The 5 Most Important Things About Skale Network
Hello guys welcome to my medium page, in this article i’m going to be deep diving into skale network from introduction and up to the most important part you need to know on a skale network before starting, I will discuss about the Blockchain first. Blockchain is a combination of many new technologies that are very mature (mature), including peer-to-peer (P2P), encryption, databases, and consensus or agreement. Within each blockchain node, the data block is encrypted and the encrypted results entered into the next data block. The encryption results are encrypted again, and entered into the next data block, and so on. Can be described as a chain consisting of data blocks.
In the last decade, blockchain has emerged as one of the most influential innovations in software architecture and technology. Ideally, blockchains are designed to be architecturally and politically decentralized, similar to the Internet. In recent times, however, blockchain-based systems have faced stumbling blocks in the form of challenges related to scalability, privacy, security, etc. Several new methods have been proposed both by the research and professional communities to mitigate these challenges. One such recent advancement proposed is the use of sidechains. A sidechain is a secondary blockchain connected to the main blockchain with a two-way peg. Sidechains may have their own consensus protocols, which could be completely different from the mainchain’s protocol.
Theoretically, a sidechain can add new functionalities, improve privacy, and security of traditionally vanilla blockchains. To this date, however, little is known or discussed regarding factors related to design choices, feasibility, limitations and other issues in adopting the sidechain technology. Moreover, there is a lack of studies discussing how and where it can effectively be integrated into blockchains to remedy current issues in a clear context. Hence, this paper provides the first comprehensive review of the state-of-the-art sidechains and platforms, identifying current advancements and analyzing their impact from various viewpoints, highlighting their limitations and discussing possible remedies for the overall improvement of the blockchain domain.
Another disadvantage that has to be taken into consideration is that once data has been added to the chain, it can be very difficult to modify. While some individuals like this about the technology, it can cause problems further down the road. To modify data, the process is extensive and requires changes to the code. Often this involves abandoning a node and creating a new one. Another Ethereum layer 2 solution SKALE Network is all set to open its doors on June30. The launch has been divided into three phases. The first phase will focus on initial security strengthening and decentralization(which will be continued throughout Phase 2 also), being in restricted access mode without any issuance, transfers and bounty in the network. It will be restricted to validators who have run the testnet and passed the onboarding process.
The Phase 2 will include dutch style auction and distribution of tokens via Codefi Activate, among buyers who would be required to stake the tokens on the network. The network will run in a delegated state, with issuance and bounty distribution to token holders who are running the network. However, the tokens can’t still be transferred or sold. It will be a Proof Of Use period, a core pillar of Codefi Activate token launch standards. The Phase 2 will increase network participation and security.
After 3 months have passed for the Phase 2 network operations, the network will turn to an open state where tokens can be unlocked and transferred. The tokens allowed for sale would be the ones purchased during Activate launch those awarded for staking, during the Proof of Use period. The network will achieve full functionality in this phase.
What is Skale Network
Skale Network is an open source security and execution Ethereum Layer 2 scaling solution, which relies on elastic side chains to divert processing off the mainnet. The developers and users can take advantage of the high performance side chains executing sub-second block times, running up to 2,000 TPS per chain that run full-state smart contracts, decentralized storage, execute Rollups, and machine learning in EVM. They offer speed/functionality without compromising security or decentralization.
It can support thousand thousands of independent blockchains of all sub types, tied to the Ethereum mainnet, fully compatible with Solidity and while maintaining full compatibility with the Ethereum eco-system. It is a collusion resistant leaderless network with mathematically provable secure ABBA-based consensus. The Layer 2 scaling solution features a friction user experience for both the developer and the end user.
Skale Network, overseen by the N.O.D.E. Foundation, will be the first project to launch a token on the Activate platform, which has been set up by ConsenSys Codefi to allow networks to launch their tokens based on a legal framework designed to withstand regulatory scrutiny.
