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June 15, 2022

SKALE Validator & Delegator Token Economics | SKALE

Conner Murphy
VP of Strategy, Head of Sales

Disclaimer: None of this is financial advice. Everything provided below is meant to be educational and does not encourage any financial investment. Please remember to do your own due diligence through SKALE provided information, external analysis, and your own research before making any decisions.

Token Economics & Network Participation

Brief Summary

This document details the opportunity provided by staking (validating and/or delegating) within the SKALE Network. Those supporting the network through these actions will yield a token return consisting of Network Issuance and Decentralized App Rental fees. Detailed token economics information with supporting background can be found throughout the document and through supplemental articles on the SKALE blog. Supporting FAQ for this document can be found here.

SKALE Token (SKL) Utility and Value for Economics

The SKALE token, with a token symbol “SKL”, serves as the built-in instrument of transfer for facilitating three core organic functions:  

  1. Security/Staking: Delegators stake SKL tokens to validators who run the SKALE network through operating nodes by validating blocks, executing smart contracts, and securing the network. Both delegators and validators are rewarded with SKL tokens for their efforts and collateralization.
  2. SKALE Chain Subscription Fees: Developers purchase their subscription access to SKALE Chains with SKL tokens.
  3. Governance voting: The SKL token will also be used for on-chain voting, which will control all economic parameters of the SKALE Network. The network will gradually evolve to a point where voting is required to change the core economic functions of the network such as issuance and fees. In general, SKALE governance follows a Delegated Stake Model. A stakeholder can either participate in governance directly by voting with its stake or delegate the voting power to other stakeholders. The default voting model used by SKALE is a simple majority vote of stakes that participate in the vote. Additional information surrounding governance and the N.O.D.E Foundation can be found here.

A delegator is a separate individual/entity who enters an agreement with a validator to provide a portion of the total staking amount (collateral) needed for a node to run in return for an agreed-upon percentage of proceeds earned from validating. Delegators are at times interchangeable with validators throughout the document when referring to earned rewards.


The SKALE Network is a Proof-of-Stake (PoS) network secured by independent global validators. SKALE validators operate and secure the network by proposing blocks, establishing consensus on a finalized block, and committing it to a chain. Without validators, who bring the ‘blocks’ and ‘chain’ to ‘blockchain’, (or miners in PoW systems), there wouldn’t be a working blockchain (or network). It is mission-critical for the network economics to reward and incentivize validators for their upfront hardware investments, operational upkeep efforts, and overall support of network performance and security.

SKALE validators earn SKL rewards every epoch (i.e. every calendar month) through:

I. Decentralized App (dApp) Fees

II. Network Issuance (or Token Inflation)

I.  Decentralized App (dApp) Fees

Developers rent SKALE chains for their dApps by depositing SKL tokens into a smart contract. This allows the SKALE Network to offer gas-less transactions to the dApp’s end users, dramatically improving the Web3 experience.

At the end of each epoch period, a portion of these SKL tokens that were deposited by the dApp developers gets allocated to a bounty pool. This in turn gets distributed to the validators as rewards if they reach certain SLA requirements (defined below).

As the network continues to grow and Web3 applications continue to proliferate on the SKALE Network, the total dApp fees look to surpass token inflation on a per node basis and will be the primary driver of token returns. The inherent value of the network will then reflect the usage and growth of the network.

I. A Network Load Utilization Curve

The SKALE Network has a network load utilization curve at the core of its pricing structure. The purpose of this curve is to balance the supply and demand of network capacity to create a stable and cost-effective network. As the network becomes over-utilized, SKALE chains become more expensive to purchase. For example, surpassing 85% network utilization sharply drives up the cost and therefore the dApp fees entering the network as rewards. This, in turn, incentivizes current validators to spin up more nodes and/or new validators to enter the network. This would result in an increase of supply, which would decrease utilization and would concurrently push prices down and stabilize the network. This model ensures balance across the network as usage increases.

