July 16, 2020
SKALE Update & Economics FAQ
We have some exciting news to share regarding Mainnet dates and the upcoming Activate Launch. We also have received a number of questions regarding the launch so have put together a helpful FAQ below.
- The SKALE (SKL) Token will be available for purchase via Dutch auction on the Activate platform on August 17th, 2020 at 12:00PM EST. All of the details, signups, etc. can be found here: https://activate.codefi.network/skale
- The Phase 2 Mainnet Launch is planned for September 1, 2020. This will commence the Proof of Use Period.
- The “Proof of Use” distribution mechanism via Activate is designed to get tokens to holders whose primary purpose is utilizing network tokens for their intended purpose. Users who acquire tokens during the launch are required to actively “prove use” of their tokens by delegating at least 50% of their purchased tokens for 90 days before being able to transfer them outside the network.
Prior to reading this, If you haven’t already read the SKALE Token and Economics overview written by Conner, please read this first. If you have read the overview and have questions, you are in the right place.
We received a number of consistent questions from community members as we sought feedback over the last few weeks and have compiled them here with answers. As a heads up, this FAQ will be a living document for a short period of time so we can add more relevant information.
Why have auction bounds, quantity, and pricing been altered from the initial post in April?
The team received a lot of feedback that the upper and lower bounds of the auction were too tight. Other recent auction projects have had bands of 10x to 100x difference in beginning and closing price. The range in the Activate launch was dramatically smaller. Therefore Consensys increased the upper bound (auction start price) and decreased the lower bound (auction reserve price) on each side. We feel this larger range will allow for greater market determination of price. As a reminder, this a Dutch Auction and the final closing price is the price point all participants get regardless if they bid at a higher early price.
Another key point is that the Activate Auction is mechanically different from other auctions. There are no pre-bids and the sale runs over a 3 day maximum period, not a 12-24 hour period. Therefore we expect more organic price discovery and expect the sale to close at a true market price point rather than in seconds or minutes due to pre-bidding.
The quantity of tokens sold in the sale will now be 125 Million. The new quantity ensures that despite the broader auction band less than 5 Million Swiss Francs are raised in the effort, which further supports the legal and compliance strategy for launch.
Tokens that were prior planned to be sold in the auction have been moved back to the Protocol Development Fund and will be allocated to a program to support dApps in the form of grants for SKALE Chains to further catalyze network growth.
Who has the ability to stake tokens? Can locked tokens be staked?
All token holders regardless of locked state can be put to work via staking in the network. This includes early Activate purchasers, early supporters, team, and foundation.
It is absolutely critical to network security to let all stakeholders stake their tokens. The cost of attacking the network is a function of the total value of tokens staked in the network. If a malicious third party owned a large chunk of the network, they then would have an attack vector to owning over ⅔ of any individual SKALE Chain. By letting all holders stake, the cost of attack is dramatically increased to the point that the most viable economic win as a larger token hodler is to support the network rather than act maliciously.
Additionally, higher stake rates across the network create a more valuable and strong network that benefits all token holders, which in turn also supports the Ethereum network by creating a, ETH-native rich and highly reliable scalability solution.
One implication of this is that all tokens held by numerous groups will be liquid on day 91 of the network. Team, early supporters/purchasers will have liquid tokens but only as a reward for staking in the network. Lock schedules apply to grants and purchased amounts, not to the bounty. Bounty, however, can be re-staked in the network creating a compounding factor that creates incentives for stakers to continue staking and not selling rewards.
Why has the auction changed from 5 days to 3 days
Community members told us that 5 days was too long for an auction. Most auctions now have pre-bidding with a 12-24 hour auction timeline. There is no pre-bidding in this auction, so having numerous days is helpful for participants and allows for slower price movement and more optimized price discovery. Based on that, 3 days was determined to be the optimal time.
What will total supply and circulation supply be on day 91 following the proof of use sale? What is the percentage of total supply sold in the Activate Sale?
Total Supply will be 4.2B tokens with 596M in circulation.
This is made up of:
Liquid Tokens: 221,250,000
- 125,000,000 from the Activate Sale which makes up 3.03% of Total Supply.
- 96,250,000 derive from protocol inflation over the Proof of Use Period (32,083,333/month).
- Please note that all token holders regardless of lock status can stake. Activate Sale Participants, Foundation, Early Supporters, and Core Team have the ability and will be staking during this time period. Estimates are that stake rate will be around 45-65% based on early data.
Unlocked Foundation Owned Tokens: 375,000,000
- 85,000,000 for the Protocol Development Fund.
- Only a small fraction of this pool will be used to grant dApps accepted into the SKALE Innovator Program tokens for 3-6 month starter grants to fund initial use of their SKALE Chains. AWS, Google, Microsoft and other cloud providers have similar credit programs to help devs get started. When these are granted they go directly into the protocol and are paid out to delegators and validators as part of the monthly bounty pool.
- 150,000,000 in the SKALE Foundation allocation. These tokens are not planned to be used in this period. Their sole purpose is to support the community. They are liquid to support any operations needed. At this point there is no plan for their use but they are ready to support unforeseen operational requirements.
- 140,000,000 are in the Ecosystem fund. The purpose of this fund is to support community requirements for ecosystem growth such as exchange listings, paying vendors for the public token launch, validator staking support programs, etc.
You can look at summary details by month with this interactive chart.
What are lockup schedules for early investors? What prices did they pay?
The lock-up schedules and prices are pasted below. Reasoning for such strong lockups are detailed in this blog post.
SKALE Tokenomics one-pager can be found here.
In the unlikely event the tokens are not all sold in the auction, what happens to those tokens?
Based on current data and metrics this is a highly unlikely outcome. However, to plan for all situations, if there are any unsold tokens they will be passed over to the Protocol Development Fund and given out as credits for dApps with the intent of driving growth and usage of the network.
How will the funds in the auction be used?
The funds will be added to the Foundation Treasury and used to fund operational efforts to grow the network. All funds will be used exclusively for growing and developing the network. This includes funding engineering, marketing, community growth, solutions engineering, legal, finance, operations, and other core business functions. The Foundation itself does not conduct business, so will fund third party vendors via the Anstalt who support the network such as SKALE Labs, and other entities and individuals.
What exchanges will the token be listed on after the Activate Sale?
SKALE is thankful to be in such a strong position of traction and to have such good network economics based on lockups that the world’s top listing options are in active discussions.
The Foundation Anstalt will finalize agreements following the Phase 2 launch so there are the best possible options for the token when the network becomes liquid and transferable on day 91. At this point we cannot publicize nor confirm any listing plans.