Introduction

Hello. I am Marvin Tong. Co-Founder of Phala Network and CEO of Hashforest Technology (the corporate entity behind Phala Network).

In this end-of-year letter, I am excited to share my personal perspective on Phala Network's direction for 2024. This letter is primarily forward-looking, focusing on plans, goals, and the vision that will guide us in the coming year while briefly reflecting on our past achievements. It outlines where we stand today and where I see us moving forward, focusing on strategic developments and potential opportunities in the year ahead.

Celebrating 5 Years: Phala Network's Strategic Evolution

In 2024, Phala Network celebrates its fifth anniversary, marking a period of both reflection and forward momentum. From our beginnings with a modest $1 million in funding, we've grown into a robust and formidable computational network. A journey made possible by our dedicated community and partnerships within and beyond the Polkadot ecosystem.

This year also marks another significant milestone. We’re excited to officially unveil Phala Network's new role as a co-processor for blockchains. This specialised utilisation of our off-chain computing infrastructure is the next phase in our long term strategy to revolutionise how blockchains operate, with the aim of enhancing their efficiency and scalability.

Our journey has always been about more than technology; it's about forging a trust-enhanced future where Phala Network plays a critical role in driving blockchain adoption and innovation.

As we step into this new phase, I'm filled with gratitude for our Phamily’s unwavering support. Together, we're not just building technology; we're crafting a legacy that redefines the blockchain space.

Phala's Next Phase: Co-process Blockchains

What is a Coprocessor?

The idea of coprocessors in computing emerged as a solution to the limitations of the CPUs in handling increasingly complex tasks. For example, GPUs were developed for intensive parallel computations in graphics rendering. This division of labor between the CPU and various coprocessors significantly improved overall computational performance and efficiency.

Graphic operating systems like Windows (compared with terminal-based Linux) and video game boosts the needs for GPU in the early years.

Similarly, we see coprocessors as the next primitive to any modern smart contracts.

Ethereum can be likened to a generalist CPU in this analogy. It's designed to be versatile and handle a wide range of decentralized applications. However, Ethereum has limitations to access external API / service (Data-Starving), processing complex, computationally intensive tasks, primarily due to technical challenges. The limitations mean that not all dApps can run effectively on it. This often results in offloading some parts of the dApps off-chain to:

• Scale web3 to reach a broader user base

• Provide gasless/low-latency experiences

• Support multi-chain functionalities

Blockchain technology is evolving into a more complex, interconnected, and multi-chain ecosystem. Therefore the demand for processing power will increases significantly. This makes coprocessors a must-have primitive for the future dApps.

Key values for being Coprocessors

Coprocessors will be the key primitive used by all the modern dApps in the future. Among the other coprocessors, Phala has its own unique capabilities:

• ✅  Link DePIN hardware together: be able to connect & organize DePIN resources into web3 servers, storage, network, sensors. We've established a robust, secure computation network to connect with DePIN networks together.

• ✅ Connect to any blockchain: as an off-chain coprocessor, Phala is isometric to any blockchain, this means it is extremely easy for us to support more chains. Then any chain can utilize us to read from/write to another supported chain. This was accomplished in 2023.

• ✅ Reusability and robust open platform: where devs can co-work and reuse existing solutions. Phat Contract is a versatile off-chain program enabling blockchain access, program customization, and trustless dApp deployment. This was also achieved in 2023. Now any blockchain developer can use Phat Contract to access, connect & verify off-chain data into on-chain smart contracts.

• 🔨 Useful Coprocessor Products:
• Develop products based on web3-coprocessors to address challenges in DeFi, web3 social platforms, GameFi, and the metaverse.
• Construct AI-Coprocessors to integrate web3 with AI.

• 🔨 Coprocessor for AI:
• Solve security concerns around AI centralization.
• Mitigate risks associated with the AI technological progress through decentralization, maintaining a more democratic world. Thus “d/acc” presented by Vitalik.



• Phala Network will prioritise the connection of AI services to dApps over traditional model training. This strategy enhances efficiency, offering developers access to AI functionalities without resource-intensive training. Furthermore, Phala emphasizes democratic governance, involving the community in decision-making regarding integrated AI services within the network. By democratizing AI governance, Phala fosters inclusivity and reflects diverse perspectives. This unique approach streamlines development, promotes adaptability, and aligns with decentralized principles. Ultimately, Phala's focus on connecting AI to dApps and ensuring democratic decision-making marks a significant transformation in decentralized AI integration, emphasizing efficiency, community participation, and flexibility.

Coprocessors: Advancing Web3 with DePINs

Just imagine, a trustless AI Agent, unable to run on blockchains, can operate effectively using Ethereum combined with platforms like Gensyn. Similarly, dApps like Huddle01 require a blend of EVM chain capabilities (NFT, Address, DID) and backend services provided by DePINs.

That's’ why there's a growing trend of projects offering DePIN services such as storage, compute, hotspot, and CDN. These DePINs, including Akash Network (GPU), Helium (hotspot), Livepeer (GPU for specific tasks), and Phala Network (TEE-CPU), have become pivotal in extending blockchain utilities beyond traditional boundaries.

This synergy illustrates the essence of DePINs: they are driven by the web3 community's demand for trustless infrastructures and heavily rely on blockchains for settlement. The true potential of DePIN projects lie in complementing blockchains by acting as coprocessors.

The role of Phala Network as a blockchain coprocessor is pivotal in addressing the scalability and computational limitations of current blockchain ecosystems:

0. Data Access and Processing into Any Chain: By allowing more sophisticated data analysis and processing, Phala Network enables the development of more complex and useful decentralized applications.

