As Web3 continues to evolve, the approach to scaling blockchains is evolving with it. Layer-1 blockchains have some known capacity constraints around how many transactions they can process per minute, which also results in transaction fee spikes during times of peak demand. SKALE has taken a modular approach to blockchain capacity with its v2 upgrade that is rolling out this week, combining the benefits of the Ethereum network with a design that allows for developers to easily spin up additional interoperable blockchains.
SKALE differentiates itself as a hybrid Layer-1, with Layer-2 blockchain characteristics. It is a Layer-1 blockchain in the sense that it has its own token and transactions happening within the SKALE network. It is also integrated with Ethereum, so it provides similar functionality to an Ethereum Layer-2 blockchain. By having the capability of spinning up additional blockchains, SKALE has the capability to add capacity dynamically.
In an interview with The New Stack, SKALE CEO Jack O’Holleran said, “When you think of SKALE, instead of being one blockchain, the SKALE Network is many, many chains. Right now there are seven EVM chains on SKALE. We expect to have over thirty in the next month. What this v2 release does is it lets all these chains start talking to each other, not just to the mainnet.”
If you look at the traditional approach to scaling Ethereum, where a Layer-2 blockchain offloads some of the transaction workloads, there are some limitations in interconnection which result in friction for users. O’Holleran said, “The issue with Layer-2 rollups is [that] in the rollup environments, users can’t communicate or bridge between rollups. They have to go back to the Ethereum mainnet and then off to another rollup. If you think about an ecosystem of Web3 applications, users don’t want to pay bridging fees to swap out tokens from a play-to-earn game, to then go buy an NFT in another Layer-2 environment.”
One of the more interesting aspects of the discussion around the SKALE v2 upgrade is what this looks like from a rollout perspective. Nodes started upgrading on April 19 and will be upgraded throughout the course of the week. When I asked O’Holleran about potential downtime for any of the blockchains he said, “There are 42 unique validator orgs running 152 servers and there is a schedule they are using to upgrade. Any current chains on v1, if greater than 5 nodes were upgrading at the same time, it would stop liveliness of a chain; so the rollout is phased to ensure there’s no downtime.”
Launching a Blockchain on the SKALE Network
When you launch a new SKALE blockchain, another benefit of the tie to the Ethereum mainnet is the nodes assigned to you are actually assigned to you by the Ethereum mainnet, which guarantees a random selection of nodes in SKALE to help maintain that security. It also rotates the node operators that work for you, which creates a collusion-resistant model amongst the shared resources supporting the chain. O’Holleran said, “You could think of it as Ethereum chains-as-a-service in the SKALE network and the chains are fast with high throughput. They can do storage, you can mint NFTs without fees, and have gasless transactions.”
One aspect of the SKALE approach that I find particularly interesting is the focus on reducing some of the volatility inherent to fluctuations in fees. Volatility creates unpredictability in pricing for developers and can also lead to fees being passed on to end users, which is not something typically seen with traditional web development.
O’Holleran had this to say about volatility: “Volatility impacts utilization. SKALE has developers pay for chains a year in advance and lock in those resources for that time period, which translates to zero transaction fees for the end users. SKALE takes that volatility away from the end user and minimizes it for the developer too because the resources are locked in.”
This reduction in volatility can also be seen in the SKALE approach to pricing around chains. O’Holleran said, “The price per blockchain changes too based on the load on the network. The supply and demand ratio helps to balance the volatility for chain renters because the pricing is integrated with a mechanic that incentivizes validators to set up more nodes which in turn drops the number of SKALE tokens required. It’s really an introduction of modern supply and demand economics and introducing more of a B2B platform-as-a-service price model to blockchain to eliminate volatility from end user adoption.”
How Is the SKALE Approach Different from Cosmos?
We mentioned Cosmos in a few previous articles as an internet of blockchains. On the surface, SKALE sounds like they are taking a similar approach, so I asked O’Holleran to highlight the differences. He said, “If you look at the Cosmos ecosystem, anyone could start a Cosmos blockchain at any moment, but you need to get your own validators and launch a token and create your own security model. Cosmos is different from SKALE in the sense that with Cosmos all these different chains are using the same code and then they have a protocol that lets people transfer between the different chains, but they don’t share any security across these different chains. SKALE actually pools security across the different chains and it is one network that is all supported by a common token.”
The SKALE implementation does sound like it offers great simplicity of implementation because there isn’t the need to establish your own validators. O’Holleran further explains, “SKALE lets people launch chains that all rely on one token and this big validator pool, which enables a more interconnected environment. It is a vision of a universe of blockchains, but it is one that builds up positive network effects because of shared security. It’s easier to launch a new chain because you don’t need to get a root token going and get validators there and try to build up enough stake to provide security, the security is already shared throughout all the chains.”
Cosmos has attempted to address the issue of security by allowing blockchains in their ecosystem to adopt a shared security model. It sounds like this could be an architecture decision where you need to make some decisions about how much control you need over your blockchain and what type of interoperability you are hoping to achieve.
Building on SKALE
To incentivize more developers to build, SKALE introduced a $100 million dollar ecosystem incentive fund. As a developer, you can apply for a project grant to help fund launching your dApp. There’s currently a specific focus on gaming developers.
If you’re interested in requesting a grant, there’s an application process that requires submitting a proposal. The proposal goes to a decentralized committee that assesses the project and either approves or denies the request. I didn’t get specifics on the approval rate for grant requests, but O’Holleran was willing to share that developers who are actively building projects are being approved for grants at a fairly high percentage of the requests. He described the model for grants as a tranche model where you can unlock additional grant money hitting milestones in your development process.