Skale Network initial and primary use case for this network will be in form of elastic sidechains for the Ethereum Blockchain and the context can be described as an ‘Elastic Sidechain Network’. In addition to running full-state smart contracts, SKALE chains offer decentralised storage and can execute machine learning in smart contracts. Over 40 decentralised applications are currently building on SKALE, ranging from games to decentralised finance, to streaming audio and more. The combination of SKALE and ethereum is a truly decentralised cloud that allows Web 3 applications to compete with Web 2 on both a cost and performance basis.
SKALE is a key element within the Ethereum ecosphere given the advantages offered by its forward-looking protocol design decisions. Key features include EVM compatibility, full Solidity language support, BLS cryptography, an RRI-based pooled security model, and having much of its operational management running in the Ethereum network. This combination of compatibility and connectedness with the Ethereum mainnet enhances SKALE’s effectiveness as a high-throughput execution layer for Dapp developers, protocol designers, and other crypto-based builders.
An advanced security model that is rooted in the Ethereum mainnet is at the core of the SKALE design. A set of over 25 smart contracts running on the Ethereum mainnet controls SKALE network functions such as chain creation, validator registration, node selection, node rotation, staking, bounty payment, slashing, and more. In addition, the network uses a large pool of validator nodes that are randomly selected and assigned to SKALE chains and then frequently rotated to prevent collusion and other malicious activities. Significant validator staking, decentralized network monitoring, and an incentivized reward system further enhance the protections of the security model.
The SKALE Network is an integral solution to blockchain scaling which addresses speed, security, ecosystem interoperability, AND transactions per second. It is a configurable network of elastic sidechains that supports high-throughput and low-latency transactions without the high transaction costs found in public mainnets. The network offers expanded storage capabilities along with embedded connectivity and interchain messaging with the Ethereum mainnet. All of this is performed using a pooled transaction validation and security model that is efficient, scalable, and collusion-resistant.
The primary benefits are near-zero gas costs, faster commit times, and increased transaction throughput. Faster commit times translate into lower latency, which allows for a better user experience. Reduced gas costs benefits both developers and users and removes friction to mass adoption. Elastic sidechains can also provide a significant amount of additional on-chain storage capacity for decentralized applications. Storing data on public chains is costly and limited whereas data storage within the SKALE Network is more extensive and economical thereby reducing the challenges app developers run into when addressing the storage needs of decentralized apps. Using an Execution Layer solution like the SKALE Network is highly effective for building and scaling Ethereum-based applications, opening up the potential for an ever-expanding spectrum of use cases — from games and decentralized finance to productivity and media applications and everything in between.
The SKALE Network is a custodial execution layer (Layer 2). Whereas non-custodial approaches use a system of fraud proofs to allow funds to move between chains, SKALE makes use of BLS signatures, deposit boxes within the Ethereum mainnet, and other mechanisms to allow for custodial ownership and use within the network (which allows it to leverage the security guarantees of the mainnet but gain the performance inherent in Layer 2). Whereas other Layer 2 models attempt to use mainnet interactions to run verification and/or fraud proofs, SKALE uses the Ethereum mainnet for staking and for other critical operations in a way thatis better attuned for the creation of a robust and fully decentralized security and execution layer. The SKALE Network can also support non-custodial Layer 2 efforts via BLS Rollups and eventually will support other proven L2 solutions as they progress from research phase to production ready.
1. Skale Elastic Sidechain
Sidechain is a separate blockchain that is attached to its parent blockchain using a two-way peg. The two-way peg enables interchangeability of assets at a predetermined rate between the parent blockchain and the sidechain. The reverse happens when moving back from a sidechain to the main chain. When it comes to business value, sidechains enables blockchain to scale by allowing certified information from one blockchain to be used for another by deriving security from the main chain, markedly amplifying the use cases for worldwide blockchains apart from cryptocurrencies. sidechains will not replace blockchains. Rather, they will solve many of the main issues plaguing blockchain today. In fact, sidechains can potentially solve two of the most prominent problems with blockchain today; scalability and flexibility.
