AWS and private cloud infrastructures like Roblox face centralization issues, thus failing to provide users with an excellent experience. If this problem is not resolved, gaming companies will be unable to realize their vision of the metaverse. Since the metaverse will be a key part of Web 3, it requires highly distributed and powerful computing capabilities to ensure reliability.

Fortunately, Phala Network has already brought powerful, secure, and scalable cloud computing infrastructure into this field through its computing resource network, Khala Network, based on Trusted Execution Environment (TEE) privacy technology. TEE can provide confidential and isolated application execution while creating blockchain computing and transaction infrastructure on nodes anywhere, including personal computers. Although the likelihood of single-node failure is higher, this computing model can be easily deployed across multiple nodes in a decentralized computing cloud, thereby enhancing overall stability.

Leveraging this technological power, Phala Network will support blockchain developers in building user-friendly applications, processing transactions, and creating a metaverse world that is faster, safer, and more scalable than ever before, providing unprecedented reliability and computing power on its globally covered network platform. Due to the speed of Phala Network's decentralized Web 3 infrastructure and the distribution of all computing power across a global network of personal computer nodes, it offers uptime and reliability that surpasses today's traditional cloud computing models, effectively meeting the modern technology-driven computing demands while having enough resilience to support and power the metaverse, undoubtedly making it the core of Web 3 infrastructure.

3. Why Choose Phala Network's "Global Web 3.0 Decentralized Computing Cloud" Services?

Frankly speaking, how to utilize blockchain protocols to incorporate any computing node into the network and provide available and stable computing services is a key issue that every decentralized Web 3 cloud computing service provider must consider. In this regard, Phala Network has adopted the Secure Worker Mining mechanism and deployed it on the Khala Network. Although Khala's mining rewards are currently only 10% of Phala's, according to news from the Phala community, a new economic model will be launched after the Qingming Festival (click here to learn more about the new economic model). Currently, the "Gemini Upgrade" plan that Phala is conducting is already in a voting state, expected to pass within seven days, and Khala and Phala will share 70% of the mining rewards, no longer distinguishing between testnet and mainnet, allowing for more flexible adjustments limited by Polkadot and Kusama's slot auctions.

To date, the Phala Network node network has covered over 50 cities globally, and more than 22,000 "Workers" have successfully registered, providing over 30,000 vCPUs and contributing large-scale computing services to the Web 3.0 world, making it a leader in the crypto industry.

Currently, the computing power on the Khala Network is equivalent to 2% of AWS, but it is important to note that this network has only been in existence for six months. If this growth rate continues, the number of trusted computing nodes available for the Web 3 world on the Phala Network mainnet will exceed 100,000.

It is undeniable that during the early DeFi and GameFi boom, primary Web 3.0 cloud services based on traditional smart contracts demonstrated tremendous value. EVM-based smart contracts can, to some extent, replace simple backends and serve as decentralized application databases. However, with the rapid development of the metaverse and play-to-earn games, traditional smart contracts can no longer drive most DApps, including computing applications based on private data (such as various daily internet and enterprise application backends, middleware, and databases) and CPU-intensive applications (such as high-throughput, low-latency game servers, artificial intelligence, etc.).

While decentralized storage protocols like Arweave and Filecoin have been widely used, the corresponding field of decentralized computing services remains blank.

In fact, due to the lack of decentralized computing and backend protocols, most DeFi, metaverse, and Web 3.0 gaming applications have to rely on traditional cloud services due to high computing resource consumption. Some smart contracts can only deploy their frontends and backends on AWS and Google Cloud. Data shows that currently, 80% of proof-of-stake blockchain nodes run on services provided by centralized cloud computing platforms, which means that the "centralization" sword of Damocles will always hang over the Web 3.0 world, as any issues with these centralized services will impact the decentralized world.

