Phala Network is a privacy-preserving cloud computing service, which offers computing power comparable to existing cloud services and protects the privacy of managed programs. Based on TEE-Blockchain Hybrid Architecture, developers can deploy confidential smart contracts running inside the TEE Enclaves in the CPU.^[1]

Phala is also based on Substrate, and will run as a parachain of Polkadot Ecosystem.^[2]

Background

Phala is the first confidential smart contract network built on Substrate, aiming to provide confidential computation and data protection services for enterprises and users. Phala Network would serve the whole Polkadot ecosystem as one of the Polkadot parachains.^[3]

Phala was founded by core team members who came from famous Internet companies such as Google, Tencent, etc. Hang Yin, Co-founder and Chief Scientist of Phala Network, was the head developer for the new Equihash mining algorithm of Bitcoin Gold (cryptocurrency).^[2]

Phala applies TEE (Trusted Environment Execution) which allows confidential data to run in an isolated and private environment and outputs results alone with authorization.^[3]

Phala Network is a cross-chain interoperable confidential smart contract network for privacy-preserving decentralized apps and services. We are developing our pilot product – Web3 Analytics, a decentralized data analytic tool – to present our vision of Web3 that we want to give the value of data back to everyone and add liquidity on data market.^[1]

Blockchain Technology  has shown lots of capabilities to us. The decentralization philosophy is no a myth anymore. Blockchains like Bitcoin and Ethereum have shown the potential for a fully decentralized system with full transparency. They make it possible for everyone to participate in the network and confirm transactions. But there are still some limitations to this system. Because everyone can join in the network, everything is visible for them.^[2]

Phala Network Products

1. pLIBRA: a confidential computation component built for Libra granted by Web3 foundation
2. Web3 Analytics: a cutting-edge data analysis tool for next-generation, able to analyze user data and output results without invading personal privacy.
3. PHA: PHA is the primary token of Phala Network. It has many utilities, that most of them are focused on payments. Paying for CPU time, on-chain storage, network bandwidth, and any other Phala resources is done by PHA token. Besides, it’s the native token for confidential smart contracts.^[1] Those contracts transact data and payments with PHA

How the Phala Network Work

Three layers of operation and protection create Phala Network. Phala nodes, pRuntime, and Phost are the fundamental layers in Phala Network. pRuntime lives in TEE and therefore is protected from the outside world. Working on the TEE system is safe but still needs accurate programming and management to only allow valid transactions. Phost is the crucial player here.^[3]

Phost is the bridge between Phala blockchain and pRuntime. All the transactions need to pass phost to go to the pRuntime. Phala blockchain submits valis transactions, and they go to pRuntime – secured in TEE – through phost.^[1]

Miners and validators are active roles in the Phala Network. Although mining is entirely different in the Phala blockchain, it still needs special hardware for running Phala smart contracts. Phala miners should have a computer with TEE processors. They receive rewards for performing smart contracts in a secure environment.^[2]

Phala Network calls classical validators, Gatekeepers. Validators are crucial players in PoS blockchains. Gatekeepers not only validate block production in Phala Network but also stores special private keys. The blockchain uses these keys to decrypt smart contracts. As a result, miners don’t have access to smart contracts and their data. They just run the smart contracts, and Gatekeepers are responsible for decrypting the contracts.^[1]

As mentioned before, the Phala blockchain doesn’t run smart contracts. Miner with their TEE hardware run smart contracts, and the blockchain only ensures their availability. In other words, the blockchain manages the miners. If one miner goes offline, the Phala blockchain will replace them with other miners.^[2]

Phala Network is developed on Kusama (cryptocurrency), Polkadot’s canary network, for faster development. Kusama Dark Pool development kicked off in 2020 Q3, and the parachain launches on Kusama in 2021.^[3]