For scalability, sidechains will allow for more TPS because a different sidechain can maintain unrelated transactions that can be executed at the same time. In terms of flexibility, sidechains will allow for the ability to work with multiple currencies, as we can have different sidechains for different currencies which can then be transferred back onto the main blockchain.
Sidechains can come in many variations, but most people are familiar with PoA or DPoS. It is well known and adds value, but is not completely decentralized. It’s important to remember that these sidechain validator sets can be compromised to censor users, pause the chain, or even act maliciously to collude and try to steal funds from them. In many scenarios, centralization at the Execution Layer can jeopardize and jeopardize the mission and incentives of a decentralized system. The elastic side chains (described below) are completely decentralized and do not have the same challenges of centralization.
Effectively, security relies on quality code, cryptography, reputation (in some cases), and incentive dynamics such as bets and deductions. This is why users should carefully analyze the security parameters and incentive structures of the sidechain and they should be careful about putting large sums of money into new and unproven chains.
In a traditional sidechain, a group of validators is appointed via PoA (where they stake their identity / reputation) and DPoS (where they stake value in the network). And while DPoS is a protocol through which users can potentially effectively move validators in and out of current sets by reallocating their delegated shares, we see that that doesn’t happen effectively with real-world adoption leading to the formation of cartels, where the power of delegation is then consolidated resulting in a new form of centralization.
Taking a real-world example, we know that both Bitcoin and Ethereum have issues with flexibility and performance. Sidechains have been designed to fix those issues; for example Plasma for Ethereum and RSK for Bitcoin. In the case of RSK-SBTC, the sidechain works as a “lock and unlock” protocol to exchange data, ensuring stability and increasing performance near 100 TPS.
That’s not to say sidechain is a magic bullet. There are still a few things to consider, for example, sidechains will add multiple independent, unsynchronised blockchains connected to the main blockchain. This will cause security constraints that will have to be addressed very carefully.
What we can be sure of is that sidechain will have a much larger role in conversations around blockchain and cryptocurrency. Sidechain technology effectively amps up blockchain’s horsepower, allowing disruption to occur at a much faster rate by adding more TPS and flexibility, and most importantly, facilitating blockchain applications in regular business scenarios.
SKALE is pioneering a new category within the Execution Layer called Elastic Sidechains. ‘Elastic Sidechains’ provide all of the benefits of traditional sidechains alongside the security guarantees of truly decentralized networks such as Ethereum or newer model Layer 1 Chains that offer sharding and rotation of nodes.
Elastic Sidechains are truly decentralized while keeping the UX advantages of traditional sidechains — such as easy setup and low-maintenance for devs, as well as zero friction experience for end users who are interacting with the chain. Another critical advantage of Elastic Sidechains is that they are configurable so that developers can select criteria specific to their needs. Criteria can include size of chain, required storage, speed, additional security guarantees, etc. These needs can be adjusted to fit their business requirements and optimize cost.
Creating Elastic Sidechains
Elastic Sidechains are best suited for dApps that require decentralization, fast finality, and cost-effective smart contract execution. Use cases with small transaction amounts and a requirement to run a high volume of smart contracts are a good fit. Low volume and high monetary value on the chain are not a good fit until networks have been proven over time. Both small and large deployments can leverage the network due to the configurable nature of the system. Just as startups leverage EC2 where they start small and grow, dApps can start small and grow their deployment along with their needs. Configurability combined with the decentralized nature of the network allow for this to be a robust and user-centric approach to blockchain development.
When creating a sidechain, a developer first configures their chain via a decentralized interface and then submits payment to the network in the form of SKALE tokens. The token amount depends on the size of the network and the duration of time they want to sponsor the network resources. There are several sidechain sizes (small, medium, and large) as well as duration options (3mo, 6mo, 12mo). Storage capacity within the network is also configurable. Each elastic sidechain is randomly assigned the use of a set of validator nodes. The default number is 16 nodes but the number can be any configuration of 3n+1 where n>=1. The size of a chain specifies how much of a virtualized subnode a chain will use.
