SKALE NETWORK CRASH COURSE— A BEGINNER’S GUIDE TO THE SKALE NETWORK ECOSYSTEM

25 min readJan 11, 2021

Blockchain technology has been in existence for over a decade since It was birthed by the anonymous entity known by the alias of “Satoshi Nakamoto” who created the disruptive technology in 2009. The Bitcoin blockchain was created to fix up the flawed money system by creating a new standard of money with new economic principles and a complex yet beautiful underlying distributed ledger technology facilitating decentralized immutable recording of data and transparent transactions by means of cryptographic hashing. It has indeed been a success as it has become a new standard of money and finance and one of the top emerging technological innovations of the decade.

The core properties of the blockchain are security, decentralization and scalability. Secure, so there are no loopholes in the protocol such that data is manipulated, or records are lost. Decentralized, because it was created to disrupt the existing centralized financial systems. Scalable, so more users on the protocol would not pose any problem whatsoever to the network. These properties in effect affect cost, security and speed of the blockchain. Unfortunately, the bitcoin blockchain has not been able to efficiently attain all three properties. Scalability and true decentralization being the most difficult characteristics to achieve.

This problem has been termed the “Blockchain Trilemma”. Having a blockchain protocol with all three properties without trading any off. This has led to the quest to keep on improving and evolving the blockchain architecture by proposing and creating new innovations in order to perfect it.

In the process of innovating blockchain architecture, there has been new advancements birthed to ensure blockchain technology eventually has these original core properties (security, decentralization and scalability). Some of these advancements include sharding, state channels, sidechains, interoperability et al. These are all ingenious solutions created to solve most especially the problem of scalability.

Our main focus on this crash course will be on sidechains and we will be looking at SKALE, a sidechain network solving the limitations of traditional blockchains with its elastic sidechain network model.

SKALE is an ethereum interoperable elastic blockchain network designed to solve the limitations of blockchain networks and enable blockchain developers and enterprises leverage on highly configurable secure and decentralized independent sidechains.

Sidechains? Interoperable? Elastic? A whole lot to assimilate I bet!

We would be breaking these down bit by bit in this crash course and reviewing other concepts as well. But first, we will be learning about what sidechains are and the need for them.

SIDECHAINS

A sidechain is a complementary or alternate blockchain affiliated or attached with a parent blockchain or main chain. Sidechains are designed in such a way that they can interact with the main chain. They are in effect pegged to the main chain.

The purpose of designing sidechains is to reduce the cost and delays associated with the main chain. It is popularly termed as an “off-chain scaling solution”. These are procedures taken to execute transactions without congesting a blockchain. Assets can be sent from the sidechain to the main chain and vice-versa as they communicate via a two-way peg. Transactions can be made on the sidechain which eases traffic on the main chain and enables scalability.

THE NEED FOR SIDECHAINS?

To better visualize it, we can think of a main chain and sidechain as a busy highway road and a free road just adjacent to the highway. Using the free road, a commuter can easily drive faster without the congestions on the highway and still connect to the highway when they wish to. This is the same way the sidechain eases the main chain. They provide cheaper transaction costs and higher throughput as well.

To better understand how this happens we will explain the working process. The sidechain eases congestion on the main chain by the transactions being run on it. So how does this happen? Tokens or assets are transferred or deposited from the main chain to a secure address where the tokens/assets are then locked up. This transaction must be confirmed on the main chain. Confirmation is made possible by means of a “FEDERATION”. The federation is a group of servers acting as a channel of communication between the main chain and sidechain. This acts as a security layer to ensure assets are truly sent to the sidechain and are locked up as well.

Once it is confirmed, due to the two way peg (communication line) between the main chain and the sidechain, a corresponding transaction is then made on the sidechain and the assets get reflected on the sidechain. Transactions can then be made fluidly on the sidechain with higher throughput and negligent fees on the sidechain. Limitations due to costs, computational speed and storage can hence be mitigated.

