AI Polkadot parachain phala votes to fully switch to Ethereum L2

Polkadot parachain Phala is set to become an Ethereum layer 2 after the community voted in favor of a recent proposal aimed at ramping computation offerings to enterprise client.

“Proposal Passed: Phala is Migrating to Ethereum L2!” a Phala X post from Wednesday reads, adding that it marks the next chapter for the project as it pushes for “greater scalability and enterprise-grade security.”

The post adds that Phala (PHA) tokenholders will receive the new ERC-20 variant at a 1:1 ratio, the “migration” will start before Nov. 20, and that “staking, rewards, and governance” will continue seamlessly on the new layer 2 (L2).

Phala announces key changes to its community. Source: Phala

This isn’t an abrupt move by Phala, as it already has a “live and functional” Ethereum L2 that was launched in January. As the proposal explains, the project aims to fully migrate and focus solely on Ethereum to maximize potential upside. 

Phala is a decentralized cloud computing network that is designed to provide private, secure and scalable computation for AI-integrated Web3 applications. It was one of the first projects to secure a parachain slot as part of the auctions held by Polkadot in late 2021. 

The proposal was initially submitted on Sept. 27, with the leader of Phala Network ecosystem success “doylegxd,” recommending the move to consolidate staking, governance and confidential compute in a “stronger” Ethereum Virtual Machine-aligned ecosystem. 

The proposal also argued that renewing the parachain slot on Polkadot would lock the project into “infrastructure with limited scalability” that would require significant resources to maintain. While working in Ethereum would also enable it to utilize next-gen computation tech. 

“L2 offers lower operational overhead and direct integration with Ethereum liquidity and tooling. It is also the natural home for deploying TDX and GPU-based confidential compute workloads, where we already see early-stage commercial traction,” the proposal reads. 

Why migrate from Polkadot?

Phala appears to be one of the few that have decided to completely move from Polkadot to Ethereum.

Other projects, such as Astar and the KILT Protocol, opted to expand their integration to Ethereum in a multichain approach instead of abandoning Polkadot.

Phala’s proposal suggests the move was aimed at capitalizing very niche tech that it needs to spur further growth. 

The PHALA token is the 11th largest AI-agent-related crypto-asset by market capitalization at $80.6 million and is among the top 50 largest AI tokens by market cap, according to data from CoinGecko.