When you see a cryptocurrency with a high staking APY (Annual Percentage Yield, i.e. the interest you earn when holding an asset or security), it’s really easy to dismiss it as a scam; typically, you should be pretty careful when you see something that seems too good to be true (duh). That’s what I thought about Akash Network initially when I saw the staking APY at 58%, until I actually dove into the whitepaper and the community: Akash’s product offering of decentralized cloud computing is comparable to, if not better than, some current traditional cloud services. First off, let’s answer the question that may be on the minds of some readers:
What is cloud computing?
Say you have a small tech startup with some funding. As you grow, your operations require a lot of computational power; the valuable business data you have requires reliable storage; and you also need to be able to communicate internally, with other businesses, and with customers through secure networking; so initially you consider building servers of your own to host your workloads, store your data, and host your website and/or customers, which is what a lot of older companies had done in the past. This requires a lot of capital for server, storage, and network expenses with underlying hardware, software, security, and physical facility costs and concerns. IT labor costs are also a concern since maintenance of these servers will be integral to your day-to-day operations. In addition, since you’re a growing company, you have to keep in mind that your current computational power and storage needs will grow and fluctuate, meaning that you’ll have to sink even more capital into server operation, even though sometimes you’ll have more computational power than you’ll need. Unfortunately, this means that your fixed hardware costs are inevitably going to be wasteful.
But since it’s 2021, you recognize that there are companies like Amazon/AWS, Google, Microsoft, and Alibaba who have the advantage of economies of scale and have hundreds, if not thousands, of data centers from which you can easily and instantaneously rent data storage, compute power, and networking features over the internet according to your changing needs, without worrying about the management of these resources. These companies also offer other computational resources that could be added to your new infrastructure like analytics, machine learning, and proprietary database services. Cloud Service Providers have enabled companies to view and use their IT Infrastructure as functional software, rather than the traditional alternative of having to be responsible for the direct management of the physical underlying IT operations, which reallocates that time and money towards actual operations. Cloud computing is the immediate availability of virtualized computational resources over the internet.
Pretty amazing, right? CSP’s typically offer services that are elastic and scalable which allows their customers to increase/decrease their usage to their needs; are mostly fault tolerant so, for example, that even in the event of a hardware component failing in a datacenter, operations wouldn’t be affected, as the failure would be automatically detected and the operation on the failed hardware would be rerouted to an alternative functioning hardware component in the datacenter; and have high availability, meaning that a high level of operational performance is maintained via high uptime, minimized downtime, all with minimal human involvement.
This all sounds pretty great, so why should anyone care about Akash? Why fix something that isn’t broken?
Let’s first take a look at Akash Network’s product offering. According to Akash’s Network Token and Mining Economics whitepaper, Akash is a permission-less and secure marketplace for cloud compute resources where they enable participants with excess, unused compute power (“providers”) to rent their resources directly to participants in need of cloud services (“clients”). Since their services are peer-to-peer, they’re naturally more secure than traditional centralized CSP’s; a traditional CSP has a higher risk of security issues with workloads in their geographically-isolated yet centralized locations/data centers than Akash since Akash’s providers are naturally disconnected. Another realized advantage of using a decentralized, peer-to-peer service like Akash is that their clients don’t have to worry about content censorship from Akash since Akash is only providing the marketplace. Akash also solves a problem with current enterprise data centers: in a report by Jonathan Koomey and Jon Taylor, 25% of the enterprise servers in their 10 data center (approximately 16 thousand servers), sample population were comatose, meaning they were completely unused for 6 months or longer, yet still consuming energy. These unused enterprise servers’ compute potential could easily be rented out to clients on Akash Network, empowering businesses with inefficient data centers/excess compute power to capitalize on their previously sunk infrastructure costs and participate in the Cloud Computing Industry, which is projected by Grand View Research to reach a valuation of nearly $830 billion in 2025. In addition to financially empowering the providers of their service, in their latest update, their services were found to save their clients eightfold in comparison to AWS’ Cloud services.