Chains can use either 1/128 (small), 1/8 (medium), or 1/1 (large) of each node’s resources. As the SKALE Network evolves, it will eventually allow for users to specify the number of virtualized subnodes, number of signers, and size of the virtualized subnodes along with other enhanced capabilities. Because the SKALE Network is EVM-compatible, developers are able to use the same tools they use when working on the Ethereum mainnet. These include writing contracts in the Solidity language, connecting to the network via web3.js, web3.py, and using tools such as Truffle and Remix. The SKALE Network also offers interchain messaging as a native capability. Interchain messaging is enabled by the virtualized subnodes which are able to validate that a transaction was signed and committed by the subnodes in another chain using BLS signatures (Boneh-Lynn-Shacham). This unique and decentralized form of messaging allows for patterns not unlike the use of push notifications or remote procedure calls in traditional Web2 development.
2. Build Large Scale Production
The SKALE Network has been built to be easy to use in development as well as expandable and performant for use in production. Developers can select chain characteristics and stake tokens and get immediate access to one or more elastic sidechains. The resource configurations for these chains can also be modified seamlessly thereby accommodating increased transaction loads, storage requirements, security concerns, and other project needs. The network is an optimal solution not only for rapid development but also for use with even the largest production solution.
Because an elastic sidechain in the SKALE Network can be easily resized, it lets chains move from a small chain size and limited transaction throughput up to a large chain with 2,000 transactions per second and highly expansive storage capacities. Resource changes take place in real-time without any additional operational efforts or node management by the user. The net result means that the SKALE Network provides an easy-to-use and ready resource for even the most demanding defi, gaming, media, and productivity applications. Single developers, vendor networks, consortiums, and any other organizational types can make use of the SKALE Network for one or more sidechains to provide readily available, safe, and secure transaction processing for decentralized solutions.
The design and structure of the network also make moving from Web2 to Web3 a relatively effortless process. The development environment is the same as developing on the Ethereum mainnet, which has the largest global blockchain developer community with access to tens of thousands of developers and a suite of ready-made tools and other developer resources. With interchain messaging and sidechain storage, existing cloud developers will be able to use many of the same current patterns they use for building applications in the cloud. Additionally, there is no operational effort necessary for running sidechains aside from setting sidechains options and then staking tokens for the chain resources.
3. Skale Network Key Feature
The SKALE Network is a configurable network of elastic sidechains that supports high-throughput and low-latency transactions without the high transaction costs found in public mainnets. The network offers expanded storage capabilities along with embedded connectivity and interchain messaging with the Ethereum mainnet. All of this is performed using a pooled transaction validation and security model that is efficient, scalable, and collusion-resistant.
- Zero to Near-Zero Gas Fees
- Random Node Selection/Frequent Node Rotation
- Virtualized Subnodes
- Containerized Validator Nodes
- Consensus via Asynchronous Binary Byzantine Agreement (ABBA)
- BLS Rollups
- Node Monitoring
- Ethereum Interoperability
Zero to Near-Zero Gas Fees
Gas fees within the SKALE Network are zero — regardless of the size of the SKALE chain — as long as the chain is below a specific resource threshold. This zero to near-zero gas fee structure is a significant benefit in terms of building and operating decentralized applications. A large gating factor in user adoption and building out profitable use cases is the friction imposed by blockchain gas fees. Removing these costs from the equation translates into much easier go-to-market opportunities, higher adoption rates, and more successful decentralized solutions.
The SKALE chain container is allocated CPU, memory and disk sizes to proportionally perform operations with zero gas fees up to a specific level. After this level is breached, gas becomes positive. This resource switch has two benefits — one is that it prevents Denial of Service (DOS) attacks and the other is that it indicates to the user that they might need to scale up to a larger SKALE chain size. (The latter indicator is analogous to moving up a level on a cloud service such as moving from a t2.micro to an m3.large on AWS.)
