Akash Network, in simple terms

Akash Network (AKT) is an open-source cloud computing marketplace. 

It leverages blockchain technology to provide a decentralized alternative to traditional cloud service providers like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure.

They call themself the Airbnb for data centers:

The team behind Akash Network is led by two key figures: Greg Osuri and Adam Bozanich.

Greg Osuri, as the CEO and co-founder, brings a rich background in open-source technology, distributed systems, and blockchain development. He is known for founding AngelHack, the largest hackathon organization globally, and has also played a role in launching several developer-focused companies, including Firebase, which was acquired by Google. His experience extends to designing cloud architectures and advocating for blockchain laws in California.

Adam Bozanich, the CTO and co-founder of Akash Network, drives the technological advancements of the platform. His previous roles include leading software development at notable companies like Symantec and Marketron, and he was also involved in the music monetization platform Topspin. Adam holds a patent in network protocol fuzzing, underscoring his expertise in security and systems resilience.

The Problems they are solving:

Akash Network aims to solve two major issues in the cloud computing industry:

1. Centralization

Most cloud computing is dominated by a few big companies like Amazon, Google, and Microsoft, which can lead to problems like higher prices, censorship, and privacy concerns.

For example, a small business might find it costly to scale its operations due to high cloud service fees, or a content provider might face content restrictions imposed by the cloud service's policies.

2. Underutilized Resources

Many organizations have computer servers that are often idle. Akash Network lets these entities rent out their unused computing power to others who need it.

This could be beneficial for a company with seasonal high computing needs, such as a tax software company that needs more server capacity during the tax season but less at other times.

By tackling these issues, Akash Network provides a potentially cheaper and more flexible alternative to traditional cloud services, while also enabling companies to monetize their idle computing resources.

How are they solving the problems?

1. Decentralized solution: Akash Network allows anyone with computing resources, such as data centres or individual servers, to lease their unused capacity. This helps optimize the use of dormant computing power and decentralizes the hosting of applications, reducing reliance on major cloud providers.
2. Increased competition: By utilizing a competitive marketplace model where providers bid to offer their computing resources, prices on Akash Network can be significantly lower compared to centralized providers.
3. Enhanced Privacy and Security: The decentralized nature of Akash Network ensures that data is not centralized in a few data centers, reducing the risk of data breaches and censorship.
4. Flexibility and Open Source: Akash Network supports a wide range of applications, from web services to blockchain nodes. Being open-source also means that the community can contribute to its development, potentially leading to rapid innovations and improvements.

According to their website, here are the key features:

Partnerships and adoption:

Akash has some significant partnerships both in the crypto space and outside of it.

Here are some of them:

1. Kava Labs: Akash Network partnered with Kava, a DeFi platform, to provide decentralized cloud solutions for Kava’s blockchain ecosystem. This partnership is particularly significant because it showcases Akash’s utility in supporting blockchain infrastructures, which are inherently decentralized.
2. Cosmos Ecosystem: Being built on Cosmos SDK, Akash Network is naturally integrated within the Cosmos ecosystem, which comprises various interconnected blockchains. This integration allows projects within Cosmos to easily deploy and manage their applications using Akash’s decentralized cloud services.
3. Solana Foundation: Akash has partnered with the Solana Foundation to provide scalable and efficient cloud solutions to developers building applications on the Solana blockchain. This partnership aims to reduce costs and increase the scalability of operations for Solana-based projects.
4. Helium Foundation: In a collaboration aimed at enhancing the capabilities of decentralized networks, Akash and Helium are working together to improve the infrastructure supporting IoT (Internet of Things) and wireless technologies. This partnership leverages Akash’s cloud services to power applications running on Helium’s decentralized networks.
5. Equinix Metal: By collaborating with Equinix Metal, Akash aims to expand its reach and capabilities in providing cloud services on a global scale. Equinix Metal offers physical infrastructure, which Akash leverages to decentralize and distribute its cloud operations further.
6. Overclock Labs: As a primary developer behind Akash Network, Overclock Labs actively uses Akash’s platform to deploy and manage decentralized networks and services, showcasing real-world utility and adoption of the Akash cloud solution.