Sidechains offer developers and enterprises the luxury of building products and solutions smoothly without going through the rigorous turmoil of exorbitant fees and low throughput posed by the Ethereum blockchain. Decentralized applications can be implemented easily using sidechains and the bottlenecks associated with using congested main chains can be easily scaled. With sidechains, decentralized applications with a broad range of use cases requiring high throughput and negligent transaction costs can be developed. Especially decentralized applications having a massive user base and a large number of transactions.

SKALE NETWORK

In the preceding paragraphs, we have looked at sidechains and their working mechanism. We have also seen the need for them in blockchain development and innovation and their merits as well. Safe to say we have only considered the strong points of sidechains. Now what are the cons?

The federations mentioned earlier which validate and confirm transactions between the main chain and sidechain pose a security risk for sidechains. The federation is made up of servers which serve as a channel between the main chain and sidechain. This is the line of communication between the main chain and sidechain and if it is breached or compromised, it will pose problems for the sidechain network. This is a weak point for sidechains.

Again, most traditional sidechains achieve consensus by using a POA (Proof of authority) or DPoS (Decentralized proof of stake) mechanism. “Proof of authority” is a consensus mechanism where network validators stake their authority or identity to participate in protocol while “Decentralized proof of stake is a consensus mechanism where validators by the volume of their staked assets. Ideally, these consensus mechanisms should aid decentralization, but it has not been so practically. Bad players can influence the network by targeting the network validators or consortiums can be created between validators which leads to centralization, hence defeating the original purpose of sidechains and the blockchain trilemma.

Evidently, we can deduce that traditional sidechains have been able to curb the problem of scalability, high transaction costs and low throughput. We can also say that security and decentralization on sidechains are still quite flawed.

This brings us to the SKALE network and its elastic configurable sidechain network model. It is an ethereum interoperable elastic blockchain network with a number of features which solve the problems faced with traditional sidechains. It enables developers build application specific blockchains(sidechains) which are interoperable with the ethereum network (main chain).

The SKALE network is interoperable with the Ethereum network in that it can communicate directly with the Ethereum blockchain. This communication is via the federation (channel of servers that enable two-way communication of sidechain with main chain. With the SKALE network developers can leverage on a speedy and more efficient development experience. Also, the smart contracts orchestrating activities on the network are executed on the Ethereum main chain. In addition, the validator stakes, user subscriptions and token inflation are maintained by smart contracts running within the Ethereum main chain.

The elastic sidechain model is an ingenious model pioneered by SKALE to fix the loopholes of traditional sidechains. With elastic sidechains, the original perks of scalability, reduced transaction costs and high throughputs are enjoyed while still adding a layer of security and decentralization due to its unique model.

SKALE is an elastic sidechain network of configurable sidechains which are operated by a group of virtualized subnodes selected from a subset of nodes in the network and are run on all or a subset (multitenancy) of each node’s computation and storage resources.

I bet that is one of the most complex sentences you have ever heard. Well, let us break it down.

ELASTIC SIDECHAIN
The elastic sidechain concept was birthed by SKALE. They provide all the merits of traditional sidechains while featuring the security guarantees of truly decentralized networks. With elastic sidechains, properties of the sidechains can be configured to the needs of the developer and enterprise. Properties such as number of validators, amount of node resources to use and frequency of rotation of validators on the sidechain.

VIRTUALIZED SUBNODES
The SKALE network is made up of a validator pool which is comprised of the various nodes in the network. Subnodes within these SKALE nodes are referred to as “Virtualized Subnodes”. These virtualized subnodes are responsible for signing, validating and committing transactions on the network. They create and commit new blocks which are added to the network. The virtualized subnodes are possible due to virtualization of the NODES. The validator nodes are virtualized and then broken into subnodes via a containerized subnode architecture. This means that fractions of the node can be used for computation and on different sidechains.

