May 21, 2020
Decentralizing the Cloud, One Step at a Time: SKALE and Multicoin at Ethereal Summit ‘20
SKALE has been very active at the Ethereal Virtual Summit. On May 8, Day 2 of the Summit, coming hot on the heels of VP Solutions Engineering Christine Perry’s presentation on Day 1, SKALE’s CEO Jack O'Holleran and CTO Stan Kladko joined Multicoin Capital’s Tushar Jain for a fireside chat that gave a good overview of what SKALE is about and where the project is headed.
“Pretty much my entire life I was doing different types of crypto” – Stan Kladko
The chat started with both SKALE Co-Founders introducing themselves. CEO Jack O'Holleran has been doing tech startups in Silicon Valley for about 15 years and, in 2017, has moved from AI and machine learning over into blockchain to start SKALE. CTO Stan Kladko is a physicist who used to do research at Los Alamos National Laboratory in New Mexico and then at Stanford University in California before joining a startup by a Stanford professor that had him working on a cryptographic accelerator hardware. He had been heavily engaged in cryptography since and eventually had his own crypto lab that was doing security vulnerability analysis for the US government. It was also in 2017, while attending Devcon 3 in Cancun, that Stan got really interested in blockchain, particularly Ethereum, and on how it could lead to disruptive change while solving long-standing problems on economic efficiency. Tushar said that it was also Ethereum that got him involved in the space.
“Our goal is to cross the chasm [towards mainstream adoption]” – Stan Kladko
Jack did not need to be prompted to give an overview of SKALE, describing it as an elastic blockchain network that makes it incredibly easy for Ethereum developers to deploy applications to the SKALE chain where there’s synergy and synchronicity between the two networks that ultimately fixes a lot of the user experience and other scaling issues encountered to date, like speed and costs.
Stan wanted to highlight that it’s still very early days right now and the state of the blockchain space can be compared to that of computers before Apple. There are a good number of early adopters experimenting with the emerging tech, but it’s just not relevant to the average person yet. The SKALE Network is designed to bring Ethereum to a billion users via a highly performant execution layer offering decentralized cloud services capable of competing with even established centralized heavyweights like, say, Amazon Web Services (AWS).
Decentralizing the Cloud, One Step at a Time
Anything one can do on AWS, he or she will also be able to do in a decentralized manner on SKALE. This is obviously a very ambitious multi-year, long-term project. While the SKALE Mainnet will launch with decentralized storage, fast and secure computation, familiar dev environment, etc., and enable the development of web and mobile apps on it, the network will continue to add new, exciting capabilities like mathematically provable protection against front-running and manipulation (ideal for DeFi), the ability to run AI, among others, with the idea being that it’s going to act as a decentralized operating system, where anyone will be able to run anything.
Proof-of-Use: The Role of Token Distribution in Network Health
“Tokens are really pieces of software [...] [that] help support networks and they help support different mechanisms and different functions. [Tokens] help utility come through a blockchain” – Jack O'Holleran
Tushar pointed out that token distribution is critically important because it leads to the security properties of the network. Jack has observed that over the last few years, a lot of network ‘utility’ tokens were launched without them producing any real utility, with nothing really supporting the tokens while the corresponding network is not yet even live.
Jack explains that the goal of SKALE is centered around utility. This way of thinking reflects even on the approach to launching the network’s tokens. SKL tokens will be launched in conjunction with the launch of the network, so that they can immediately be put to their intended utility.
ConsenSys shares this same belief in having decentralized networks pursue active utility starting at launch, so it makes perfect sense for SKALE to be their inaugural partner for and the first project to launch on ConsenSys Codefi’s new launchpad and participation platform, Activate.
Activate introduces a novel kind of token launch arrangement, called Proof-of-Use, that exactly matches SKALE’s thoughts on how it should be done. With Proof-of-Use, not only will the token launch in conjunction with the network’s own launch for immediate applicability of its utility, but those who will purchase the tokens on Activate will need to first finish Proof-of-Use, that is, they would need to use the token for one of its intended purposes — in SKALE’s case: staking by delegating the tokens to validators, and getting rewards for doing so as per the network economics — for at least 90 days. This effectively makes it so that there is no liquidity during that period while all the tokens are either locked, or doing Proof-of-Use and put to work on contributing to the security and scalability of the network. The utility tokens are already set to perform their service at network launch. This initially incentivizes the right usage of the token and promotes its continued active use even after the Proof-of-Use period, effectively turning token holders to token users. Ultimately, Jack is confident that this produces a much stronger, healthier network over a 3, 5 and 10 year time frame.
