Features of the Skale Network — A Beginner’s Guide.

21 min readJan 9, 2021

Overview

By the end of this crash course, you should be able to come to a full understanding of the features of the Skale network, the role it play in decentralised applications, scaling of Ethereum and in generating bounties for validators and delegators.

Skale is a decentralised and configurable network of on-demand blockchains that offers high throughput, cost-effective and low-latency transactions coupled with the advantage of high storage capabilities and advanced analytics. It aims to provide Ethereum as service to developers by offering gasless subscription-based decentralised network for the provision and deployment of high throughput, EMV compatible, storage-enabled and provably secure byzanite fault tolerant blockchains. Its main use is in the form of elastic sidechains for the Ethereum Blockchain- referred to as the ‘ Elastic Sidechain Network’.

How sidechains work (https://medium.com/blockrocket/scaling-ethereum-what-scaling-solutions-can-you-use-today-40a57df73888)

The Skale network belongs to the next generation of autonomous blockchains that brought in a new paradigm of security and fair crypto economic incentive structure. Its design is specifically done to provide great scalability function for the Ethereum network as well as high TPS, interoperability and security. It is built on the Ethereum blockchain to address the scalability issues facing it - initially Ethereum could only handle 14 transactions while Visa could do 24,000 transactions per second.

The main goal of Skale is to bring Ethereum to over a billion users by building scaled decentralised applications which is believed to scale not just transaction throughput but user experience thereby improving the adoption of Ethereum. Each DApp can run on its own Ethereum integrated bloackchains- imagine writing an email on gmail like I do everyday and all of a sudden it becomes very slow and very expensive to use due to high traffic on Facebook resulting in a bad user experience. This situation does not happen on Web2 because Google has got its own server and Facebook has its own server as well. Therefore, the current system of having thousands of DApps sharing a single blockchain is simply impracticable for supporting Web3, and as such, resulting in Skale network offering each application and website its own blockchain for storage, computation and other needs. Hence, this is the reason Skale network serves as a decentralised could to power Web3, and so, it can be said, that given the evolving nature of things, the centralised cloud providers of today won’t have the capability and capacity to power the decentralised web of tomorrow.

The future of the Ethereum mainnet depends on its effective scaling to meet its network demands and growth. The two considerations to bear in mind when addressing Ethereum’s throughput scaling concerns are: firstly, every transaction has to be completed by every node meaning adding more nodes to the system will not help scalability but only security. Secondly, all transactions regardless of how small they are must go through the main network. Some solution provider have proposed sharding as a possible solution to the first concern.

The sidechains in the Skale network are operated by a group of virtualized subnodes selected from a subset of nodes in the network and run on each node’s computational and storage resource bank. When creating an elastic sidechain, customers select their respective chain configuration and payment is submitted to the Skale manager for the duration they want to rent the network resource required to maintain their elastic sidechain. For users to meet their business/budgetary needs, they are offered the option of selecting elastic sidechains with a minimum of 16 virtualised subnodes where each subnode is either using 1/128(small), 1/16(medium) or 1/1(large) of each node’s resource. As the network continues to develop, it will at some point allow users to specify the number of virtualised subnodes , signers and size of the virtualised subnodes that will comprise their elastic sidechains respectively.

The Skale token (SKL) is a utility token and not a security token. Therefore, it is classed as a work and usage token . In order to use it on the network, it has to be staked by a delegator to evidence proof-of-stake and for validators it represent the right to work. Staking for delegators is done on the skale deamon via a series of smart contracts referred to as the Skale manager on the Ethereum mainnet. Each proof-of-stake sidechain is highly configurable and comprised of nodes which stakes the Skl tokens on the Ethereum mainnet. These nodes utilise a consensus mechanism called the asynchronous fault tolerant protocol.

Key Features of the Skale Network

Fast, secure and fully decentralised

This network affords developers a fast and convenient way to furnish cost-effective, high performing sidechains that can run full / complete smart contracts. The high performant nature delivers speed and functionality without compromising on security and decentralisation. Its pooled validator model offers the advantage of improved security framework for the entire network. The smart contracts on the mainnet, node virtualisation and orchestration model account for the fully decentralised mode of operation of the network.