To visualize this better, think of a manufacturing plant owner who just opens a fresh manufacturing plant. To kick off operations, he hires 128 skilled workers to commence operations. He now has a staff strength of 128 workers working on his manufacturing plant company. Eventually, he gets awarded with contracts for a manufacturing project in two other industrial cities. Say the first project is in City 1 and the next two are in City 2 and City 3. Then he sends a fraction of his workers to the different cities to start the various projects. In effect, those projects in those cities start using up a fraction of his workforce.

Bringing it back, in this analogy, a node on SKALE network is the plant owner, virtualization of the node and breaking it down into virtualized subnodes is his recruiting of the skilled workers into his plant, fractions of the nodes (virtualized subnodes) being used by the sidechains are the sending off of the workers to the different project sites for work.

This subnode and node virtualization is made possible via a containerized architecture deployed within each node in the Network. This containerization architecture features a number of advantageous benefits to the network.

To read more about the benefits of this containerization architecture and how it accelerates the future of decentralized finance, check out this article published on the SKALE blog on containerization.

NODES

A large set of nodes run by validators constitute the SKALE network. The nodes validate transactions occurring on the sidechains running on SKALE. To be eligible to work on the network, nodes need to run the SKALE daemon which evaluates if the node possesses the necessary network hardware requirements. If the node possesses the hardware requirements, the SKALE daemon will allow it to submit a request to join the network to the SKALE Manager. The request submitted by the node would include the required network deposit and node metadata. On the event of the request being committed to the ethereum main chain, the node will be added as a full node or fractional node.

The difference between a full node and fractional node is in the utility of its resources. Full nodes get all of their resources used up for one elastic sidechain while the fractional nodes’ resources are used fractionally for multiple elastic sidechains.

When the node is created, it is randomly assigned to a set of peer nodes (originally 24 but might be subject to change). These peer nodes audit the nodes downtime and latency at specific time intervals and the data is submitted to the SKALE manager to determine the node’s bounty reward.

Like we earlier defined, SKALE is an elastic sidechain network of configurable sidechains which are operated by a group of virtualized subnodes selected from a subset of nodes in the network and are run on all or a subset (multitenancy) of each node’s computation and storage resources. Being a network of elastic sidechains, developers can build solutions on their own blockchain configured to their preferences (consensus protocol, parent blockchain, chain size etc.) based on the network needs of their solution. With this model, developers have the blockchain and its resources all to themselves for their applications. It will be a vast blockchain network of numerous blockchains, sidechains, storage chains etc. providing high performance networks with high throughput to developers to build products on.

Now we have broken down the seemingly complex concepts associated with the SKALE network, we can now dive into the intricacies of the SKALE ‘Elastic Sidechain Network” model and hence understand it better.

We will be considering five subheadings that cover a great majority of the SKALE ecosystem. These five subheadings will cover crucial topics on the SKALE network. They are:

1. SKALE PROTOCOL AND CONSENSUS

2. CREATION OF ELASTIC SIDECHAINS

3. SKALE VALIDATORS

4. THE SKALE TOKEN

5. HOW SKALE SOLVES THE BLOCKCHAIN TRILEMMA

SKALE PROTOCOL AND CONSENSUS

Consensus is the process or mechanism by which blockchain and distributed ledger systems come to agreement on creation of blocks in a distributed network. There are a number of consensus mechanisms widely used in the blockchain ecosystem and more are constantly developed in the bid to revolutionize blockchain architecture. These include Proof of Work (PoW), Proof of Stake (PoS), Delegated Proof of Stake (DPoS) etc.

The bitcoin blockchain uses Proof of Work (PoW) mechanism which is the first blockchain consensus mechanism developed by Satoshi Nakamoto. Proof of work requires nodes to validate blocks by solving cryptographic puzzles (work done) in order to propagate new blocks.

