Exploring SKALE Network and the SKL Token

Ivan On Tech

Written by Ivan on Tech

November 23, 2021

SKALE Network is an elastic blockchain network and Ethereum layer-2 scaling solution. Powered by the native SKL token, the SKALE protocol uses an Asynchronous Binary Byzantine Agreement (ABBA) consensus mechanism and a network of containerized validator nodes that can facilitate secure, zero-gas transactions with high throughput. The SKALE crypto ecosystem acts as an Ethereum-as-a-Service provider for Ethereum developers. Also, it enables developers to create custom sidechains with functionalities and parameters specific to the decentralized applications (dApps) they’re building. Moreover, these dApps are highly robust, secure, and scalable.

In this article, we’re going to dive deep into the SKALE crypto ecosystem. We’ll explore the concept of an elastic blockchain network, containerized validator nodes, and the Asynchronous Binary Byzantine Agreement (ABBA) consensus model. Also, we’ll discuss the native SKL token and the various roles it plays throughout the platform. Plus, we’ll look at the inner workings of the SKALE protocol and some of the core aspects of the platform.

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What is SKALE Network?

SKALE Network is an “expandable multichain blockchain network” and Ethereum-as-a-Service provider for developers. Every decentralized application (dApp) on SKALE effectively runs its own Ethereum blockchain. The SKALE Network scaling solution uses the Ethereum mainnet for core network operations. Accordingly, SKALE Network benefits from the security of the largest smart contract-enabled blockchain.

While the SKALE crypto ecosystem boasts the security of the main Ethereum chain, it also supports a vast network of  “dapp-specific chains”. This allows exclusive, fast, and scalable chains to function without gas constraints. Furthermore, developers gain access to decentralized data storage, servers, and message transfers, all from the same custom chain.

Blog SKALE Network

Also, SKALE Network addresses the issue of scalability and performance that can hinder the adoption of blockchain-based technologies. Using application-specific architecture, the SKALE crypto platform offers a highly modular, configurable network of gas-free and subscription-based “on-demand blockchains” capable of processing 20,000 transactions per second (TPS). 

Each of these chains has high-throughput, low-latency, advanced analytics and costs less than deploying dApps directly on Ethereum. Plus, these Ethereum-compatible elastic sidechains use an Asynchronous Binary Byzantine Agreement (ABBA) consensus protocol with a Delegated Proof of Stake (DPoS) consensus mechanism. Every Proof-of-Stake sidechain uses a series of nodes that stake the native SKL token on Ethereum to secure each chain. 

Moreover, each chain is compatible with Ethereum Virtual Machine (EVM) and common open-source Ethereum developer tooling such as Solidity and Truffle Suite. Also, SKALE Network is orchestrated by a series of Etheruem smart contracts known as SKALE Manager. Plus, SKALE uses an Ethereum bridge called Interchain Messaging Agent (IMA) to enable cross-chain transfers of any token standard or message.

The SKL Token

The SKALE Network token (SKL) is a multi-functional ERC-777 utility token. Holders of the SKL token can contribute to the network by staking as a validator or a delegator. Validators run nodes, validate blocks, and execute smart contracts. Plus, delegators can stake their SKL tokens with a validator. By being a validator or a delegator, participants can earn a passive income in the form of SKL tokens while securing the network.

Blog SKL Token

Also, developers who hold the SKL token can access network resources by “deploying and renting an elastic sidechain”. The SKL token is the primary medium of exchange throughout the platform and is essential for paying subscription fees. Furthermore, SKL token holders can participate in on-chain governance to vote on proposals to make changes to the economic parameters of the network.

Because the SKL token uses the novel ERC-777 token standard, delegators do not need to send tokens to a delegation smart contract. The ERC-777 is backward compatible with the ERC-20 token standard and is supported by ERC-20 wallets and protocols. However, the ERC-777 standard allows for more complex and flexible transactions. At the time of writing, the SKL token is trading at around $0.33 with a market cap of $786.6 million, according to CoinGecko.

Exploring the SKALE Crypto Ecosystem

The SKALE Network is a custodial execution layer, or Ethereum layer 2 solution. It serves as a “decentralized cloud” that makes it simple for developers to deploy Ethereum Virtual Machine (EVM)-compatible elastic sidechains. These sidechains are modular and highly configurable, with low latency and high throughput. Developers can customize various parameters, including the network size, transaction speeds, security features, and storage capacity.

A group of virtualized subnodes is chosen from a larger group of nodes within the network to oversee operations. The selected nodes share computational resources with sidechains. Plus, they can communicate with other chains in the network using an interchain messaging protocol.

Blog SKALE Elastic Blockchain Network

Traditional sidechains often enjoy better performance and lower latency than layer 1 chains by using a smaller network of validator nodes. However, this can increase the potential for collusion or bribery. SKALE network addresses this issue using a “pooled validation model”. This model benefits from a large group of validator nodes that use random node assignment and rotation to further enhance security and minimize the potential for bad actors throughout the network. 