Random Node Selection/Frequent Node Rotation
Validator nodes are assigned to elastic sidechains via a random process that is arbitrated by a mainnet contract. Security of chain consensus is further protected via frequent node rotation. Nodes will be removed from one or more chains on a non-deterministic schedule and new nodes added. This rotation takes place via the node cores continually checking in with the mainnet — exiting current chains and connecting with and working on new chains as so determined by the mainnet contracts and its random assignment algorithms.
Nodes within SKALE Chains are Regularly and Randomly Rotated Thereby
Leveraging the Security Pool of the Entire Network on Behalf of Each Chain
Each elastic sidechain is comprised of a collective of randomly appointed virtualized subnodes which run the SKALE daemon and the SKALE consensus. Nodes in the SKALE Network are not restricted to a single chain but rather can work across multiple sidechains via the use of virtualized subnodes. This multiplex capability is made possible via a containerized subnode architecture deployed on each node in the Network. Each node is virtualized and is able to participate as a validator via this subnode architecture for an independent number of sidechains.
Validator Nodes Consist of Virtualized Subnodes and a Node Core
Containerized Validator Nodes
Virtualized subnodes are enabled via an innovative containerized architecture that provides industrial-grade performance and optionality for decentralized application developers — performance and flexibility that is similar to traditional centralized cloud and microservice systems. Containers are divided into several main components encapsulated via a dockerized Linux OS — allowing for each node to be hosted in an OS-agnostic manner.
Consensus via Asynchronous Binary Byzantine Agreement (ABBA)
The consensus model used for block creation and commitment for each elastic sidechain is a variant of the Asynchronous Binary Byzantine Agreement (ABBA) protocol. (Derived from Mostefaoui et al. although other consensus protocols can be used, as long as it satisfies certain properties.) The benefits of the ABBA protocol is that it is designed to exhibit robustness in the case of subnode downtime where each latent and/or down subnode is regarded as a slow link. Additional details on the protocol can be viewed here.
ABBA Consensus Protocol
Interchain Messaging via BLS Threshold Signatures
Each elastic sidechain supports BLS (Boneh–Lynn–Shacham) threshold signatures which is important for supporting interchain messaging. Virtualized subnodes for each chain are able to validate a transaction that was signed and committed by the subnodes in another chain through the use of that chain’s group signature. This signature is made available to all other chains via publishing on the Ethereum mainnet.
This messaging capability mirrors a microservice model whereby a sidechain is able to perform one or more specific operations and then feed these outputs directly to another chain or onto a message queue (i.e. the Ethereum Mainnet) which can then serve as inputs for other sidechains and their processing needs. SKALE’s interchain messaging provides support for all the major Ethereum token standards including ETH, ERC20, ERC721, ERC777, and Dai.
Each sidechain also supports BLS Rollups which provides an efficient and secure way to use the SKALE Network to improve throughput and lower gas costs on the Ethereum mainnet. A rollup can generally be defined as a solution where transactions are published on chain, but computation and storage of transaction results is done differently to save gas. BLS Rollups works by using a crypto algorithm called aggregated BLS signatures to shrink ETH transaction sizes.
The work to integrate BLS Rollups into SKALE encompasses three phases of development with Phase 1 providing up to fifty transactions per second for ERC-20 token transfers. Other phases will further improve transaction performance metrics. A more detailed outline on how BLS rollups work and the roadmap can be found here.
Sidenote: In addition to BLS Rollups, there are other rollup approaches including Optimistic Rollups and ZK Rollups. Optimistic rollups are problematic in that they can allow incorrect results to be published on chain (which can only be addressed via a post-transaction complaint procedure). ZK Rollups are technically better than Optimistic Rollups in that they preserve stateful correctness on chain. Problems arise, however, in that ZK-S*ark operations are compute intensive which means transactions can sometimes take hours to finalize. BLS Rollups are a more realistic solution in that it uses BLS cryptography which is lightning fast.
BLS Rollups Offer Significant Advantages Compared to Other Forms of Rollups
A Node Monitoring Service (NMS) runs on each SKALE Node and facilitates the performance tracking of a certain number of other nodes in the network. Performance tracking measures both uptime and latency through a regular process which pings each peer node and logs these measurements to a local database. At the end of each epoch, these metrics are averaged and submitted to smart contracts on the mainnet that use them to determine the payout distribution to nodes as well as flag suspect nodes for review and potential penalties.