Stan Kladko believes that Proof-of-Use is especially important for SKALE because the complexity of the network entails ambitious, multi-year long-term goals, and SKALE would need people who will stay with the network for a long time and be properly rewarded for it. Tokens should preferably go to people who will take the time to learn about the network, use SKALE, and grow with SKALE over time. On Activate, a user needs to successfully pass a quiz about SKALE before he or she can participate in the token auction, making sure that people who are purchasing the tokens know what the project is about and what it stands for. After the user has participated in the auction and has received tokens, Proof-of-Use would ensure that he or she will get to actively take part in the network.
Stan emphasized how Proof-of-Use is fully decentralized and is not some off-chain mechanism. It is built with Solidity and ETH smart contracts, and Web3 tools. Users enter smart contracts to “prove use” over a certain period of time. SKALE and ConsenSys’ Proof-of-Use follow the same engineering idea of leveraging the Ethereum MainNet as the security layer, thereby saving a lot of time while also greatly improving security at the same time compared to if everything is to be built from the ground up.
Jack O'Holleran added that SKALE and ConsenSys are also on the same page about the need for dApps to offer a more frictionless user experience. Up till now, dApp UX have oftentimes been overly complicated and this has impeded user growth. When SKALE was looking at the Activate Proof-of-Use, among the deciding factors on whether to push through with it or not is if it’s going to end up being a smooth process. SKALE wants to engage long-term supporters and people who understand the network, but wouldn’t want to limit it only to engineers. What’s great about the mechanism and what the Activate team has produced at ConsenSys is that they have made the process completely seamless by bringing together this Web2 and Web3 experience in a way that a lot of dApps will likely need to start functioning in the near future. So Proof-of-Use, in itself, is actually a taste of the future Ethereum experience where smart contracts are interacting with Web2 frameworks as well to deliver a really smooth user experience.
Tushar Jain asked if anything like Proof-of-Use has been tried before and Jack shared that there was an initiative, also by ConsenSys, called the Brooklyn project that shared some of the same intentions. It’s an open source legal framework and project that a lot of people got behind where again the goal was to prove that a utility token is a utility token — like how the Howey Test let us prove that a hammer is a hammer — by helping networks launch the right way. There’s also Token Foundry from a couple of years ago. Now ConsenSys Activate is launching something similar but also very different and, to Jack’s knowledge, is the first and only implementation of this idea in a PoS network where there’s validation and delegation. The SKALE token has both a custody and a delegation function as an ERC-777, so there’s a lot of new ground being cut here and a lot of very complicated technical feats, all while making it really easy for people to participate. At the end of the day, doing it like that helps developers plan for and scale their Ethereum dApps more than if the token just immediately goes on exchanges and has incredible volatility. So the token will go on exchanges later; liquidity is important. But for the first 90 days, it will not be on any secondary markets. The token will really just be used exclusively for its core purpose.
SKALEing into the Future
“We have lots of cool things [...] and [...] we need lots of people to join our community so I actually would like to encourage people to join us” – Stan Kladko
Jack said that there’s a new major version of the Testnet coming out in a few days, carefully distinguishing between major versions and the many other minor releases. This next Testnet version would show what will eventually become the Mainnet getting pushed and tested, with the Mainnet release itself planned for as soon as possible after this summer. Update logs can be found here.
Stan Kladko is looking at the long-term growth of the network. He looks at Google with its millions of computers, and AWS with its millions of computers, and he looks at how the SKALE network can scale linearly. Stan believes that in the future, all of the current centralized applications such as Google and Uber and eBay will move to become decentralized and this loops back to some things which he mentioned at the very beginning that crypto and blockchain provide a way to change the economy on the global scale. It is going to be a very different, much more fair and much more innovative economic model, and SKALE hopes to be among the foundations of this new economic order. Stan would like to invite everyone to join the open source project, the community, and the network.