Collusion -Resistant Leaderless Network

The network design was based on the principle of random selection and frequent node rotation with validator node incentive model for the purpose of preserving the integrity of transaction within each chain in the network. The pooled validator model of the Skale network contract promotes efficiency, scalability and collusion resistance. Hence, the leaderless nature prevents the possibility of collusion amongst network players by ensuring equal opportunity to successfully propose and commit new blocks.

Fully compatible with solidity and the Ethereum Ecosystem

The Skale network uses solidity as its contract language just like Ethereum. This gives developers the advantage of not having to learn a new language or protocol. Solidity is an object-oriented and high-level language for implementing smart contracts used by the Ethereum Virtual Machine. It was influenced by C++, Python and Java script. Since Skale and Ethereum virtual machines use the same language, it makes the Skale network compatible with the Ethereum virtual machine. Hence, smart contracts that run on Ethereum can run on the Skale network without no hiccups.

Mathematically Provably Secure ABBA -base consensus.

The consensus model for each sidechain in the Skale network is the Asynchronous Byzantine Binary Agreement (ABBA) protocol. This protocol is responsible for the robust nature of the network whenever there is a node downtime. A node experiencing a downtime is refer to as slow link and results in latency issues. However, the ABBA protocol, helps to resolve downtime issues resulting in stability and fault correction.

ABBA Consensus Protocol ( https://skale.network/blog/technical-highlights/)

BLS Rollups

Each of the sidechains support BLS( Boneh-Lynn-Shacham) Rollups which offers an efficient and secure way of using the Skale network to improve throughput and reduce the gas costs on the Ethereum mainnet. In a rollup, transactions are published on-chain, but computation and storage are done differently in order to save gas. BLS rollups utilise a crypto algorithm called aggregated BLS signatures to shrink Ethereum transaction sizes.

BLS Signature Shrinking an Ethereum Transaction (https://skale.network/blog/technical-highlights/)

Why is the Skale Network Unique

The network prevents security risk by using a pooled validation model which protects independent sidechain with the resources of the entire network.
It offers a decentralised cloud for furnishing and deploying high-throughput, low-latency elastic sidechain which carries out high performance operation with almost negligible downtimes.
The Skale protocol and corresponding Skale token enable a superior combination of processing potential with incentivised execution.
To further secure the network, each validator must stake a very significant number of tokens.
The network is a custodial layer (layer 2). Non-custodial systems use proof of fraud to allow funds to move between chains but Skale uses BLS signatures and deposit boxes within the Ethereum mainnet coupled with other mechanism to enable custodial ownership and use within the network.

Other reasons why the Skale network is unique includes:

Containerised Validator Nodes: The virtualised subnodes are enabled via an innovative container architecture that creates an industrial grade performance and functionality for decentralised application developers, their performance and flexibility are similar to centralised cloud and microservice systems. The containers are divided into several components encapsulated via a dockerized Linux OS which allows each node to be hosted in an OS-agnostic manner.
Elastic Sidechains: The Elastic sidechains comprised of virtualised subnodes which engage in block creation and commitment via asynchronous, leaderless and provably secure protocol. This secure protocol was design to exhibit robustness whenever there is the case of virtualised subnode downtime and each latent / down virtualized subnode is regarded as a slow link because it necessitates delays in transmitting message in real time. A node might not be able to make a bounty call because: (i) The node is down., (ii) The bounty container is down.,(iii) No enough Ether in the node to necessitate call transaction., (iv) The Ethereum end points are not properly working., (v) If the node is set in maintenance mode.
Interchain Messaging via BLS Threshold Signatures: Each of the elastic sidechain supports BLS (Boneh-Lynn-Shacham) threshold signatures which is important for promoting interchain messaging. Virtualised subnodes for each chain are able to validate a transaction that was signed and committed by the subnodes in another chain via the use of the chain’s group signature. The signature is made available to other chains by publishing on the Ethereum mainnet. This messaging capability mirrors a microservice model that allows a sidechain to perform one or more specific operations and then feed these outputs directly to another chain or message queue which serves as an input for other sidechains and their processing needs. Skale interchain messaging provides support for all major Ethereum token standards including ETH, ERC20, ERC721, ERC777 and Dai.
Node Monitoring: A node monitoring service runs on each Skale node and enhances the performance tracking of a certain number of nodes in the network. Performance tracking measures both uptime and latency via a regular process which pings each peer node and logs the measurements to a local database. At the end of each epoch, the average of these metrics are taken and submitted to smart contracts on the mainnet that use them to determine payout distribution to the nodes and also flags suspicious nodes for review and potential penalties.
Zero to Near-Zero Gas Fees: The Skale network has zero gas fees regardless of the size of the Skale chain- as long as the chain is has not exceeded the specific resource threshold. This almost zero gas fee structure gives a significant benefit when it comes to building and operating decentralised applications. A drawback in user adoption and building profitable use case is as a result of the high gas fees imposed by the Ethereum blockchain. Eliminating the high costs opens the door way for great market opportunities. The Skale chain container has a CPU, memory and disk sizes that can proportionally perform operations with zero gas fees up to a specific level. After this level is exceeded, gas becomes positive. This swift due to the threshold limit for zero gas has two benefits — one, it prevents Denial of Service (DOS) attacks and secondly, it indicates that the user might need to scale up to a larger Skale chain size .
Random Node Selection/ Frequent Node Rotation: Validator nodes are allocated to the elastic sidechain through a random process adjudicated by a mainnet contract. The security of the chain consensus is protected by frequent node rotation . Nodes are removed from one or more chains by a non-deterministic schedule and new ones are added. The rotation takes place via the node’s cores and it is continually checking with the mainnet- exiting current chains and connecting with new ones as determined by the mainnet’s contract and random assignment algorithms.
Virtualised Subnodes: Every elastic sidechain is comprised of a selection of randomly assigned virtualised subnodes that run the Skale deamon and Skale consensus. The nodes in the Skale network are not limited to a single chain and can therefore work across multiple chains via the use of the virtualised subnodes . The dynamic capability is made possible by a containerized subnode architecture deployed on each node in the network. Each node is virtualised and made able to participate as a validator via the subnode’s architecture for a number of independent sidechain.
Network Bounties and delegation Workflow: The Skale network has a set of validators securing the network. The validators help in providing computational power to the Skale Network via deploying nodes. The collection of validators and the nodes they create is a function of the entire validator network that performs work for the Skale chain (Elastic sidechain). As a node participates and continue to participate in their assigned Skale chains, they are awarded bounties based upon their performance at the end of each network epoch and each node is monitored by their peer nodes. When an elastic sidechain reaches the end of its life, the resources (computation and storage) of its virtualized subnodes are freed so that validator nodes may participate in newly created Elastic sidechains.

Delegation States (https://skale.network/blog/network-bounties-and-delegation-workflow/)

Developers create chains with the Skale network by selecting the size of the chain(small, medium or large), duration of the chain (6 months, 12 months or 24 months) and staking Skale tokens in order to provide the network resources. These tokens are staked into the Ethereum mainnet via one of the smart contracts that resides on it. Every month, a certain number of the tokens from the developer’s stake gets moved into a bounty pool and then used as payout to the validators within the network. An inflation event takes place each month when new Skale tokens are created via a smart contract on the Ethereum mainnet resulting in the new tokens being pushed into the bounty pool for payout to validators. The bounty pool is a portion of the chain token’s stakes plus the inflation amount. The distribution to validators isn’t necessarily shared equally because a modifier component often slightly adjusts the payout as a function of the time the tokens are staked into the network. Nodes with tokens locked for 12 months often gets a higher percentage than those locked for a lesser period of time. An hour prior to the end of an epoch, validator commission’s fees and delegator’s bounties are calculated for the current epoch and made available for withdrawal by the end of the epoch.

Skale Network a Web 3.0 Solution for Ethereum

Scalability has always been the key obstacle facing blockchain. In order for a web 3.0 vision to be realised, scaling solutions must be implemented.