In terms of adoption, there are 45 projects deployed on Akash, utilizing the computing power offered by the network of providers. The deployed projects range from Minecraft servers to decentralized search engines.

The revenue, measured as USD spent on the marketplace, is accelerating. I put together a graph showing the monthly USD spent on the Akash Networks marketplace:

In April, the revenue was roughly $80K. Given a constant revenue at that level, the yearly revenue is roughly $1 Million.

To give you a sense of scale, AWS (amazon web services) generated over $90 Billion in 2023.

Even though the adoption of Akash is accelerating, the current revenue is not justifying a market cap in the billions.

However, this is crypto. We can't make use of traditional metrics.

The Tokenomics

When looking into the tokenomics, I'm mostly interested in two things:

1. If the project grows, will the token increase in value? This is not always the case, like with Cosmos.
2. What is the supply mechanics of the token? Specifically, I'm interested in the inflation rate, and if the supply is capped.

Akash Network's native cryptocurrency is called AKT, and the tokenomics are looking great. AKT is mainly used in four ways:

1. Payment: AKT is used to pay for cloud services on the platform, driving its demand as more users adopt Akash for their computing needs.
2. Staking: Providers must stake AKT to offer their services, ensuring reliability and deterring malicious behavior by risking a loss of their stake for non-compliance.
3. Governance: AKT holders can vote on network decisions, influencing the development and operational policies of Akash Network.
4. Rewards: Staking AKT earns rewards, incentivizing participation and investment in the network.

AKT has a capped total supply which due to scarcity drives the price up. However, with a current inflation rate of 17%, the circulating supply of AKT grows significantly each year.

For the token's value to increase, the demand for AKT must outpace this inflation, necessitating that the market capitalization grows by more than 17% per year.

Essentially, the network's usage and adoption need to expand sufficiently to absorb the additional tokens generated by inflation and drive the token price upward.

I believe this will be achieved. After all, this is the crypto market - a 17% swing up/down is just another Tuesday.

Render vs Akash:

If you don't know Render, have a look at this article before reading on. 

The market cap of Render is almost 4x that of Akash Network.

The only two main reasons are probably:

1. Higher current adoption of Render
2. A better future outlook for Render

Let's take a look at the adoption vs. market cap of both:

Render saw impressive growth in Q4 of 2023, reaching a usage worth 1.1M RNDR.

In Q4 RNDR opened at $1.5 and closed at $4.5, giving us an average price of $3.

The "revenue" of Render in Q4 can therefore be estimated at $3.3 million.

Multiply that by four and you have a yearly revenue of $13 million.

The market cap (MC) of Render at the start of 2024 was roughly $2B, putting the MC 153X the yearly revenue.

Now, let's compare that to Akash Network:

I have estimated Akash to have a yearly revenue of $1 million at the current level of adoption.

The current market cap of AKT is $1.3B, which is 1,300X the yearly revenue.

Conclusion:

AKT is roughly 8.5X higher priced relative to the yearly revenue, compared to RENDER in 2023.

Looking deeper into things, I've formulated a hypothesis:

The main source of income and adoption for Akash is GPU power, which is in direct competition with Render. Given Render's established position, this is looking bleak for AKT.

This is just speculation - Akash has not stated that their main source of income is from GPU.

But there are signs:

Take a look at the revenue generated by Akash Network:

For some reason, sales ramped up around the end of August and the beginning of September last year.

Now, take a look at the GPU capacity of Akash:

GPU capacity ramped up around the same time.

This might be a coincidence, but it seems like GPU might be the main reason for AKT's rise in adoption and value.

So why invest in AKT, when RENDER is clearly leading in the distributed GPU space?

Here's why:

Render is attached to OTOY, a centralized company. It follows that it is not completely decentralized and permissionless. Further, it runs on the Solana blockchain, which itself is highly centralized.

Akash Network, on the other hand, is truly decentralized. Additionally, it is built on Cosmos, offering a great degree of decentralization.

A case can be made that AKT deserves a higher MC/Revenue than RENDER due to its decentralized and permissionless nature.

In addition, AKT has higher growth potential as the market cap currently is only about 25% of Render's market cap.