Proof of Stake (POS) enables to participate in consensus by staking their cryptocurrency on the network. The validator of a new block is chosen pseudo-randomly and mining power is determined by the amount of stake owned.

Delegated Proof of Stake (DPoS) is an innovative variation of the traditional proof of stake mechanism. With DPoS, validators are elected on the network by users. The top validators are chosen based on the staking power of its voters.

SKALE network runs a Proof of Stake mechanism system. Every node on the network is required to stake a predetermined amount of SKALE tokens to be able to participate in the network. This is like a pass to qualify the node as a participant in the network and take part in creating blocks. The SKALE tokens also ensure there is no bad activities on the network. When nodes engage in activity not condoned by the network, there is a slashing of their staked SKALE tokens which serves as a penalty.

These activities include not properly participating in its assigned chain consensus or not maintaining uptime and latency standards enforced by network-agreed-upon SLAs (security service level agreement). SLAs are the terms of contract agreed upon by SKALE and the validators while running nodes on the SKALE network. Once these terms are breached by a node, the penalty is a slash in the node’s staked tokens. Prolonged downtime and double spend attacks are part of the malicious activities that could lead to the slash of SKALE tokens staked by a node. This is done to ensure tasks assigned nodes are carried out efficiently which in effect contributes to a smooth running of the SKALE network. If you can vividly recall when we talked about nodes, we mentioned that after a node is created and verified, it is assigned to a group of peer nodes which audit its downtime and latency. These peer nodes make sure the node is up and doing by monitoring its uptime, participation on the network and latency as well. If nodes perform well, they are rewarded accordingly.

Nodes can be delegated tokens by SKALE token holders if they do not have the maximum number of tokens specified to be staked. This increases the mining power of nodes and encourages participation in consensus.

SKALE MANAGER

The SKALE network comprises the SKALE nodes and SKALE manager majorly.

The SKALE manager is the smart contract system that operates the SKALE Network. It contains functions for node registration and exit, bounty management, and monitoring verdicts. It organizes all entities within the network, including elastic sidechain creation or destruction, node creation or destruction, withdrawals, and bounties.

The SKALE Network keeping up with recent cryptography innovations has several outstanding features which make it highly performant and secure as well. They will be outlined below:

FEATURES OF SKALE NETWORK

1. BYZANTINE FAULT TOLERANT

2. ASYNCHRONOUS PROTOCOL

3. THRESHOLD SIGNATURES

4. LEADERLESS CONSENSUS

BYZANTINE FAULT TOLERANT
Fault tolerance is a property in systems that make sure it continues running despite the event of failure of one or more of its components. Byzantine faults are one popular and difficult problem faced by distributed systems. In summary, it has to do with a situation where a number of components in a distributed system fail or behave maliciously. In the case of a blockchain, the components are the nodes.

For a blockchain system to be byzantine fault tolerant, the number of bad nodes must not exceed one third of the total number of nodes in the system. As long as this is in place, the network will reach consensus (two thirds of nodes are honest players in the ecosystem). Activities associated with bad nodes include lying, collusion, and non-participation. The SKALE network being byzantine fault tolerant means that it would still run efficiently even with the presence of a few bad players.

But what if the bad players exceed one third of the total number of nodes? That would not be possible. Like we considered, nodes are assigned to 24 peer nodes which monitor its activities and submit the metrics to the network. Malicious nodes have their staked tokens slashed as a penalty for bad behavior and if it continues, they eventually lose their tokens and exit the network. This ensures that the network is rid of bad players.