Building a Community
“We’re really trying to understand how we can entice and encourage people and explain to them that this thing is really exciting. It’s really [a] new future” – Stan Kladko
Stan is excited about the community organizing around this new economic paradigm powered by cryptography and decentralized networks. There is a very strong economic trend that is making people around the world try to learn how to become validators, and not only for SKALE, but for many other networks. Earlier networks like Bitcoin or even Ethereum are simple in comparison to the much more complex networks being built today where not all network problems can be directly solved by mathematics or technology. People underappreciate the social and even psychological aspects that bring about the creation of communities supporting these networks; social and psychological dimensions which he believes, would lead these communities to evolve into cooperatives of people that have their own governance systems and incentives for engagement, almost like the formation of new forms of religions, democracies or decentralized countries.
This part Stan finds really underappreciated and exciting. No one has ever built such decentralized communities before so how they will play out is unknown and something to look forward to when the networks go into production. According to Stan, the team at SKALE understands that there can’t be perfect security or perfect decentralization, and that SKALE and the space as a whole would need to take this movement mainstream and design many things along the way. He believes the critical thing is to have good human understanding and relationships within the community because no math can help if the community goes sour. With people and the social and psychological dimensions they bring, decentralized networks go way beyond just simply being networks, and easily turn into vibrant communities conceptualizing new governance structures, following new economies, and marching toward a new future.
Jack O'Holleran observed that, especially with recent global conditions, the world is fast turning very virtual. So it is important to get ahead of that and still able to connect with the community, and one huge advantage SKALE enjoys is that it is part of the Ethereum family with its amazing community, tooling and ecosystem. Jack says that when he thinks about community, it’s really about supporting a SKALE community within the general Ethereum ecosystem, and it’s been great going to hackathons and events and getting to know the people behind Ethereum because Ethereum is also not just math — it’s a broad collection of humans and people with similar ideals and intelligence and work ethic. So SKALE can focus on supporting the Ethereum community and developers, and while this broader community flourishes, so will the SKALE-specific community.
It’s interesting that Stan Kladko ran a cryptography security lab for 7 years that performed security audits on incredibly complicated pieces of software and issued certification recognized by and asked for by the US government — the White House, FBI, US Senate — before they would use a product. Jack’s first startup, Good Technology, even had to seek out an audit and certification from Stan’s lab. Stan intimately knows that audits are incredibly valuable and should be done, but parallel to this, there’s also value in thinking about threat modeling in a different perspective and getting into the weeds where people try to attack the system, so SKALE is launching a major HackerOne award system where money will be given to people who find weaknesses within the system. Combined with extensive edits that have been done and will continue to be performed, this gives the SKALE network the best possible security. In addition to these, SKALE will also be launching a Gitcoin bounty program to complement the work on HackerOne. Both these systems have different groups of talented people who can find different weaknesses in the network before SKALE goes live.
Advice to Others in the Ecosystem
“Search GitHub, learn, talk to people, you know don’t just code in obscurity without actually looking at what other people do” – Stan Kladko
To wrap things up, Tushar Jain, asked the SKALE CEO and CTO if they have any advice to give to others who may also be planning to launch their own network or a project on Ethereum.
Stan was quick to advise that developers should leverage GitHub and the accessibility of open source code. Never has it happened in history before where millions of people put in code that others are free to search and use. As CTO, Stan is in the position to get SKALE to apply his own advice to the project’s development workflow, which has allowed the team to remain small, with corresponding savings in engineering costs and development time. Of course, giving back by also providing open source code whenever possible is very important. The Proof-of-Use smart contracts, for instance, are in the Public Domain and can be reused by others. Responsibly using other people’s code is a great way to hack and speed things up when building complex systems, and the tools to do this have just only very recently become available.
Jack’s advice, on the other hand, was to not put the cart before the horse. This is one of the biggest and most common mistakes entrepreneurs make. They spend a great deal of time and money designing foundation structures and all these other things that don’t really matter if people are not going to use anything built on or with them anyway because there is no product-market fit. So do the basics well and focus on code and customers first, get the product-market fit, and then only after that should they dive into the myriad other activities of setting everything up. Jack feels like his advice has also been applied well in SKALE and things have more or less been handled in the right order.
You can watch a recording of this fireside chat on YouTube.