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Key Points:
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Phala Network community approved full migration from Polkadot to Ethereum Layer 2.
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Tokenholders will receive ERC-20 tokens at a 1:1 ratio before November 20.
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The move focuses on confidential AI compute and scalable enterprise-grade solutions.
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Ethereum’s ecosystem offers better integration, liquidity, and GPU compute capacity.
Phala migration to Ethereum L2 marks a bold move by one of Polkadot’s early parachains toward a more scalable and enterprise-ready future.
The decision, passed by community vote, signals a strong belief that Ethereum’s ecosystem provides better tools for confidential AI and Web3 enterprise solutions.
Phala Network, once a key Polkadot parachain, is known for its decentralized cloud computing platform designed to deliver secure computation for AI-driven Web3 applications. The project now enters a new phase as it transitions into an Ethereum Layer 2 environment. According to Phala’s latest announcement, the migration process will begin before November 20, with every PHA tokenholder receiving an ERC-20 variant at a 1:1 ratio.
A strategic shift from Polkadot to Ethereum
This migration is not a sudden pivot. Phala already operates a live and functional Ethereum Layer 2 launched in January. The proposal, submitted on September 27, was championed by Phala Network’s ecosystem success lead “doylegxd.” He emphasized that the move consolidates staking, governance, and confidential computing in an ecosystem better aligned with the Ethereum Virtual Machine.
Polkadot’s architecture offered early support for Phala’s mission, but maintaining a parachain slot required high resource commitments. Renewing the slot would lock Phala into infrastructure with limited scalability, restricting growth in confidential AI compute. By contrast, the Ethereum Layer 2 environment offers lower operational overhead and deeper access to liquidity, tooling, and next-gen GPU computing technology.
As the Phala team noted, “L2 offers direct integration with Ethereum liquidity and tooling, which is essential for deploying TDX and GPU-based confidential compute workloads.”
Enterprise growth through confidential AI compute
The Phala migration to Ethereum L2 also positions the network to attract enterprise clients seeking privacy-first computation. With its new architecture, Phala Network aims to serve industries that require confidential AI compute, such as healthcare, finance, and government services. The company’s secure enclaves and GPU capabilities allow sensitive data processing without exposure, creating trust in AI-driven automation.
From my standpoint, this move gives Phala a clear technological edge. Ethereum’s expanding Layer 2 ecosystem now provides a foundation for scalable, privacy-preserving cloud services—something Polkadot’s current model struggles to match. The decision also reduces dependence on parachain renewal cycles and their associated costs, freeing resources for innovation.
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Phala Network’s position in the AI crypto sector
Phala Network’s token (PHA) currently ranks as the 11th largest AI-agent-related crypto asset with a market capitalization of around $80.6 million, according to CoinGecko. It also sits among the top 50 AI tokens by market cap, reflecting strong community and investor interest.
The Phala migration to Ethereum L2 amplifies that visibility. With Ethereum’s broader developer base and liquidity pool, Phala can pursue deeper integrations with decentralized AI protocols and Web3 enterprise solutions. This could open partnerships for shared confidential compute frameworks, allowing third-party developers to build private AI models within Ethereum’s Layer 2 environment.
The rise of Ethereum L2 ecosystems
Phala’s decision also adds to a growing narrative: Ethereum Layer 2 is becoming a preferred platform for scalability-focused Web3 projects. Other Polkadot-linked initiatives like Astar and KILT have expanded to Ethereum but retained their multichain approach. Phala, however, is going all in.
By focusing solely on Ethereum, Phala Network joins the ranks of projects seeking long-term operational simplicity and network effect benefits. The migration represents confidence in Ethereum’s roadmap, including enhanced scalability through rollups and improved security guarantees.
For enterprises considering confidential AI compute, this transition may serve as a benchmark for how decentralized infrastructure can evolve toward performance, privacy, and ease of integration.
A new chapter for Phala Network and AI-driven Web3
The Phala migration to Ethereum L2 demonstrates how projects can adapt to the shifting balance of blockchain ecosystems. By choosing to align with Ethereum’s massive network and developer resources, Phala Network positions itself to scale confidential AI compute while expanding into Web3 enterprise solutions.
In the coming months, Phala’s success on Ethereum Layer 2 may serve as a key indicator of whether full migrations, not multichain strategies, define the next wave of blockchain evolution. For now, the move represents a calculated bet that Ethereum offers the optimal ground for growth, security, and AI integration.