II. Network Issuance (Token Inflation)

The SKALE Network will issue new tokens (inflation) to support validators. These rewards are designed to be disproportionately weighted in the early years and ladder decay each year in the first six years. This is done to support validators early on as the network continues to mature and stabilize with a goal to have little impact in the later years once usage and growth have occurred.

Metrics and Risks

Service Level Agreement (SLA) threshold

The SLA Threshold is a metric used to rate the performance of validators and consists of percentage uptime and response time.  If a validator does not meet the SLA requirements for a particular epoch (as determined by the network monitoring procedures), they will not be eligible to participate in the awards from the bounty pool. Further information can be found here.


Slashing may occur in situations where a validator performs malicious behavior, such as double-spend, in a manner that can be confirmed by a decentralized group of network participants according to the procedures as specified by the network governing body. This is a major risk to all parties involved (including delegators) and should be understood in detail before participating.

Become a Validator

If you are interested in becoming a validator, please join the SKALE Discord channel. Through these channels, you will receive the latest updates around product, testnets, mainnet, and onboarding. The Solutions Engineering team will be there to support you throughout the process.

The network is designed to be permissionless. In the future, signup and registration will be self-serve, and registering as a validator will be ungated.

Participate as a Delegator

Token Event

SKALE, in partnership with ConsenSys, was the first project to provide public access to their token through ConsenSys Codefi’s launchpad platform, Activate. The SKALE Token (SKL) launched on Activate, which will provide public distribution of tokens and the opportunity to participate in SKALE’s decentralized network.

SKALE and ConsenSys share the belief that a crypto token should launch with an already functioning utility in its public decentralized network. In this respect, Activate is pioneering a new feature, Proof-of-Use, which is embedded in the SKL token and applies to the SKALE launch on the platform.

Proof-of-Use requires users who claim or purchase tokens during the launch to actively “prove use” on the platform before they’re allowed to transfer or redeem them for other purposes. In SKL’s case, this means that participants are required to delegate 50% of their purchased tokens for a minimum of 60 days before liquidity opens anywhere. This guarantees that after the launch, tokens purchased on Activate are used for their intended utility, instead of used for passive speculation. Distributing tokens among stakeholders with aligned incentives ensures networks are effectively bootstrapped and encourages further delegation post required delegation period.


As mentioned, a Delegator is a separate individual who enters an agreement with a validator to provide a portion of the total staking amount needed for a node in return for an agreed-upon percentage of proceeds earned from validating.

Each validator can choose to either self-bond (stake a portion of the amount needed per node) or accept a delegation from other token holders. Each validator is free to decide on how much commission to charge for the service.

Delegators, on the other hand, are free to choose whom to delegate their tokens to. The main factors for delegators in choosing a validator will include the node performance (SLA), the commission rate set by the validator, and the reputation of the validator. Validators can choose to decline individual delegation or not accept any at all.

Delegator Risk & Rewards

SKL token holders will decide if they would like to stake their SKL tokens into the network. After researching validators and understanding the risks involved (slashing), delegators can decide the number of tokens they want to delegate and which validator they will partner with. Once chosen, the delegator will earn token rewards based on the number of tokens they delegated, the commission percentage set by the validator, and the amount of time they stake for.

Delegators will receive a bonus dependent on the length of time they choose to lock up and stake. The longer they lock their tokens up, the more rewards they can potentially earn. These rewards are paid out and liquid at the end of every epoch. Once chosen, staked tokens are locked until the time period they chose is complete.

Background & Additional Information

Why Stake

Token economics is a critical part of almost every decentralized network. Participants who provide resources and services to the network need to be appropriately rewarded for their efforts (labor and capital) and security granted to the network. Tokens are used as the form of currency within a network economic model with this model being designed so as to reward honest service and discourage malicious behavior.

In Proof-of-Stake systems, network participants called 'validators' ensure consensus by proposing and voting on transaction blocks. Network nodes within a validator set to alternate between offering blocks up for validation by other nodes, or checking the blocks submitted by a proposing node and voting en bloc. If sufficient nodes serving as validators deem the block correct, the block gets added to the chain.