ASYNCHRONOUS PROTOCOL
SKALE consensus uses an asynchronous timing model. Here latencies with regards to sending messages on the network do not pose a problem. Thus, messages can take an indefinite period of time to deliver while the network runs smoothly. Virtualized subnodes in the network sending messages do so with no immediate expectation of a response and implement an exponential backoff algorithm whereby they attempt to redeliver messages that have not been responded to with longer intervals between them. The exponential backoff algorithm is an algorithm used to prevent network congestion in systems by spacing out retransmissions of same data. So being asynchronous, SKALE network allows for latencies with virtualized subnodes sending messages. With this asynchronous factor allowing for latency, there can be numerous subnodes trying to retransmit messages to the network at the same time. This can lead to a congestion of the network. The exponential backoff algorithm prevents this from occurring by making sure the rate of messages sent by slow virtualized subnodes are monitored and structured in such a way that there are no collisions. The model follows that of the internet, where network nodes tend to fail, and messages are delayed. The advantage of leveraging this asynchronous timing model is slow links (nodes that delay messages to be sent to the network) do not halt the SKALE network from running efficiently or achieving consensus.

THRESHOLD SIGNATURES
SKALE network uses threshold signatures for supermajority voting. Threshold signatures are a cryptographic primitive for distributed key generation and signing. It is a new innovation in cryptography with numerous benefits. A distributed key generation and distributed signing model employed by SKALE.

For threshold signatures, there are three steps :

1. KEY GENERATION

2. SIGNING

3. VERIFICATION

The first step involves the generation of a verifiable public key to be used for signatures. A private key share is simultaneously created too. The second step involves a signature generation. Here messages are signed, and a digital signature is sent out as output. In the last step, verification and validation of the signatures output in the previous step is carried out.

SKALE network makes use of BLS threshold signatures(Boneh Lynn Shacham). The key generation event uses joint-Feldman Distributed Key Generation (DKG) to assign private key shares and verifiable public keys to virtualized subnodes. The verifiable public keys are stored and then used for signature verification purpose on the network.

Using BLS threshold signatures enable efficient interchain communication and support randomness in node allocation. As a result, true decentralization, an efficient consensus algorithm and security can be achieved on the SKALE network.

LEADERLESS CONSENSUS
In numerous decentralized / distributed consensus protocols, a node is elected as a proposer of a block for consensus to occur. SKALE uses a different approach, a leaderless consensus method. Here, all virtualized subnodes have the chance to propose blocks. The set of virtualized subnodes which are eligible for committing blocks on the network are those which receive a supermajority of signatures.

This leaderless policy on the protocol ensures fairness in the ecosystem and guarantees that all the virtualized subnodes participating in the network have a fair and equal chance to propose and commit blocks on the blockchain.

All these features are put in place to ensure the SKALE network functions as an optimal blockchain network with provable security.

USE CASES FOR SKALE NETWORK
The elastic sidechain model of SKALE facilitates the creation of high performance chains with varying configurations. Therefore, all kinds of decentralized applications can be built and developed on SKALE network. SKALE network use cases include:

1. DECENTRALIZED FINANCE: Spending/saving, investing, trading, lending, prediction markets.

2. GAMES: Battle games, strategy games, board and card games, collectible card games

3. MEDIA/ADVERTISING: Decentralized media streaming, decentralized media hubs, censor-resistant social nets, self-sovereign personalization, permissioned ads.

4. DECENTRALIZED COMMERCE: DAOs and LAOs, business registries, track and race, trading and exchanges, productivity apps.

5. IOT (INTERNET OF THINGS): Supply chain and logistics, decentralized mesh networks, device registries, data marketplaces, environmental monitoring.

6. OTHERS: Healthcare, real estate, digital identity, voting, fundraising, charity giving.

ELASTIC SIDECHAIN CREATION

The utmost feature of the SKALE network is the ability to create configurable chains best suited for the needs of individual projects and products. Developers can choose the different parameters of the sidechain to be created and configure it according to his preferences. Features such as chain size, consensus, protocol, parent blockchain, storage capacity etc. can be modelled according to what he wants for his product.

The process of creating an elastic sidechain involves a number of processes. First, the developer configures the features or parameters for his sidechain. Then they make payment to the network. Payment is made in SKALE tokens which is the native token of the network. SKALE token payment determines how long his chain will use up network resources (duration of usage) and the size of the chain itself.