In this context, the general decentralized computing network launched by Phala Network can freely combine with decentralized smart contracts, storage protocols, and data indexing services, and its smart contract Fat Contract, based on the concept of privacy contracts, plays a significant role. As a new type of smart contract product focused on providing backend functionality for Web 3.0, Fat Contract (V1 version has officially launched) differs in many ways from traditional EVM smart contracts, such as:

1. Low Latency: Fat Contract supports millisecond-level read and write responses for the metaverse;

2. Asynchronous Interoperability: Fat Contract can quickly and securely introduce off-chain data by creating asynchronous requests;

3. High-Performance Computing: Fat Contract supports vertical and horizontal scaling, providing users with a program execution environment close to native CPU performance, and expands with hardware upgrades. Ideally, the overall throughput of applications can scale linearly with the increase in the number of nodes.

4. Mature Developer Ecosystem: Phala applications will be developed based on the industry-standard WASM and built in the Rust ecosystem, known for its security and high performance, supporting the Ink! contract programming language developed by Parity.

5. Trustless: Applications deployed on computing nodes cannot be manipulated or forcibly shut down.

6. Data Confidentiality: End-to-end encryption is mandatory for user requests, memory states, and databases, with responses only occurring for authorized operations.

Based on these characteristics, Phala Network's Fat Contract can support multiple scenarios, including multiplayer online games, off-chain interoperability (such as oracles, decentralized chat or communication services, data marketplace platforms, etc.), and large-scale real-time computing (such as the metaverse, gaming, NFT rendering, AI recommendation engines, etc.).

It is worth mentioning that among various application scenarios, the metaverse is undoubtedly the current "focus area" for Phala Network. At this stage, they have established partnerships with multiple metaverse and NFT platforms, such as Blender, Bit.Country, RMRK, etc., while also encouraging developers to build metaverse ecological infrastructure based on Fat Contract through financial grants, including:

1. Web 3.0 Rendering Farms: Through Fat Contract, NFT artists can access reasonably priced, decentralized, and privacy-friendly model rendering services.

2. Web 3.0 Game Servers: Through Fat Contract, metaverse platforms can obtain decentralized backend services.

3. Running Game Engines: Based on the characteristics of Phala's off-chain computing, it is suitable for running more complex and large programs, such as game engines that can be deployed on Phala's decentralized servers.

4. Phala World: Phala World is the first "Play to Build" concept metaverse built on Phala Network. As a game created for the community, Phala World transforms community contributions to the Phala network into assets within the game. Each address in Phala Network can automatically generate growing and interoperable NFT characters that connect to mainstream metaverse platforms, thereby promoting the migration of blockchain systems to the metaverse gaming world.

As one of the best application cases for Fat Contract, Phala World ensures the decentralization and trustlessness of the game through "computing power + privacy," while Fat Contract effectively addresses the storage and high-speed processing issues of massive data, providing low-latency response services for user requests through AR and distributed storage solutions, truly realizing the vision of a Web3 metaverse.

Additionally, in terms of cross-chain functionality, Phala Network has launched the cross-chain bridge SubBridge, a cross-chain tool for asset and information transmission based on the "XCM + ChainBridge cross-chain protocol," breaking the dimensional barrier between Substrate and EVM-compatible chains, enabling interoperability between the Polkadot parachain ecosystem and Ethereum and other EVM-compatible chain ecosystems.

In summary, Phala Network is undoubtedly the best choice for current "global Web 3.0 decentralized computing cloud" services.

4. Conclusion

Due to the impact of the COVID-19 pandemic, the global digital business transformation has entered a more challenging and urgent phase, with a significant increase in demand for cloud computing solutions from various organizations such as enterprises, schools, and governments. According to ResearchAndMarkets, the global cloud computing market size is expected to grow from $371.4 billion in 2020 to $832.1 billion by 2025, with a compound annual growth rate (CAGR) of 17.5%. Although North America remains the largest cloud computing market globally, the Asia-Pacific region, led by China, is growing the fastest, indicating that the market potential in this field remains enormous.

Undoubtedly, Web 3.0 will become the most powerful innovation driver globally in the next 20-30 years. In this context, we cannot "lie flat" on past conceptual designs, nor can we be limited to so-called "fundamentalism," as the road to the successful revolution of Web 3.0 is still long. Thanks to the increasingly mature blockchain technology, a new decentralized Web 3 cloud computing "decentralized track" has emerged within the cloud computing industry. Who will stand out? Phala Network is undoubtedly one of the best answers.