Validators(or delegators) lock in a stake of network assets, typically represented by cryptographic tokens of a sufficient value, which acts as collateral to discourage malicious behavior and reward honest service. The internal token economics underlying this mechanism is what keeps the network healthy which in turn rewards validators for doing so.

A stake consists of a set of tokens that get contributed to a network to serve as collateral for the period of time a validator is performing services on behalf of the network. A stake is of sufficient value so as to discourage malicious behavior while still allowing for a sufficient rate of return for participation in the network.

Why Stake on SKALE

The SKALE Network is a security and execution layer that connects with the Ethereum network and lets developers build their dApps in a secure, reliable, and cost-effective manner. It is an elastic and decentralized blockchain network that supports thousands of independent blockchains, sidechains, storage chains, and other types of sub-chains – all tied to the Ethereum public mainnet. This network forms an execution layer in the form of high-performance chains that facilitate transactions based upon on-chain escrows. The SKALE Network provides a full-stack transaction processing cloud and Web3 services through this security and execution layer.

The SKALE Network powers highly configurable, blockchains for each individual application within industries ranging from DeFi to IoT, gaming to media, and much more. SKALE enjoys unlimited linear scalability — the more validators that join the network, the more blockchains can be supported, resulting in a truly decentralized yet scalable network.

SKALE solves the end-user experience problems that inhibit blockchain adoption and growth by offering the best of blockchain and traditional cloud — delivering the frictionless UX, high performance, and development agility found in cloud-based computing while still having the decentralization and security of Ethereum.

The value of native utility assets in a network economy is derived solely from the value that the network provides to its users and participants. Staking on the SKALE Network supports a credible and essential network protocol with well-designed economics and innovative technology aimed at serving a billion end users.


SKALE is backed by the leading supporters and thought contributors in the space, which has helped ensure the team has enjoyed the guidance and funding needed to create a world-class network.


The SKALE Network is also supported and run by the world’s top validators. Their belief in the network enables it to be fully decentralized at launch.

Token Supply and Distribution

The Total Supply of SKL tokens at genesis is 4,140,000,000. The Network has a max supply of 7,000,000,000 tokens. 33% of the max supply (2,310,000,000‬ SKL tokens) are set to be minted as network issuance (inflation) throughout the lifespan of the network. 550,000,000 of the Foundation’s 700,000,000 tokens will be minted at the six-month mark as a milestone. It will continue to complete its full 7-year vesting schedule, with the first 50,000,000 tokens of that remaining 550,000,000 Foundation tokens unlocking at the end of month 24 and then continuing to unlock every 6 months until completion.

There will be zero public liquidity in the first 2 months following the network launch in order to facilitate Proof-of-Use.  After those first 2 months, which could mean completion of the Proof-of-Use period, the only public liquid tokens available would be those that were purchased on Activate at network launch and tokens earned via staking rewards. The circulating supply schedule for the remaining supply is shown in the chart below as well as this interactive chart.

SKALE Validator FAQ

The SKALE Validator FAQ covers the top questions and concerns of Validators at the time of release, and is definitely a must-read, especially for Validators and those who are considering setting up a Validator node.

SKALE Validator FAQ

About the SKALE Network

The SKALE Network is an open-source blockchain network with a mission to make it quick and easy to set up cost-effective, high-performance Ethereum native blockchains that run full-state smart contracts. SKALE aims to deliver a performant experience to developers that offer speed and functionality without giving up security or decentralization.


SKALE is an Ethereum native, modular blockchain network composed of high-throughput, low-latency blockchains that are optimized for Web3 user experience. SKALE chains offer zero gas fees to end-users and have advanced features such as on-chain file storage, interchain messaging, zero-cost minting, ML/AI smart contracts, 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.

For more information on SKALE

SKALE Website

Dapp Developers interested in utilizing SKALE for a project, please apply to the SKALE innovator program.

Join our Discord Server.

Documentation on deploying a Dapp to SKALE can be found in the Developer Portal.

To learn more about the SKALE $SKL token, please visit our SKL Token page.

Build on SKALE

The SKALE Innovator Program for developers includes grants, consulting, Marketing & PR, engineering support, QA support, and investor introductions.

Apply to the Innovator Program