4. Skale Network Validator
Blockchain mining and chain validation are not without risk so miners and validators need to pick the right networks to join. SKALE is a Proof of Stake (POS) network that utilizes a work token. The advanced containerization and virtualization of nodes make operation seamless and the SKALE Protocol optimizes the allocation of resources of each node across the entire network of elastic blockchains. This protocol is also mining pool resistant — meaning that there is no advantage to be gained by pooling resources at the mining level.
Node setup and staking is simple and takes only a few steps. Validator rewards are distributed on a near-even basis across the network of nodes — with validator rewards based on meeting performance targets, not by optimizing rigs to improve cryptographic performance. Each node is rated based on its SLA behavior for the chains the node is validating with node performance being assessed by the other nodes in the network.
Validator payouts are made on a monthly basis to validators that meet the performance and uptime criteria. Payouts include tokens paid in the form of sidechain subscription fees and token inflation as specified via a smart contract running on the Ethereum mainnet.
The SKALE Network is a Proof-of-Stake (PoS) network secured by independent global validators. SKALE validators operate and secure the network by proposing blocks, establishing consensus on a finalized block, and committing it to a chain. Without validators, who bring the ‘blocks’ and ‘chain’ to ‘blockchain’, (or miners in PoW systems), there wouldn’t be a working blockchain (or network). It is mission-critical for the network economics to reward and incentivize validators for their upfront hardware investments, operational upkeep efforts, and overall support of network performance and security.
SKALE validators earn SKL rewards every epoch (i.e. every calendar month) through:
Decentralized App (dApp) Fees
Developers rent S-chains for their dApps by depositing SKL tokens into a smart contract. This allows the SKALE Network to offer gas-less transactions to the dApp’s end users, dramatically improving the Web3 experience.
At the end of each epoch period, a portion of these SKL tokens that were deposited by the dApp developers gets allocated to a bounty pool. This in turn gets distributed to the validators as rewards if they reach certain SLA requirements (defined below).
As the network continues to grow and Web3 applications continue to proliferate on the SKALE Network, the total dApp fees look to surpass token inflation on a per node basis and will be the primary driver of token returns. The inherent value of the network will then reflect the usage and growth of the network.
Network Issuance (or Token Inflation)
The SKALE Network has a network load utilization curve at the core of its pricing structure. The purpose of this curve is to balance the supply and demand of network capacity to create a stable and cost-effective network. As the network becomes over-utilized, S-chains become more expensive to purchase. For example, surpassing 85% network utilization sharply drives up the cost and therefore the dApp fees entering the network as rewards. This, in turn, incentivizes current validators to spin up more nodes and/or new validators to enter the network. This would result in an increase of supply, which would decrease utilization and would concurrently push prices down and stabilize the network. This model ensures balance across the network as usage increases.
Security and validity of transactions in a sidechain or subchain in a second layer primarily rests with the performance and behavior of the validator nodes. To make sure the validation layer is operating properly, a network first has to have a large number of validator nodes. A small number of nodes in a network is inherently risky and fragile.
In addition and as a requirement for a secure and robust network, it must provide for a) the random selection of chain validator sets and b) the rotation of nodes in and out of chains on a frequent basis. Without randomness and rotation, there is a far greater risk of bribery of and/or collusion between validators, vastly reducing the security and integrity of the chains within a network.
A final requirement at this layer is a proper incentive structure that addresses both penalties and rewards. With respect to the former, every validator node should have significant value staked into a network. Staking is an enforcer of good behavior in that if a validator decides to collude or go byzantine and gets caught, it will lose its stake and be removed from the network. With SKALE, the validator stake will be on the order of 100,000USD equivalent (or higher based on token appreciation).