Difference between Web 2.0 and 3.0 (https://medium.com/@FEhrsam/scaling-ethereum-to-billions-of-users-f37d9f487db1)

Ethereum is like a blank canvas and you can build whatever you want on it. However, Ethereum has suffered from significant scalability issues from inception and was only capable of handling 14 transactions per second compared to Visa’s 24,000- the poor capability for handling transactions led to serious network congestion on Ethereum. It was estimated that the 14 transaction per second is halved to 7 transactions per seconds for tokens (4.7m gas limit, 21k avg gas price for standard transaction = approx. 220 standard transactions every block, current avg block time of 17s= 14 transaction/seconds, making gas requirement doubled for token transactions.

To increase the adoption of Ethereum based application and decentralised solution, the industry must scale transaction throughput and better user experience which would in turn improve, storage, computation, transaction per seconds, latency issues, costs economy and offer seamless messaging between chains and connection to API- based wallets.

The layer 2 solution of the Skale network provides results to blockchain scaling by addressing speed, storage, computation, security, ecosystem interoperability and transactions per seconds. The configurable nature of the elastic sidechains of the Skale network on Ethereum mainnet accounts for high throughput and low-latency transactions at relatively low costs compared with the high costs associated with public mainnets. These elastic sidechains also provide computation and significant storage capacity for decentralised applications and anything can be built on Ethereum via the elastic sidechains of the Skale network.

Furthermore, the robust nature and cost-effective advantage of the Skale network makes it less challenging for app developers to address the storage needs of decentralised applications because each application and website is given its own blockchain to meet its storage and computation needs. Hence, applying execution layer solution like the Skale network is found to be highly effective in building and scaling Ethereum based applications.

An alternative scaling solution for Ethereum is the Plasma Technology. Plasma aims to provide a trustless alternative to state channels and sidechains. It relies vey much on cryptography, crypto economic incentive and game theory to offer a trustless and greater decentralised solution. Plasma solution such as Matic leverages proof-of-stake sidechains to reduce the ability to censor or collude as a plama provider. Plasma relies on merkle’s proofs submitted by validators to the main chain which makes users wait for confirmations in order to complete and finalize their transactions. The Plasma system has watch towers that prevents malicious attempts to cheat and when a party is offline it ensures fraud proofs are correctly submitted and combats any malicious behaviour. The key problem with Plasma is its implementation. Long exit games are initiated when users leave the Plasma chain and move to the root chain which is problematic for application developers when it has to do with UX. Also, there is high complexity and costs when utilising this solution for scaling and when compared with Skale network layer 2 solution Plasma technology is said to be very limited.

Polkadot was designed to function as a fully scalable blockchain meant to act as a deployment and interaction testbed for new blockchain technologies. Ethereum 2.0 and Polkadot use sharding to achieve scalability. Sharding involves partitioning the blockchain network or data to enable parallel processing in other to increase throughput. Shards in Polkadot are known as parachains and can only execute transactions in parallel because the flexible meta-protocol allows parachains to connect to the main chain. In contrast, Ethereum 2.0 has a main chain called Beacon chain that facilitates communication between the shards which connects to the Beacon chain. However, due to the variant in sharding for Polkadot and Ethereum 2.0, the high level of interoperability offered by Polkadot was not possible with Ethereum 2.0, as only Ethereum specific shards can be part of the Ethereum ecosystem.

Hence, because the Skale network is built on the Ethereum mainnet, it is not only compatible with the Ethereum ecosystem, but provides elastic sidechains on the Ethereum mainnet that allows DApps to be built as ‘sidechain blockchains’ on the mainnet, thereby creating an avenue for scaling the throughput and interoperability of the Ethereum network with better transaction times, security features, storage and lower or negligible downtimes. Also, Skale interchain messaging provides support for all major Ethereum token standards including ETH, ERC20, ERC721, ERC777 and Dai because they both use Solidity as their language.

Furthermore, the Skale network stands to further improve the dominance of Ethereum over other so called ‘Eth killers’ like Cosmos, Polkadot, Algorand, Radix and more by providing Ethereum as a service to developers through a gasless subscription-based decentralised network for the provision and deployment of high throughput, EMV compatible, storage-enabled and provably secure byzanite fault tolerant blockchains. In fact, report has it, that the combined market cap of all ‘Eth killers’ represents only 25% of Ethereum market cap. Hence, Skale network can be predicted to further improve the continued dominance and market cap of Ethereum.