0. Offloading Computation: Phala Network acts as a specialized processor that takes on complex computational tasks from the main blockchain. This offloading significantly improves the efficiency and scalability of the network.

0. Generating Verifiable Results: The results of such off-chain data access, process and compute should be verifiable by ZKP or Trustless Environment. And they can be used for smart contracts on any chain.

0. Maintaining Security and Decentralization: Phala Network achieves this enhanced functionality while still upholding the principles of decentralization and security intrinsic to blockchain technology, often using advanced cryptographic methods like zero-knowledge proofs, MPC and TEEs.

Our roadmap in 2024

Since building useful coprocessor products are our next to do, there are two market opportunities that can help Phala Network scale faster, and become THE coprocessor for web3.

If you are interested for a detailed roadmap, click here.

Coprocessor Platform

In 2023, we dedicated considerable time and effort to refining Phat Contract, actively gathering and incorporating feedback from hackathons and individual interviews for its ongoing improvement. After analysing feedback from Phat Contract use cases and user interviews in 2023, we identified a significant paradigm shift in smart contract development.

In 2024, we will work hard to make our existing platform, Phat Contract, accessible better, including:

• UX friendly Account Abstraction.

• Free-to-use tier.

• Listing more templates.

Coprocessor for Smart Contract Extensions

We have observed a new dApp development pattern, Smart Contract Extension, from Uniswap's hooks and Lens Protocol's Open Actions. Smart Contract Extension brings a level of modularity and user-centric design previously unseen in smart contract development. By encapsulating specific functionalities and interactions within self-contained modules, Smart Contract Extension promises to enhance user engagement and offer unparalleled flexibility in decentralized applications.

The shift towards Smart Contract Extension is driven by the evolving demands of the blockchain ecosystem. In a landscape where user experience and adaptability are paramount, Smart Contract Extension offers a solution that is both flexible and user-focused. This design philosophy is particularly pertinent in the realms of decentralized finance and social media on the blockchain, where personalized and engaging user interactions are key.

As a blockchain coprocessor, we stand to play a critical role in the implementation and efficiency of smart contract extension. By offloading the computation-heavy aspects of these contracts, Phala Network ensures that the primary blockchain remains unburdened, thereby enhancing performance and scalability. This integration is particularly vital in a multi-chain world, where the complexity and interactivity of applications are constantly increasing. The integration of smart contract extension with Phala Network's coprocessor capabilities marks a significant stride forward in blockchain technology. It represents a harmonious blend of innovation and efficiency, promising to unlock new potentials in the blockchain space and offering a glimpse into the future of decentralized applications.

Coprocessor to connect DePIN

Extensions for DePIN strategy is set to fundamentally change how smart contracts interact with decentralized infrastructures, such as compute, storage, or IoT services.

Utilizing Phat Contract, we aim to create a seamless integration between smart contracts and various DePIN projects. This integration will allow on-chain developers to easily access and incorporate DePIN resources, significantly accelerating the development and enhancement of their dApps. It's about creating a more interconnected and efficient ecosystem where developers have a toolbox of versatile resources at their disposal.

Our vision for Extensions for DePIN is about more than just bridging gaps; it's about fostering a symbiotic relationship between EVM and DePIN. By modularizing resources and services from these projects, Phala Network, as a coprocessor, will not only support the expansion of individual DePIN markets but also enhance the overall capabilities of smart contracts. This integration is crucial for nurturing a more robust and dynamic web3 environment.

The Extensions for DePIN initiative represents a leap towards a more collaborative and integrated web3 world. We believe this approach will drive innovation, efficiency, and growth across the entire blockchain ecosystem, benefiting developers, users, and DePIN projects alike. This is our commitment to not just adapting to the evolving landscape of blockchain technology but actively shaping its future for the betterment of all stakeholders.

Coprocessor for AI

I firmly believe that AI is pivotal in solving many of the adoption challenges currently faced by web3. AI's potential to transform user experience, enhance functionality, and bring about more intuitive interactions is immense.

Phala Network, as a key coprocessor between the bridge of web2 and web3, could help massively with d/acc. In 2024, our missions also include building one or more of the following ideas:

Cyber Defense Practice:

• Leveraging Phala for efficient cyber attacker identification and developing tools to enhance defenses, including secure internet solutions and robust physical infrastructure.

• Emphasizes the importance of secure internet and decentralized technologies like blockchain and cryptography to protect against centralized control and manipulation.

Info Defense Practice:

• Relies on collective identification of truth and consensus-building to distinguish between misinformation and truth.

• Includes tools like Community Notes, prediction markets, and opinionated wallets to help users identify scams and protect them from fraud.

Social Defense (Democracy) Practice:

• Aims to enable more decentralized governance over contentious decisions.

• Utilizes algorithms to help communities identify points of agreement between sub-tribes who otherwise disagree on many issues.

Conclusion:

As a Founder, when I look towards 2024, it's not just as a milestone year for Phala Network; it's a deeply personal journey into realizing a dream we've nurtured from the start.

This year is about bringing to life the vision of Phala as a transformative blockchain coprocessor. Every step, from our initial concept to the intricate development of Phat Contracts, has led us to this moment. My focus is on seeing our innovative ideas resonate within the web3 community, turning Phala's capabilities into tangible solutions that redefine blockchain technology. For me, 2024 isn't just another year in the calendar; it's a testament to our dedication and a beacon of our future aspirations.

Marvin Tong CEO of Hashforest Technology