There are various chain sizes and time durations for using the SKALE network’s resources. Chain sizes range from small to medium and large while network resources usage duration for a chain ranges from 3 months to 6 and 12 months(year). The developer’s sidechain is then assigned a set of validator nodes randomly. A default sidechain has 16 nodes but that can be changed using the formula 3n+1 and n must be greater or equal to 1. We mentioned that the various sizes of a chain are small, medium, and large. Chain size depends on how much of a virtualized subnode the chain uses. For a small chain, it uses 1/128 of a virtualized subnode which equate to approximately 0.78%. For a medium chain, it uses 1/8 of a virtualized subnode which equate to approximately 12.5%. For a large chain, it uses 1/1 of a virtualized subnode which equate to approximately 100%.

Current configurable parameters for sidechains are chain size, consensus, protocol, parent blockchain, storage capacity, added security measures (shuffling of virtualized subnodes and frequency of shuffling), virtual machines. Eventually, the SKALE network will increase these to allow for number and size of virtualized subnodes, number of signers and other parameters to be configurable for a sidechain.

After the request to create the elastic sidechain has been received by the SKALE manager, a new elastic sidechain is created, and its respective endpoint returned to the creator. If there are no sufficient resources (free resources in the network) available in the network to support creation of the configured elastic sidechain, the transaction is cancelled, and the creator is notified.

If the creation request goes through and there are adequate resources for the sidechain to leverage on, the creator then proceeds to start using the elastic sidechain created.

If a user wishes to destroy an elastic sidechain, it can happen under two instances. First, the rental deposit for network resources has been exhausted or he has flagged the Elastic Sidechain for removal from the network. In the first instance, before the rental deposit is exhausted, the network notifies the user that their resources are almost exhausted and gives them the opportunity to additional time to the chain’s lifetime by depositing more payment for rental.

When an elastic sidechain is being destroyed, assets belonging to the user are transferred from the SKALE network to the ethereum main chain, the virtualized subnodes are removed from the sidechain, the storage and memory of the sidechain is hard reset and completely erased and the sidechain is removed from the SKALE Manager. The user who commissions the destruction of the sidechain is then rewarded.

Noteworthy also is the fact that when an elastic sidechain has been created on the network, it can be easily resized and reconfigured to accommodate increased workload on the sidechain. This is done in real-time and conveniently without any additional operational efforts or node management by the user.

SKALE VALIDATORS

At the core of the SKALE network elastic sidechain model are the nodes. The nodes validate transactions on the network and also facilitate the virtualization of subnodes. These nodes are run by validators who stake SKALE into the network and then gain the right to run nodes and earn both fees and tokens via inflation. The fees and tokens are the rewards for participating in the network. Rewards are distributed evenly across the network of nodes — with validator rewards based on meeting performance targets, not by optimizing rigs to improve cryptographic performance.

This is a fair system. Quite different from the traditional mining pool models where the fastest and most powerful nodes get majority of network rewards. On SKALE, rewards are based on node’s performance and participation in the network. The rewards are paid out monthly to validators.

SKALE validators earn SKALE token rewards every calendar month in two ways. They are:

I. Decentralized App (dApp) Fees
II. Network Issuance (or Token Inflation)

(I) dApp Fees:

Recall that developers who create elastic sidechains have to stake an amount of SKALE tokens to be able to rent resources on the chain. A certain percentage of this revenue is sent to a bounty pool allocated to reward validator nodes. The rewards are evenly distributed to nodes that meet the specified SLA(Service-level agreement) requirements.

II. Network Issuance (Token Inflation)

The SKALE network will issue new tokens every year(inflation) to support validator running nodes on the network. They will be released at a yearly reduced rate until the 7th year. This new tokens issued out will be given to validator nodes running efficiently on the network.