Use Cases for Ethereum Execution Layer

Without the elastic sidechains of the Skale network, it would have been challenging building decentralised applications on Ethereum accounting for its scalability issues. Hence, the execution layer solution of the Skale network on Ethereum was a breakthrough solution for DApps scaling and efficient operations on Ethereum. It also paved the way for a range of use cases such as decentralised finance (DeFi), games, media/ advertising , decentralised commerce, IOT and more ( healthcare, real estate, fundraising, voting and digital identity).

Defi : Defi stand for ‘decentralised finance’ and is a financial ecosystem built on blockchain technology. It comprises of services such as investing, borrowing, lending, trading and other financial services based on decentralised non-custodial infrastructure. It uses decentralised network and open source software to design financial services and products. It builds and operates financial DApps on top of a transparent and trustless framework such as permissionless blockchain and peer-to-peer protocols. One of the DApps on the Skale network demonstrates how digital currency can transform a product category and change its existing model. The elastic sidechains does not only speed up processing time but significantly reduces transaction fees. Hence, running the system directly on Ethereum mainnet would have been challenging whereas running it on the Skale network offers good economics.
Games: Online gaming is another category of blockchain innovation and it is somewhat easy to use as a sidechain solution. The sidechain solution made the process workable for online gaming by moving to a layer 2 solution. This account’s for speed in the game and reduction in gas fees. A number of games had to be developed as decentralised apps due to the importance of recording and preserving moves within the game. One of the games developers are building on the Skale network is a strategy war game where players can build empires and battle with other players. The player actions are stored on one or more of the Skale sidechains for transparency purposes as well as for validation that players own their lands, armies and other game assets. The use of sidechains were found to speed up development, speed of play and decreased operating costs.
Trustless Sports Betting / Prediction Markets: In betting, data is streamlined and helps to prevent illicit tampering otherwise popular with traditional bookmarkers. Blockchain sports betting is another option for DApps and uses elastic sidechains. The main advantages are reduced gas fees and faster transaction times resulting in greater user adoption. Transaction fees reduction through the use of elastic sidechains have had a significant impact on the overall economics. Recently, on the Skale network, a sports betting DApp was created that uses the Ethereum network to increase transparency in the betting process.
Content Streaming : Steaming media is another category of blockchain use case. This has become less popular over centralised current solutions such as audio and video streaming networks because the foregoing has been characterised by distrust due to favouritism and payout manipulation on the part of streaming providers and censorship. A decentralised solution stands to eliminate most of these issues in that smart contracts serves as a transparent medium for recording playback events and making payouts. Also, the fact that the protocol is not own by one person or entity adds to censorship resistance. The decentralised solution also helps to remove streaming providers from the transaction resulting in lower subscription fees and greater payout to those who own the contents. With the use of Ethereum-base execution layer, there is a big difference in the performance of decentralised streaming apps in that artiste can create their own pages, upload their music and get paid directly by people that play their music- all managed on the Ethereum network and within the elastic Skale chains. The use of multiple sidechains helps to improve development agility and to separate the logical functions of the application.
Data Custody and Privacy: This is a fundamental service used by decentralised applications. Trustless processing with decentralised data is very different from centralised computing. Trustless computing offers a much higher fidelity of computing results along with higher censorship resistance. With a trustless streaming media, claims of favouritism and heavy-handedness in recording plays and calculating royalty payouts are significantly reduced. Companies working on Skale Network can use Skale as their execution layer to build protocol for data custody and privacy in such a way that the protocol can be easily layered into applications and used by other protocols to build in decentralised network security and data management capabilities.
Collectible Games: Collectible game cards find use in the blockchain technology. Collectible game cards are of high value because of the scarcity of their supply in the game space. Making these cards into digital forms and tokenizing them does not only make them more scarce but also allows for new powers and capabilities of these cards. Tokenized cards are very visible and tradable making them very attractive and they can be easily searched in a decentralised ledger. Tokenization has the disadvantage of long commit times and a continuous stream of transaction fees that make the game expensive to operate. Using the Skale network, Dapps can get to faster transaction times and seamless game play without compromising on security and transparency and the other advantages an EMV compatible ledger can provide. The Skale network has a built-in capability that allows token owners to approve any actions that can cause a token to exit the network. Hence, using a scalable execution layer reduces transaction latency and gas fees.