To coerce or bribe the validators of a sidechain with this type of a pooled validation model — one that employs random selection and frequent node rotation — a bad actor would have to effectively bribe two thirds of the larger network. To do this with a large number of nodes in the overall network would be exceedingly difficult. SKALE’s network design is based on these core principles and is directly aligned with stopping — if not eliminating — attacks and preserving the integrity of transactions within each chain in the network.
The SKALE Network consists of a large set of nodes, all running concurrently and independently, validating transactions within the elastic sidechains they are overseeing. These nodes all make use of a unique set of SKALE contracts that run on the Ethereum mainnet. These smart contracts are where the SKALE token lives, where issuance occurs, and where rewards get disbursed to the node validators. These smart contracts are also where the analysis of the network takes place and where corrective actions are taken if there is bad behavior by one or more nodes.
Developers create chains by first selecting the size of the chain (small, medium, and large), duration of the chain (6mo, 12mo, 24mo), and then staking SKALE tokens in order to provision the network resources. These tokens get staked into the Ethereum mainnet via one of the SKALE contracts that reside there. Each month, a certain number of tokens from this developer stake gets moved into a bounty pool which is then used to pay the validators within the network. An inflation (issuance) event also takes place each month whereby new SKALE tokens are created via a contract on the mainnet, the result of which gets pushed into the bounty pool for payout to validators.
For example, if there are a thousand validator nodes in the network and they all perform well, they will each participate in the monthly proceeds from the bounty pool which includes a portion of the sidechain token stakes plus an inflation amount. The distribution to the validators is not necessarily shared equally as there is a modifier component that slightly adjusts the payout based on the duration of time tokens are staked into the network. Nodes with tokens that are locked up for twelve months, for example, will get a greater percentage than those locked-up for three or six months.
The node core in a validator within the SKALE Network has a primary role in moderating the network — a role that is in addition to self-organizing around the validation and operation of sidechains and subchains. Each node gathers and uploads data in service of keeping the network honest and operational. Each node in the network is continuously monitoring a random set of 24 nodes, gathering data and pulling log files from these nodes. The node core will score each of the nodes, looking at uptime, latency, performance and other metrics and then basing the score on whether certain thresholds are met or not. This mechanism is a part of the SKALE Node Monitoring Service and is called the SKALE SLA function.
Nodes submit their metrics to a contract on the mainnet which blends, processes, and aggregates them to get a clear picture of network and node health. If a node is deemed to have performed well during an epoch, it gets to participate in the award from the bounty pool. If a node performs poorly, it will not receive an award for that period. If it acts maliciously, it may get flagged and pulled from the network. In the case of the latter event i.e. suspicions of cheating, indications of having been hacked, or engagement in other malicious acts, a review process will be initiated which could end up with node stake getting slashed.
Validators go to the SKALE website (www.skale.network) and sign up. The SKALE network team will review the application and then schedule review times with potential validators. The process is a mutual evaluation process until such time as there is self-serve signup and on-boarding. Candidates that go forward in the process are asked to sign a non-binding intent letter and then go through a certification process. Once they pass, they will be included in the Alpine cohort (this is the name given to the initial set of network validators).
There is a Discord channel that validators are invited to join. The SKALE team will also work closely with validators to help them set up the node and register it into the network. The containerized nature of the architecture makes it easy to stand up and operate a node. The CLI process to do this is straight-forward for almost any engineering or devop team. The goal at this point is to work with a solid set number of experienced validators to ensure a smooth launch of the mainnet.
The network is designed to be permissionless. In the future, signup and registration will be self-serve and registering and white-listing as a validator will be ungated.
The Role of a Validator Node
The node core in a validator within the SKALE Network has a primary role in moderating the network — a role that is in addition to self-organizing around the validation of sidechains and subchains. Each node gathers and uploads data in service of keeping the network honest and operational. Each node in the network is continuously monitoring a random set of 24 nodes, gathering data and pulling log files from the other nodes. The node core will score each of the other nodes, looking at uptime, latency, performance and other metrics and then basing the score on whether certain thresholds are met or not. This is called the SKALE SLA function.
