Ethereum News Today: Phala Leaves Polkadot's Costs for Ethereum's AI Scalability

Phala Network, a decentralized cloud computing platform specializing in confidential AI and GPU compute, has confirmed its transition from the Polkadot parachain to an Ethereum layer 2 (L2) solution following a community vote. The migration, set to begin before November 20, aims to enhance scalability, reduce operational overhead, and align with Ethereum's liquidity and tooling ecosystems. PHA tokenholders will receive a 1:1 ERC-20 equivalent of their tokens, with staking, rewards, and governance functions continuing uninterrupted on the Ethereum L2.

The decision marks Phala as one of the few projects to fully exit Polkadot, diverging from a multichain strategy adopted by others like Astar and KILT Protocol. According to the proposal, Phala's existing Ethereum L2, launched in January 2024, will serve as the foundation for this migration. The move is driven by the need to access Ethereum's broader developer tools and liquidity, as well as to focus on next-generation confidential computing technologies such as Intel TDX and GPU-based solutions. The project cited Polkadot's parachain slot limitations and high maintenance costs as key factors in the decision.

Phala's migration strategy emphasizes enterprise-grade security and scalability. The proposal highlights that Ethereum L2 offers "lower operational overhead and direct integration with Ethereum liquidity and tooling," which are critical for deploying commercial confidential compute workloads. Early-stage traction in GPU-based confidential computing has already been observed, positioning Phala to capitalize on growing demand for secure, scalable AI infrastructure.

The PHA token, currently the 11th largest AI-related cryptocurrency by market capitalization at $80.6 million, will transition to an ERC-20 standard without disrupting existing staking mechanisms. Tokenholders will retain governance rights, with vPHA tokens serving as the functional governance token post-migration. The team has outlined a phased approach, including asset migration, staking contract finalization, and collaboration with exchanges like Gate.io to ensure a seamless transition.

Phala's migration reflects a broader trend of blockchain projects prioritizing Ethereum's ecosystem for scalability and developer adoption. Unlike Polkadot's parachain model, which requires significant resources for slot renewals, Ethereum L2 offers a more cost-effective path for scaling compute-intensive applications. The project's focus on confidential computing aligns with Ethereum's expanding use cases in enterprise and AI-driven Web3 applications.

Source: [1] Cointelegraph (https://cointelegraph.com/news/polkadot-parachain-phala-votes-switch-ethereum-l2)

[2] Bitnewsbot (https://bitnewsbot.com/phala-to-migrate-from-polkadot-to/)

[3] Coinotag (https://en.coinotag.com/phala-poised-to-migrate-fully-to-ethereum-l2-aiming-to-expand-confidential-ai-and-gpu-compute-services/)

[4] Phala Forum (https://forum.phala.network/t/proposal-sunsetting-phala-parachain-and-migrating-to-ethereum-l2/3999)

[5] Phemex (https://phemex.com/news/article/phala-network-to-transition-from-polkadot-to-ethereum-l2-22515)