SKALE (SKL) token is a utility token based on the Ethereum ERC-777 standard, designed to operate on the SKALE network. It has multiple roles, including staking for network security, participating in governance, and leasing the SKALE chain. These tokens are minted by smart contracts on Ethereum, with an initial total supply set at 7 billion tokens, and the supply can be increased through governance-approved minting events, with an expected annual issuance rate of 9.3%.

It is important to note that SKL is not used for Gas fees within the SKALE chain. Instead, it uses a zero-cost Gas token called sFUEL for on-chain transactions.

The utility and functionality of SKL Token

SKL tokens are staked by validators to secure the network. They run validation transactions, execute smart contracts, and maintain network security and performance as nodes. Staking is crucial for the Proof of Stake (PoS) consensus mechanism, ensuring that validators have economic incentives in the network integrity.

Both validators and delegators can earn rewards for staking SKL tokens, and the distribution of rewards is based on the number of staked tokens, the percentage of fees set by the validator, and the staking period.

Token holders can also participate in SKALE governance by voting and influencing operations and policies. Voting is token-weighted, meaning the more SKL tokens a holder stakes, the greater their influence on governance decisions. Developers and organizations can lease the SKALE chain using SKL tokens, which enables them to access the network's computational resources and run scalable dApps without paying gas fees.

Token Economics

The SKL token economics is designed to support the growth and sustainability of the network. The initial supply of SKL tokens is 7 billion, with an annual issuance rate of 9.3%. This controlled inflation is managed by network proposals and minting events, ensuring a balanced supply to support network incentives without excessive dilution.

Token allocation includes distribution to validators, delegators, N.O.D.E. Foundation, and other stakeholders. The N.O.D.E. Foundation, responsible for network development and governance, receives a portion of the tokens, unlocked over seven years to support its activities.

Staking mechanism

Staking in the Skale Network involves locking up SKL tokens to support network operations and security. Validators must stake at least 20 million SKL tokens per node, which can be achieved through self-staking or delegation from other token holders. The staking operation takes place on the Ethereum mainnet, leveraging Ethereum's security to secure these transactions.

Validators are rewarded based on their stake amount, network performance, and staking period. These rewards incentivize validators to maintain high performance and effectively secure the network.

Delegation allows SKL token holders to delegate their tokens to validators without having to run the node themselves. This process involves the following steps:

• Select Validators:Token holders select a validator to delegate their SKL tokens. Information about validators, including their performance and commission rates, can be obtained on the Skale Network platform.
• Token Entrustment: Using tools such as Metamask or Skale Manager, token holders delegate their tokens to selected validators. The delegation process requires specifying the ID of the validator, the number of SKLs to be delegated, and the duration of the delegation.
• Get Rewarded: Delegators are rewarded based on the number of tokens delegated, validator performance, and commission rates. Rewards are distributed at the end of each staking period.
• Cancel Order:The delegator may request to cancel the delegation before the end of the staking period. This process must be initiated at least 72 hours before the end of the period to allow the validator to adjust their node operations.

Validator role

Validators are responsible for running validation transactions, executing smart contracts, and protecting network nodes. Their roles and responsibilities include:

• Node Operation:Validators must maintain high-performance nodes and minimize downtime and latency. Nodes are regularly rotated to enhance network security and decentralization.
• Staking:Validators must meet the minimum staking requirement (20 million SKL per node) through self-staking or delegation. They must optimize their staking amount and node operation to maximize rewards.
• Security:Validators are incentivized to maintain network security through rewards and penalties. The slashing mechanism punishes validators for malicious or negligent behavior, ensuring that they act in the best interest of the network.

Security Measures

The Skale network uses a combination of encryption technology and economic incentives to protect its operations and ensure network integrity:

• Proof of Stake (PoS):The PoS model requires validators to stake a large amount of SKL tokens to provide economic incentives for honest behavior. Validators who act maliciously or fail to fulfill their responsibilities can be punished through slashing mechanisms, resulting in a reduction of their staked tokens.
• BLS Threshold Signature:The network uses BLS threshold encryption to protect inter-chain message transmission and ensure the integrity of cross-chain transactions. This encryption method can create aggregate signatures for verifying transactions on multiple nodes.
• Distributed Key Generation (DKG):DKG enhances security by distributing key generation among multiple nodes to prevent any single node from controlling cryptographic keys. This approach ensures that even if certain nodes are compromised, the network remains secure.
• Node Rotation and Monitoring:Nodes in the Skale network are regularly rotated to enhance security and prevent centralization. Continuous monitoring of node performance ensures that validators meet network standards and receive corresponding rewards or penalties.

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• SKL Token Overview: Introducing SKL token, its creation and supply mechanism.
• Utility and functionality: SKL's role in security, staking, rewards, and governance.
• Token Economics: Analysis of Initial Supply, Issuance Rate, and Economic Model.
• Staking Mechanism: The technical details of the staking process within the Skale network.
• Entrustment process: The steps to entrust SKL tokens and receive rewards.