Each validator node has significant value staked into the network. This stake prevents bad behavior as they lose their stake if they decide to go byzantine or default. Validators have an option to self delegate or accept delegation from other token holders. When delegators delegate their tokens to validator nodes, they are incentivized for it and get rewards in SKALE tokens.

Delegators are SKALE token holders who decide to support validators by agreeing to delegate a portion of the staking amount in return for rewards a validator node receives. Validators can decide to stake a portion of the amount needed per node or receive delegations from token holders.

The delegators can choose from a pool of validators to delegate their tokens to. Choice of validator is totally up to them and largely influenced by the node performance, percentage return offered by validator and the reputation of the validator. On the other hand, validators can also choose to decline delegations too.

If you are interested in becoming a validator, you can sign up on the validator page, fill the form and join the SKALE Discord channel. Your application will be considered by the SKALE network team and a schedule reviewed s well.

The SKALE Network has an extremely strong set of validators. These validators range from experienced network operations teams to experienced crypto miners to experienced ETH developers.

Here are the validators that are integrated with SKALE and available to public token launch participants via the Activate platform beginning September 24, 2020:

SKALE Validators available on Hubble and Anthem later this year (not available on Activate for the Mainnet Phase 2 launch):

SKALE TOKEN

The SKALE Network token ($SKL), is a hybrid use token for the SKALE network which enables validators to run nodes, delegators to stake tokens to validator nodes and enables developers to deploy or rent resources for elastic sidechains on the SKALE network. The SKALE Network token is the native token of the SKALE network. SKALE token enables users to rent network resources (computation, storage, bandwidth) for a predetermined amount of time.

SKALE is built on an ERC-777 token standard which supports delegation on the token level. ERC-777 is fully backwards compatible with ERC-20, which means that it is supported by all participants of the Ethereum ecosystem with ERC-20 support. The ERC-777 standard ERC777 standard mitigates the problems associated with third party spending of tokens by introducing the concept of operators.

The SKALE network token plays a very crucial role in the SKALE network ecosystem by contributing to network security through its use case of delegation and staking.

The SKL token serves as a utility token for orchestrating different activities on the SKALE network. The main functions are highlighted below:

Security of and staking in the network: SKL token holders (delegators) stake their SKL tokens to validators who run nodes on the SKALE network. They get rewarded with SKL tokens for delegating their tokens to validators.
Payment method for SKALE Chain subscription fees: Developers purchase their subscription access to SKALE elastic blockchains (sidechains) using SKL tokens. They also use the SKL token to rent rresources on the SKALE network.
Rewards for validators and delegators staking their tokens: Rewards are accumulated monthly, based on fees paid by developers for chains and a monthly inflation of tokens into the network.
Governance and voting: SKL tokens will be used for on-chain voting, which will govern all economic parameters of the SKALE Network. Additional information surrounding governance and the N.O.D.E Anstalt can be found here.

Now we will look at the the tokenomics, distribution model and other features of the SKALE network token.

TOKENOMICS

The total supply of $SKL tokens at Genesis network launch was 4,140,000,000. The maximum supply of SKALE network tokens are 7,000,000,000 tokens.It has an estimated network issuance rate of 9.3% in the first year. This rate is gradually released until the 7th year. The public launch allocation was 4.23% of the total supply at launch which was 175,000,000 SKL tokens and the public launch price was $0.03.

DISTRIBUTION MODEL

Validator rewards: 33%

Delegator Allocation (Early Supporters + Public Allocation) : 28.1%

Founding team : 16%

SKALE Foundation : 10%

Protocol development fund : 7.7%

Core team pool : 4%

Ecosystem fund : 1.3%

TOKEN LAUNCH

The SKALE network token was launched on ConsenSys Activate platform. The N.O.D.E. Foundation chose the ConsenSys Activate platform for the SKALE Network launch because of their approach to the legal and regulatory ambiguity around utility token offerings that decentralized projects face. It provided a token sale, staking and delegation platform for fair and distributed token launches. After the sale, SKL token holders can use Activate’s easy token staking and delegation functions to earn network rewards. More information on token delegation can be found in the SKALE Delegator Hub.