I will admit: considering that these traditional CSP’s are so large, they’re able to offer other cloud services that bring real value to their customers like their proprietary analytics and database applications. Still, this doesn’t bear enough threat to Akash considering its current cost savings and other benefits. Companies are also often multi-cloud, meaning that they use multiple cloud service providers, allowing Akash to be viewed as a potentially supplementary service, in addition to a company’s current cloud services. Another thought to consider is that as traditional CSP’s onboard more enterprise customers, if they have existing data centers, they have the option of subsidizing their cloud costs with income generated from leveraging their now-excess computational resources with Akash.
In addition to the benefits previously stated, I’d like to discuss why Akash fits into the vision of Web3 and the future of the internet. Before I jump into this, I should explain the concept of Web3.
Web3
Web2 is the internet we use today where most companies like Facebook, Google, Snapchat, etc. provide free services for your personal data. These large companies leverage that data to advertise, and shape the content you see, regardless of whether you want to see those ads or that content, or not. Web3 is the restructuring of this current internet environment to benefit the users rather than tech companies. According to Mason Nystrom, “Web3 is an internet that is open for all users, built on open protocols and transparent blockchain networks.” Currently there are monopolies and oligopolies providing services on the internet, and the common person has no say in decisions made by these giants, even though these entities are using the data of the common people. It’s easy to think that we should leave those decisions up to the “experts,” yet we have seen with the events surrounding the 2016 election as well as the operation by Myanmar’s military what trusting a corporation like Facebook brings us, and how the results don’t necessarily align with what’s actually in our best interests. One could make the argument that bad actors were the primary cause of these adverse events, but Facebook is able to leverage user data and push the agenda of whomever pays them. We’ve seen companies like Facebook, Google, Amazon, etc. faced with antitrust scrutiny, and talks of breaking them up are abound, yet as we know, the wheel of justice turns slow, and politicians are other entities whom we can’t necessarily trust to have the public’s best interests in mind. With Web3, transparency is ensured with the offered services, users are able to own, share, and/or monetize their personal data, and content creators will have a say in the governance (decision-making) of Web3 platforms, allowing for the democratization of information and the internet. It will take time for the transition from Web2 to Web3 but it’s a transition with the best interests of internet users in mind.
Here’s how Akash fits into this vision:
Akash could be seen as a part of Web3’s architecture, providing a transparent service that benefits both its clients and providers through considerable cost savings and the monetization of unused computational resources, and allows their users to participate in its governance, all while being a viable alternative to the traditional CSP’s. The multi-billion dollar Cloud Computing industry is growing rapidly, with companies allocating over 30% of their IT budgets to cloud computing services; it might make sense to some of these companies to try out an uncensorable, secure, democratized, and cost-efficient service by a smaller entity like Akash (~$219M market cap) to handle their cloud computing needs, especially considering that 35% of the fourth quarter of 2020 cloud infrastructure services spending (nearly $14B) were attributed to providers other than the giants: Amazon/AWS (32%), Microsoft (20%), Google (7%), and Alibaba (6%). Every part of Akash Network fits into the themes of Web3 and it could aid in bridging the gap between Web2 and Web3, with the support of individuals and enterprises, alike.
Update: I would really love to hear my readers’ feedback so please feel free to send any question, comments, corrections, or concerns to me on Twitter, or shoot me an email at therhlmndl@gmail.com.
If you think that this asset is worth buying into, and would like to support me, I’m planning on making all of my articles on Medium free to access, so feel free to use my Gate.io referral link here to purchase Akash (AKT) or other cryptocurrencies in which you may be interested. I am personally invested in Akash and see the long-term value for it so I’m also staking it using the Keplr Wallet Chrome browser extension, accessible here. Staking rewards are also compoundable so your APY can reach above 70%, based on the current APY.
Forewarning: when you stake with Akash, if you want to pull out your staked amount, you have to wait 21 days for those funds to become accessible, so I would not recommend investing or staking if you don’t see the long term potential in this service. Please do your research when investing.
Thanks for reading!