Nodes submit their metrics to a contract on the mainnet which blends, processes, and aggregates them to get a clear picture of network and node health. If a node is deemed to have performed well, it gets to participate in the award from the bounty pool. If a node performs poorly or acts maliciously, it gets flagged and is pulled from the network. In the case of the latter event i.e. suspicions of cheating, indications of having been hacked, or engagement in other malicious acts, a review process will be initiated which could end up with node stake getting slashed.
By way of example, if there are a thousand nodes in the network and they all performed well, they will each participate in the monthly proceeds from the bounty pool. The distribution to the validators is not necessarily shared equally as there is a plus/minus component that is based on how long a node is staked into the network. Nodes that are bonded for twelve months, for example, will get a slightly greater percentage than those bonded for three or six months.
The Importance of Staking by Validators
As highlighted previously, each validator will be staking SKALE tokens into the network as part of their participation as a validator. This bondedness plays a fundamental part in securing the network. The staking amount will be approximately $100,000 USD equivalent at the onset. These stakes will live in the mainnet and serve as a measure of faith in the network and as recourse against bad actors.
If a node tries to perform a double spend, for example, and gets caught by the system, the offending node’s stake will get placed into escrow (which essentially serves as a penalty box). During the first year of the network, a review board comprised of validators will vote on as to whether an infraction occurred. If the decision is yes, the validator will lose their stake, in which case, it will either get burned or remain in the penalty box.
5. Skale Token
The SKL token is built on an ERC-777 token standard. ERC-777 tokens support delegation on the token level. This means that a delegator will no longer have to send their tokens to a delegation smart contract. Instead, the delegator will share a staking provider a secure delegation key while storing their tokens in a wallet of their choice. ERC-777 is fully backwards compatible with ERC-20. The total supply of SKL at genesis will be 4.14 billion, and will have a max supply of 7 billion.
All tokens at genesis will either be locked or illiquid. 596.25 million SKL genesis tokens will enter circulation 91 days after genesis, which means that they become liquid and can either be sold or transferred. This occurs after the 90 day Proof of Use period ends on the Consensys Activate platform.
The SKALE token, with a token symbol “SKL”, serves as the built-in instrument of transfer for facilitating three core organic functions:
- Security/Staking: Delegators stake SKL tokens to validators who run the SKALE network through operating nodes by validating blocks, executing smart contracts, and securing the network. Both delegators and validators are rewarded with SKL tokens for their efforts and collateralization.
- SKALE Chain Subscription Fees: Developers purchase their subscription access to elastic blockchains (S-chains) with SKL tokens.
- Governance voting: The SKL token will also be used for on-chain voting, which will control all economic parameters of the SKALE Network. The network will gradually evolve to a point where voting is required to change the core economic functions of the network such as issuance and fees. In general, SKALE governance follows a Delegated Stake Model. A stakeholder can either participate in governance directly by voting with its stake or delegate the voting power to other stakeholders. The default voting model used by SKALE is a simple majority vote of stakes that participate in the vote. Additional information surrounding governance and the N.O.D.E Foundation can be found here
Proof of Use
All token holders who receive tokens via Consensus Activate are required to complete a Proof of Use, which requires token holders to stake at least 50% of their SKALE tokens for 90 days before their tokens become unlocked and liquid.
Staked tokens will be locked, while staked, and token holders can choose to stake for 3, 6 or 12 months. Token holders who choose to stake for longer will have a higher reward rate (1.5x for 6 months, and 2x for 12 months) when compared to staking for the 3 month minimum.
All validators will receive equal rewards on SKALE with the exception of the multiplier for choosing to stake tokens longer. This means that rewards are not proportional to the amount of tokens staked to validator. With this in mind, it would be beneficial for a staker to stake to a validator with lower stake.
Because inflation is fixed at 9.3% for the first year, the reward rate will fluctuate based on staking participation. The target stake rate at launch is 40%. Validators and delegators can expect an annual reward rate of 9.9% if staking in 3 month increments, 19.81% if staking in 6 month increments, and 29.71% if staking for the full year as long as the target stake rate is achieved.