Understanding How the Cudos Token powers the network

CUDOS is a decentralised compute network providing a trusted layer 2 oracle network for blockchains and scalable cloud resources. It tries to solve the limited computing capacity of blockchain projects for high-end tasks, which when implemented on the blockchain, will increase network fees for developers due to the high cost of RAM and CPU. Cudos’s solves this by building a layer 2 and layer 3 network integration that allows blockchains to mine and compute-heavy tasks off-chain, and the result is communicated back to the blockchain for final resolution. For instance, processing 3D video games on-chain will increase resource usage on the network. With Cudos layer 2 and 3 networks, such tasks are compiled and completed off-chain by a network of powerful servers with the capacity to perform such tasks at a lower cost. Currently, the project works with the Ethereum and Algorand blockchains. Note that non-blockchain projects can also integrate with the Cudos network but this article focuses on the blockchain component.

Layer-1 Explained — No Utility token needed

Cudos’s layer one is on-chain implementation and takes place at the blockchain level. Cudos has deployed its smart contracts at the blockchain level, which interacts with smart contracts writing and deployed on the blockchain by developers and dapps. The blockchain smart contract invokes the Cudos smart contract, on the same blockchain, in order to request work to be computed off-chain or to access external data at layer 2 and layer 3 levels. In summary, the layer is on-chain and operates at a smart contract to smart contract level while layers 2 and 3 are off-chain implementations.

Layer-2 Explained — Utility token needed

Layer 2 is the Cudos network, which is made of nodes (servers) deployed by members of the network to compute and validate transaction request to determine the type of workload that needs to be performed at the layer 3 levels (discussed later). The nodes are off-chain and the Cudos network currently has over 20,000 nodes validating transactions at the layer 2 level. These nodes are constantly listening to events in the CUDOS smart contract in layer 1, to see when a new request for a compute job is created. The selected node validates the transaction and sends the request to the relevant app or code deployed on the layer 3 marketplace for the computation task to be performed. Once the task is completed, it is validated by a consensus check needed in order to return a unique result to the original requesting smart contract on the layer 1 blockchain.

To run a node on the Cudos network, the owner needs to buy and stake about 2,000,000 CUDOS tokens in order to be eligible. The Cudos network uses a reputation-based model to select nodes for tasks. The higher the CUDOS tokens staked by a node, the higher the chance it will be select to compute and validate tasks on the network. In return, nodes are rewarded CUDOS from the network fees for completing tasks on the network.

Layer-3 Explained — Utility needed here

One of the disruptive components of the Cudos network is the layer 3 platform implementation. Cudos Ventures has built the technology which allows it to aggregate idle computing resources from servers, laptops and mobile phones into a central marketplace. They are called “Workers” are dotted across over 145 countries. Blockchain projects and DeFis then leverage these resources to process high computing tasks off-chain. This third layer is also called the Cudo platform and interested Workers who want to pool their resources have to install the Cudo software before they can be allowed to compute tasks.

Here again, Cudo undertakes to a benchmark of all Workers (pooled computing resource) to know their capabilities and the type of tasks they can perform. Developers can create apps on the marketplace or apps can deploy their custom code on these data centres. The nodes in layer 2 can invoke the layer 3 platform based on inputs supplied by the layer 2 nodes. Also, anyone can store data at layer 3 which can be accessed by the layer 1 on-chain smart contract. The Cudo Nodes work with the Cudo Workes in computing and validating transaction identifiers and hashes before returning the result to the layer 1 on-chain smart contract. The figure below is an overview of the Cudos architecture and how the CUDOS tokens are used to fuel the implementation process.

To add your computing resource as a Worker on the Cudo Platform, the owner does not need to stake any CUDOS tokens to get started. Rather, they earn CUDOS as rewards for performing computational tasks on the platform.


The CUDOS token plays a crucial role in the operations of the Cudos network and platform (layer 2 and 3 respectively). Users pay network fees using the CUDOS utility token, which is in turn used to reward the Cudo nodes and Workers for performing tasks on the platform. Nodes also need to stake the token in order to qualify as a validator while Cudo Workers don’t need to stake or have CUDOS tokens to join the Cudo platform with their computing resources. The private sale of the CUDOS token has closed but the public sale will happen on the 12th January 2021. I am looking forward to the public launch to accumulate some of the CUDOS tokens for future usage in storing my dapp and research data.

Scroll to Top