In conclusion, the features of the Skale network appear to provide the Ethereum network with the super framework / structure it needs to meet its scalability challenge and growth demand- thereby ushering in a new dawn for the building of decentralised applications as ‘sidechain blockchains’ on the Ethereum mainnet with sufficient storage and computational capacity. The Skale network as opposed to the so called ‘Eth Killers’ has come to further stabilised the dominance of Ethereum in the blockchain/crypto space. Also, the Skale network would have been nothing without the open source community- thanks to this great community.

Thank you for taking the time out to read this crash course and please stay tuned for more crash course write-ups about the Skale network.

Resources

Glossary of terms

MSR -Minimum staking requirement to register a node in the network.
Epoch- This is the period for which bounties are calculated for validators and delegators and payouts are made. A single epoch starts at the beginning of the month (UTC) and end midnight of the month (UTC).
Delegation- This is providing a portion of the total staking amount needed to run a node in return for an agreed percentage of proceeds earned from the validation.
Delegator- This is an individual / entity that enters into an agreement with a validator. Validators can choose to accept delegations from delegators or choose to self-delegate.
Delegation Period- This is the delegation set by the delegator. At launch, delegation period was set at 2 months.
Undelegation- This is the act of withdrawing from a delegation agreement with a validator. Undelegation must be requested by the delegator whilst delegating during an epoch. An undelegation request should be not less than seven days before the end of the epoch.
Bounty- This is the reward earn per node that is registered in the network. Each node that meets the SLA requirements receives the same amount of bounty. The bounty includes inflation, and in future, will include proceeds from chain subscription fees
Commission Fee- This is set by validators and agreed to by each delegator as part of delegator’s delegation request and acceptance. It specifies the percentage amount validators will get from the bounty payout. The payout amount less commission fee is what is distributed amongst delegators.
Node Creation Window: This is the first three days of an epoch. Validators register nodes within the node registration window in order to receive payout in the next month.
Delegation states: (i) Proposed- Delegators propose delegation to a validator. (ii) Accepted- Validators accept a delegation. (iii) Cancelled- If a validator has not accepted a delegation, delegators have the right to cancel and delegate to another validator. (iv) Delegated- All accepted delegations turn to a delegated status on the first day of each month and stay the same until the delegation period ends or an undelegation request is made. (v) Undelegation request- The default status for a token holder on a chain is auto-delegation. If a token holder does not want the auto-delegation status, they have to put in an undelegation request at least seven days prior to the end of the epoch. (vi) Completed- When a delegator requests an undelegation for a specific delegation, the delegation turns to a completed state by the end of the specific delegation period. (vii)- If a validator does not accept a delegation and if the delegator does not cancel its delegation before the start of a new epoch, the delegation will automatically be rejected at the beginning of the new epoch.
EMV- Ethereum Virtual Machine.
Avg- Average.
DApps- Decentralised Applications.
ETH (Ether)- Is the cryptocurrency generated by the Ethereum protocol as rewards mines in a proof-of-work system for adding blocks to the blockchain.
ERC-20 Tokens- This allows for fungible tokens on the Ethereum blockchain. This standard is widely adopted by the ecosystem.
ERC-721- This is a free open standard that describes how to build non-fungible tokens on the Ethereum blockchain.
ERC-777- This is the new token standard replacing ERC-20. It is a larger and comprehensive scheme. It is a standard for fungible tokens.
Defi- Decentralised finance.
DOS- Denial of service.
ABBA-Asynchronous Byzantine Binary Agreement.
Gas fee- This is the fee required to successfully conduct a transaction or execute a contract on the Ethereum blockchain platform.
$SKL — This is the Skale network token.
BLS- Boneh-Lynn-Shacham.
Trustless- This means participants involved does not need to trust each other or a third party for the system to function.
TPS- Transaction per second.
Decentralisation- This is the transfer of control and decision-making from a centralised entity to a distributed network.
CPU- Central processing unit.
OS- Operating system.
UX- User experience.
Network- A technical infrastructure that provides ledger and smart contract services to applications.