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June 4, 2024

State of SKALE - Q1 2024 by Messari

SKALE Network

The latest Messari report “State of SKALE Q1 2023” revealed the numbers and insights behind SKALE’s sustained phase of growth and expansion. Highlighting key developments across Gaming and AI initiatives, the report showcases how SKALE's unique approach to blockchain scalability is achieving notable adoption.

Key Metrics & Insights

  • Chain Payments Update: The network collected $228,000 in chain payments after their introduction in January. This model charges developers a subscription fee in SKL to operate a SKALE chain, instead of charging end users via transaction fees.
  • Nebula Gaming Hub Continues Growth: Nebula's average daily transactions, active addresses, and new addresses grew QoQ by 39%, 56%, and 178%, respectively, largely driven by the play-to-earn motorcycle game MotoDex.
  • Expansion in AI: SKALE saw new launches and partnerships in AI, including PaLM AI, GPTVerse, Fusionwave AI, ChainGPT, and Dmail.
  • New Ecosystem Builders: The N.O.D.E. Foundation signed on 68 new projects to launch on SKALE.

Network Analysis

Network Usage

Average daily transactions increased by 18% QoQ to 1.1 million. With the number of SKALE chains remaining constant, the increased activity was driven by more usage on the existing chains. Nebula and Exorde were significant contributors to this growth.

The number of SKALE validators remained at 45, while the total number of active nodes stayed at 115. Total SKL staked fell by 7% QoQ to 2.3 billion, but the value staked in USD terms rose by 57% due to SKL price appreciation.

Upgrades and Roadmap

The SKALE network introduced the Release 2.3, enhancing performance with a 30% reduction in block times, improved Ethereum compatibility, and oracle response verification. An upgrade to the Interchain Messaging Agent (IMA Bridge) significantly increased transfer speeds—561% faster for SKALE chain transfers, and 10,976% faster to Ethereum.

Looking ahead, the proposed Levitation and SKALE Ganymede (SKALE G) protocols aim to integrate ZK-rollups with the SKALE architecture, enhancing Ethereum connectivity and security.

Ecosystem Overview

Growth across all SKALE chains was significantly driven by the AI protocol Exorde and the gaming hub Nebula. Exorde saw its average daily transactions grow by 28% QoQ to 499,000. Nebula experienced a 39% increase in daily transactions, reaching 490,000.

Nebula's growth was largely fueled by play-to-earn (P2E) motorcycle game MotoDex and the fantasy football platform 5TARS. Additionally, the role-playing game World of Dypians launched in Q1 and quickly became one of Nebula's top applications. Other notable launches on Nebula in Q1 included Ballers City, Paradise Brawl, Heroes Battle Arena, Hatchy Rampage, Roco Finance, and Sportzchain.

On the other hand, NFT hub Calypso saw a 25% decline in average daily transactions, falling to 48,000. This decrease was primarily due to reduced activity on Untitled Platformer, a P2E platform game that had previously accounted for most of Calypso's activity following its Q2’23 launch. Despite this, new projects like Dmail Network, Solo Network, and DripVerse Protocol were launched on Calypso in Q1.

Titan Hub, a community hub for AI projects launched in Q4’23, saw growth driven by PaLM AI, which offers a multi-platform chatbot powered by Google’s AI suite and an NFT Studio marketplace for bot-created NFTs.

Development and Growth Initiatives

SKALE Labs announced partnerships with several projects in Q1 that are set to launch later in 2024. These include gaming platforms Arena Games, Life Games, and GameXPad, role-playing game Land of Chasers, gaming metaverse GangstaVerse, AI hub GPTVerse, chess game Chess3, AI-based metaverse FusionwaveAI, music platform Hitmakr, AI infrastructure protocol ChainGPT, play-to-earn game ArmourX, NFT marketplace and launchpad NFT Arcade, and NFT marketplace plugin for WordPress Kredeum.

In March, at the Game Developers Conference (GDC), SKALE announced up to $2 million in grants for attending projects and developers. Additionally, a partnership with Antier Solutions was established to launch an accelerator program for SKALE projects, aiming to drive the growth of new clients and enterprises building on SKALE.

Ongoing growth efforts are supported by the SKALE Ecosystem Accelerator Program (SEA Program) and the N.O.D.E. Foundation. The SEA Program, launched in Q3’23, helps projects grow by leveraging infrastructure and content creator partnerships. The N.O.D.E. Foundation continues to allocate funds from its $100 million ecosystem fund announced in February 2022, and has signed 68 new projects to launch on SKALE.

SKL Token Overview and Use Cases

The first quarter of 2024 marked a significant upswing in the crypto market, and SKALE's SKL token was no exception. The circulating market cap of SKL increased by 74% QoQ, reaching $612 million.

The SKL token serves three main purposes: SKALE chain subscription fees, network security through validator staking, and governance.

Subscription Fees

SKALE has implemented a unique revenue model where subscription fees are charged to developers for operating SKALE chains, rather than traditional transaction fees being imposed on end-users. This model was officially launched in early January 2024. The first payments, starting on February 1, 2024, accumulated over 2.6 million SKL ($228,000) in subscription fees throughout the quarter. These payments are distributed to validators.

Initially, the subscription fees are priced via a static curve, starting at $3,600 per chain per month in SKL and scaling up to $83,333. This static pricing helps increase the fees distributed to validators and aims to offset inflationary pressure while keeping the financial burden on developers manageable. However, there are plans to transition to a fully dynamic price curve within 12-18 months. This dynamic curve will automatically adjust based on the network's load, defined by the percentage of total validator resources in use across all active SKALE chains.

Network Security and Validator Incentives

SKALE's validator operations, including staking and rotation, are managed on Ethereum via the SKALE manager smart contract. This contract runs distributed key generation (DKG) to generate Boneh–Lynn–Shacham (BLS) keys for each node, ensuring secure and efficient operation. In Q1 2024, no DKG events occurred.

Since its inception, most validator rewards have been sourced from inflation. SKL has a fixed total supply, with one-third allocated to validator rewards, and approximately 48% of this allocation has been distributed. The long-term strategy is for subscription fees to replace inflation as the primary source of validator rewards. The goal is to have 90% of validator rewards funded by fees instead of inflation by Q4 2027. In Q1 2024, just under 4% of validator rewards came from fees.

Token-Based Governance

In Q2 2023, a Snapshot vote passed to implement a proposed governance system. This system allows staked SKL holders to participate in governance votes on key network decisions, such as subscription fees, inflation rates, slashing penalties, and minimum stake requirements.

Looking Forward

Q1 2024 marked a pivotal period for SKALE with the successful launch of chain payments, which collected $228,000 in SKL. This shift marks the end of a loss leadership model and sets the stage for sustainable growth. Average daily transactions across SKALE chains, driven by Gaming and AI expansion, and the N.O.D.E. Foundation's efforts to expand the ecosystem saw 68 new applications signed on. In general, SKALE Network's unique blockchain solution is attracting more and more builders looking to deliver a better onchain experience for their users.

About SKALE

SKALE is the world's fastest blockchain, designed for fast, secure, user-centric Ethereum scaling. SKALE chains offer zero gas fees to end-users and have advanced features such as AI/ML smart contracts, on-chain file storage, interchain messaging, zero-cost minting, and enhanced security features.

The SKALE Network enables developers to deploy their own EVM blockchain in minutes without sacrificing speed, security, or decentralization. Welcome to the SKALEverse.

More Information on SKALE

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