Utilizing Activate’s more compliant KYC policy, the final number of approved participants in the SKL token sale was 4,533 with $53,300,000 in purchase intent. On Friday, September 11, 2020, the public token sale of SKL concluded with 3,736 people from 90 different countries purchasing 167,139,884 SKL at $0.03 USD/SKL, creating a global decentralized network of participants spanning the globe and significantly increasing network security.

SKALE’s mainnet phase 2 went live October 1 2020, with over $80 Million USD in TVL(Total Value Locked). A global contigent of roughly 4,000 people and entities from 90 different countries secured 135 SKALE Network nodes across 46 validator operators by staking their tokens.

$SKL has been listed and is now trading on Binance, Huobi, CRYPTO.COM, Uniswap, and other exchanges.

Uniswap SKL-ETH trading pool

SKALE Token Address

https://etherscan.io/token/0x00c83aecc790e8a4453e5dd3b0b4b3680501a7a7

SKALE Token Unlock Schedule

Interactive Token Unlock Schedule

SKALE Token Resources

Tokenomics One Pager

Validator and Delegator Economics

Validator FAQ

Delegator Hub and FAQ

Watch SKALE on Coinmarketcap, Coingecko, and Blockfolio.

HOW SKALE NETWORK SOLVES THE BLOCKCHAIN TRILEMMA

In the opening pararagraphs, you would recall we talked about the blockchain trilemma and the quest to create solutions to solve it. SKALE network elastic sidechain solves this trilemma quite conveniently. Like we said, an ideal blockchain has all the core properties of security, decentralization and scalability without trading any property off for another.

SCALABILITY
The SKALE network’s elastic sidechain model is originally engineered to be scalable. Traditional sidechains in themselves are scalable in nature due to the cutting down of data processing on the blockchain by running computations off-chain. SKALE on the other hand enables the creation of configurable individual/single sidechains specifically suited for the needs of each user. There are no network congestions because every user runs on their own blockchain. Additionally, users estimate the needs of their applications and specify chain sizes and resources to use. If estimated resource needs turn out to be wrong, users can reconfigure their chain size and other parmeters to better suit their needs.

DECENTRALIZATION
Decentralization is a very important property of a blokchain. It is at the core of a blockchain. It is the original purpose of blockchain technology which is creating decentralized solutions and systems. Traditional sidechains and protocols struggle with decentralization. Even with brilliant consensus mechanisms with ideal propositions for decentralization, we still see that true decentralization is not attained. Consortiums and sects are formed which influence the network however they want.

SKALE solves this by doing a random assignment of validator nodes when a sidechain is created. The validator nodes are chosen from a validator pool randomly. This ensures no specific set of nodes are used to run a sidechain.

SECURITY
Security has been a pressing concern for traditional sidechains. SKALE network ensures security through its pooled validation model. A large number of validator nodes are frequently rotated in sets. Another way SKALE network ensures security is by the staking requirement for nodes. The value staked in the network by nodes are a deterrent against malicious behavior because when a node does not comply to the requirements requested by the network(active participation in the network and uptime) or engages in malicious behavior, its staked tokens are slashed as a penalty.

Shuffling of virtualized subnodes is an added security measure by SKALE network. It is done to mitigate any collusion attempts between virtualized subnodes on the network.

The SKALE network will evidently be a gamechanger in the blockchain sphere. Designed to resolve bottlenecks associated with developing solutions on the blockchain, SKALE network will surely be a sought-after decentralized network.

I do hope that this course on the SKALE network and its ecosystem has been insightful to you and you have learnt a whole lot in the process. I do hope you go on to learn more about the SKALE network and get to be a member of the ecosystem.