Furthermore, validators must stake a substantial number of SKL tokens, meaning they have considerable ‘skin in the game’. Accordingly, validators have an economic incentive to act honestly. Plus, sidechains require resource subscriptions to function, which are also paid for using SKL tokens. To operate a sidechain, users stake SKL tokens into a series of smart contracts on the Ethereum mainnet called the SKALE Manager. These smart contracts also take care of token inflation, validator payouts, and monitoring node performance. Moreover, as a custodial execution layer, SKALE uses Boneh–Lynn–Shacham (BLS) cryptographic signatures instead of fraud proofs. This allows the network to benefit from an increase in performance without compromising on security.

Elastic Blockchain Network

The SKALE Network consists of various customizable elastic sidechains. Developers can create bespoke application-specific sidechains by choosing from a range of virtual machines, parent blockchains, consensus mechanisms, and security measures. The size and duration of the network determine the amount of SKL tokens needed for configuration.

Blog SKALE Crypto Ecosystem

Furthermore, developers can use the same tools they would use on Ethereum. Accordingly, developers can write smart contracts in the Solidity programming language, using familiar tooling such as Truffle Suite and Remix while connecting to the network using web3.js and web3.py. Additionally, the platform provides interchain messaging that works in a similar way to a push notification or remote call function in Web2 development.

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SKALE Protocol

SKALE protocol is a next-generation Proof-of-Stake (PoS)-based elastic blockchain network. Participants must stake the native SKL token to make use of the network. Accordingly, they receive an incentive to act honestly, as their stake would be slashed if they were to act maliciously or fail to maintain uptime. Also, the protocol uses an algorithmic peer review system to enforce latency standards. In this system, SKALE Network validators are each appointed 24 peers. These peers monitor network activities and log information regarding uptime and latency. 

Blog SKALE Protocol

Furthermore, SKL token holders can delegate tokens to SKALE Network validators who have not surpassed the maximum stake threshold. Both validators and delegators can earn a passive income with crypto while securing the network. However, delegators receive fewer rewards than validators. 

SKALE Manager

The SKALE Manager is an entry point to all of the smart contracts throughout the SKALE crypto ecosystem. It orchestrates every functionality of all entities within the network, including creating elastic sidechains and the creation/destruction of nodes. Further, the SKALE Manager organizes smart contracts on the Ethereum mainnet, where it also selects nodes for new elastic sidechains.

Consensus

The SKALE protocol uses a Proof-of-Stake (PoS) and Asynchronous Binary Byzantine Agreement (ABBA) consensus mechanism. Many distributed consensus protocols rely on the election of a leader to propose a block to the network to reach consensus. However, the SKALE consensus protocol allows all virtualized subnodes to propose blocks. To be accepted for commitment to the blockchain, virtualized subnodes must hold a supermajority of signatures. This mechanism helps to prevent collusion throughout the SKALE protocol and provides a fair opportunity for all virtualized subnodes to propose blocks.

Blog SKALE Network 2

Virtualized Subnodes

The SKALE protocol uses a containerized virtualized subnode architecture, enabling each node to run several elastic sidechains at the same time. Also, the SKALE protocol is not restricted to a one-to-one mapping between nodes. This containerized architecture facilitates performance levels that can rival centralized systems but with complete modularity and configurability.

Governance

The SKALE crypto network uses a decentralized governance model to ensure that network participants have a say in future changes to the SKALE protocol. The Network of Decentralized Economics (N.O.D.E) Foundation was set up by SKALE Labs, the parent company of SKALE Network, and is the governing body of the SKALE ecosystem. The N.O.D.E Foundation will oversee the electing of network representatives to facilitate the smooth running of governance procedures. These representatives include network validators, developers, and other community members. Initially, all representatives will be chosen by the Foundation. 

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However, as the platform matures, elections will take place via a variation of on-chain voting. Moreover, an allocation of 10% of the total supply of SKL tokens goes to the N.O.D.E Foundation. This comes with a seven-year vesting period and aims to provide the SKALE ecosystem with sustainable resources and funding.

Exploring SKALE Network and the SKL Token Summary

The SKALE crypto network is an innovative Ethereum-as-a-Service scaling solution combining a payments system with a “sophisticated container orchestration mechanism”. Thanks to the Asynchronous Binary Byzantine Agreement (ABBA) consensus mechanism and enterprise-grade security, the open-source elastic blockchain network protocol makes it simple and cost-effective for developers to create highly performant bespoke sidechains that benefit from the security of the Ethereum blockchain. Using the SKALE crypto network, developers can operate full-state smart contracts with full functionality without jeopardizing the speed, security, or decentralization.

Blog SKALE Network 4

Moreover, SKALE Network enables blockchain developers to create bespoke networks with parameters that cater specifically to decentralized applications (dApps). If you want to learn how to interact with dApps and decentralized finance (DeFi) protocols, check out the DeFi 101 course at Moralis Academy! Here, we teach students how to install and use the number-one Web3 wallet, MetaMask. Also, we show students how to navigate some of the most popular DeFi platforms, including Uniswap, Compound, MakerDAO, and Aave

Following this, be sure to check out our DeFi 201 course. Here, you’ll learn about liquidity pools, yield farming, crypto arbitrage, and much more. Also, be sure to see our Technical Analysis 101 course to take your trading game to the next level. This course teaches students how to remove emotions from trading and instead use trading indicators and on-chain analysis to make informed decisions using probabilistic outcomes. Enroll today at Moralis Academy! Also, don’t forget to follow us on Twitter @MoralisAcademy! We’d love to hear your thoughts about SKALE Network and the SKL token!

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