Ethereum News Today: Phala Shifts to Ethereum L2 to Boost AI Privacy and Scalability

Phala Network, an AI-focused decentralized cloud computing platform, has announced a full migration from the Polkadot parachain to Ethereum Layer 2 (L2) following a community vote. The transition, set to begin before November 20, 2025, aims to enhance scalability, enterprise-grade security, and alignment with next-generation confidential computing technologies such as Intel TDX and GPU-based workloads. Phala (PHA) tokenholders will receive a 1:1 conversion to an ERC-20 token variant, with staking, rewards, and governance functions preserved on the new L2 infrastructure. The move reflects a strategic pivot to leverage Ethereum's liquidity, developer tools, and ecosystem to accelerate growth in confidential AI and GPU compute services.

The decision to migrate from Polkadot stems from operational and technical considerations. Phala's parachain slot on Polkadot is set to expire on November 20, 2025, and the project cited limited scalability and high maintenance costs associated with retaining a parachain slot. By contrast, Ethereum L2 offers lower operational overhead and direct integration with Ethereum's infrastructure, enabling Phala to focus on technologies aligned with Intel's roadmap, including TDX and GPU confidential computing, where early commercial traction has already been observed. The migration also aligns with Phala's goal to consolidate staking, governance, and confidential compute operations into a single, EVM-compatible ecosystem.

Phala's transition to Ethereum L2 marks a rare departure from Polkadot among blockchain projects. While others, such as Astar and KILT Protocol, have adopted a multichain strategy to expand into Ethereum, Phala's move represents a full commitment to Ethereum. The project, which secured one of the first Polkadot parachain slots in late 2021, has already deployed a functional Ethereum L2 since January 2025, indicating a deliberate, phased approach to migration. This shift positions Phala to capitalize on Ethereum's robust developer community and liquidity pools, which are critical for scaling enterprise-grade applications.

The PHA token, currently the 11th largest AI-agent-related cryptocurrency by market capitalization at $80.6 million, is among the top 50 largest AI tokens globally. The migration is expected to bolster its utility by integrating with Ethereum's decentralized finance (DeFi) and Web3 ecosystems, potentially enhancing liquidity and adoption. Phala's focus on confidential computing-enabling secure, private data processing for AI applications-aligns with growing enterprise demand for privacy-preserving technologies in sectors such as healthcare and finance.

Key challenges include ensuring a seamless transition for tokenholders and miners. Phala's proposal outlines a structured process: parachain assets will be frozen during migration, with users able to redeem them via the Phala App post-migration. Staking and governance will transition to Ethereum L1, while GPU/TDX compute workloads will operate on L2. The team has emphasized minimizing disruption through phased rollouts, audits, and collaboration with exchanges like Gate.io.

The migration underscores a broader trend in blockchain infrastructure, where projects are increasingly prioritizing scalability and enterprise compatibility. Phala's move to Ethereum L2 reflects confidence in the platform's ability to support high-performance, privacy-centric applications-a critical factor as AI and Web3 adoption accelerate.

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

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

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