[Project Spotlight] — Akash Network
Overview
In the year 2020 53% of internet traffic will be from cloud computing services, 80% of which will be owned by Google, Amazon, and Microsoft. Akash is aiming to disrupt that centralized model with a token-incentivized model of providing cloud computing services from around the globe to anyone who wishes to join the network.
Why Akash Makes Sense
Across the world, you can see examples being present like China and other nation-states censoring groups through technical means including pressuring companies to remove github access, take down server access, or block social media altogether through state-owned ISPs. Akash believes that by democratizing cloud services, they can pass cost reduction up to 2/3 to customers of traditional services for app deployment and other cloud functions. Centralized services are easier to censor and stop because large centralized corporate structures have singular goals. Akash envisions a world where thousands or millions of compute suppliers can choose to supply or not from the server set up in their own homes. This is where Akash sees their value. Decentralized, distributed cloud services to create a product that is globally consistent, region agnostic, and censorship-resistant, all while providing stable, competitive pricing to clients.
Project Analysis
Core Product — Cloud Services
Akash is aiming to incentivize individuals or businesses to add their servers to the network in exchange for Akash tokens (AKT). AKT is the token of value and settlement on the blockchain, which is a Tendermint proof of stake chain that provides the global Akash consensus layer. Cloud service providers also must participate in staking, ensuring honest actors participate in the network. In layman’s terms, the Akash blockchain keeps a record of which customers use the services, the payments distributed to service providers, the stake rewards and block creation, and whether all that is accurate and sound. The user-facing product is a decentralized marketplace where customers seeking cloud services can bid for orders based on memory, compute, storage, bandwidth, etc. Akash provides the marketplace to match orders with fulfillment providers, and facilitates the payment transactions and deploying the cloud services. Another core component of the product is how Akash interfaces with providers. The Akash whitepaper claims to have features and functionality to setup a provider with self-managed deployments, load balancing, and essentially a system to do all the work of being a cloud service provider. They do have this dashboard currently (below), but it does not appear configurable other than through the command line at present.
Akash is currently running Providers who are serving leases to end-users, and anyone can join as a Provider. The staking requirement for Providers has been dropped, and Akash is currently running several promotions for providers to encourage adoption in the testnet. Documentation is available here. Akash says they are for any computer to run compute, even a Raspberry Pi stick configured to be an inexpensive onboarding for people to run compute from home.
Blockchain Fundamentals
Akash is a delegated proof of stake blockchain using the Tendermint consensus protocol. This gives them tremendous support with the Tendermint team’s work and provides simpler interoperability with Cosmos project tokens. That’s good for liquidity and exchange value.
Akash is starting its mainnet launch with 128 validators, which is pretty distributed and gives a fair amount of smaller validators a chance to join the network. They also have plans to increase that number over time, which is admirable. We’ll see if open-governance allows that to happen. One of the major value-adds to providers is that because providers can get paid in AKT, they can turn around and stake that AKT with a validator. Staking has various lockup periods ranging from a month to a year(or more). This is done to give stability to the token and consensus during the early days, and it’s smart, but it does introduce a barrier to entry. The earlier whitepaper also says providers must stake in order to be part of the network, however, there is no minimum stake.
Token Analysis
AKT tokens are used for a variety of things on the network. They are the settlement layer for service providers and customers, as well as the basis for fees on the network for transacting orders, staking, and governance. the token is intended to be a low liquidity token, in reference to their lockup staking requirements. The lockup encourages staking longer-term and more stability in the network, especially as an early-stage project. They aren’t allowed at present to disclose their exchange listing plans, so we can’t really gauge how that will impact price discovery. AKT is set to be an inflationary token to ramp up the volume of tokens available over time, with a deflationary mechanism attached. That is, inflation gets smaller until a balance of the right token supply is reached. There is also an upper bound for maximum token supply (389 million)that, in my opinion, is a nice middle ground between something like Ripple (100 billion) and bitcoin. This shows thoughtful token economics from the team.
The most significant commercial example is if a delegate stakes and does lockup for at least 1 year. Akash calculates a return of .45% per day or over 101% for the year. As the lockup period is lowered, rewards also lower somewhat proportionally, with emphasis on encouraging longer lockup periods. That’s a pretty interesting model to encourage more established companies to join as they typically have more cash on hand to invest in long term business and finance goals. If a company has the infrastructure in place, they could just put 200k into Akash for staking instead of hiring a full-time engineer for a year and get a pretty significant return to hedge against other losses. Similar strategies could play out at quarterly levels, essentially running a crowd share on servers for X time until it’s needed. Lots of business strategy becomes available for staking models and resource allocation.
In the above scenario, you should wonder “But what about price fluctuations and volatile crypto exchange rates?” Akash says they have an exchange rate lock-in mechanism with AKT so delegators and providers don’t need to worry about that. This mechanism is explained in detail on page 6 in this whitepaper.
Remarks
The Akash team has clearly done their homework and learned from many PoS projects that came before them. With a wide range of credible faces behind their project and a reasonable amount raised from seed funding, this project looks to be in good hands with enough runway to really set the tone. With an attainable mainnet goal in 2020 listed on their technical roadmap, this project aims to start off the new decade with a bang. This is a highly needed product, and with the influx of decentralized projects across Eth, Cosmos, and others, there is a lot of space for companies with extra hardware in their round 2 or 3 budgets to allocate temporary resources to being service providers. This lets hardware be a more flexible cost commercially, which is a pretty significant value add. The ability for providers to stake their profits to secure the network, and gain staking rewards on top of standard earned rates is very significant. This model is essentially an additional vertical for any business getting into decentralized consensus space and isn’t hyped nearly enough by the community in general.
Thanks to the Akash team for taking the time on the Thanksgiving holiday to answer a few questions. Best of luck!
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