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State of Skale


May 19, 2024 ⋅  15 min read

Key Insights

  • The network collected $228,000 in chain payments after launching them in January. Instead of charging end users via transaction fees, SKALE generates fees by charging developers a subscription fee in SKL for operating a SKALE chain.
  • Nebula’s average daily transactions, active addresses, and new addresses grew QoQ by 39%, 56%, and 178%, respectively. Growth was largely driven by play-to-earn motorcycle game MotoDex.
  • SKL’s circulating market cap increased by 74% QoQ to $612 million. Its market cap rank grew slightly from 147 to 144 QoQ.
  • Beyond gaming, AI has been a popular sector for projects building on SKALE, with new launches and partnerships in Q1 including PaLM AI, GPTVerse, Fusionwave AI, ChainGPT, and Dmail.
  • In Q1, the N.O.D.E. Foundation signed on 68 new applications to launch on SKALE, a 106% QoQ increase.


SKALE (SKL) is a Layer-1 (L1) app-chain framework with pooled security. A set of Ethereum smart contracts manage several core network functions, including staking, validator orchestration, BLS key generation for each SKALE chain, and more. SKALE supports a network of configurable EVM-compatible, dapp, or general-purpose chains (SKALE chains). Each SKALE chain is secured by a rotating subset of SKALE’s pooled validator set. The SKALE V2 upgrade in Q2’22 brought interoperability between SKALE chains.

SKALE also differentiates itself by offering zero gas fees to end users. To generate fees, the protocol instead collects subscription fees from developers to create a new SKALE chain. SKALE contributors SKALE Labs and the Network of Decentralized Economics (N.O.D.E.) Foundation are specifically targeting gaming and other retail use cases via their development and growth efforts. At the end of Q2’23, SKL token holders passed a proposal to initiate token-based governance over protocol parameters using offchain governance platform Snapshot. For a full primer on SKALE, refer to our Initiation of Coverage report.

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Research Contents

State of SKALE Q4 2023

Financial Analysis

The crypto market continued its upward trend in Q1’24, and SKL was no exception. Its circulating market cap increased by 74% QoQ to $612 million. Its growth slightly outpaced that of its peers, as its market cap rank increased from 147 to 144 QoQ.

The SKL token has three primary use cases: SKALE chain subscription fees, network security (via validator staking), and governance.

Subscription Fees

SKALE has a unique revenue model because validator fees are paid by developers (SKALE chain owners) rather than the end user. SKALE still has a gas token (sFUEL) to combat network attacks like DDoS, but it does not have any monetary value, and users can receive it from token faucets. To generate fees, the protocol instead charges developers a subscription fee in SKL for creating their own SKALE chain.

SKALE chain pricing officially went live in early January. Previously, grants via the Protocol Development Fund were utilized for the majority of chain payments to incentivize growth in a loss leadership model.

The first chain payments were due starting February 1, 2024. Throughout the quarter, chain payments totaled over 2.6 million SKL ($228,000). These payments are distributed to validators. Chain payments are currently priced via a static price curve that starts at $3,600 per chain per month in SKL and can go up to $83,333. This figure aims to increase the fees distributed to validators, which can offset inflationary pressure without creating too high of a financial burden for developers.

The current plan is to transition to a fully dynamic price curve for chain fees after 12-18 months of live chain payments. The dynamic price curve will aim to have a target price and automatically adjust itself based on the network’s supply change. The network load is defined as the percentage of total validator resources being used across all active SKALE chains. A higher network load leads to increased cost and vice versa.

The technical implementation for subscription fees will also be rolled out in a phased approach:

  • Stage 1 will introduce onchain payment functionality for SKALE chains and rewards-claiming functionality for validators. However, a committee composed of three core developers, three validators, and three ecosystem builders will be required to arbitrate cases where SKALE chains or validators fail to meet the payments or requirements.
  • Stages 2 and 3 will automate more of the process onchain and add additional features, although the committee will still have blacklist authority. Stage 2 is proposed to launch on July 1, 2024, and Stage 3 on July 1, 2025.

Network Security Costs and Incentives

SKALE validator operations, including staking and rotation, occur on Ethereum via the SKALE manager smart contract. The SKALE manager runs distributed key generation (DKG) to generate Boneh–Lynn–Shacham (BLS) keys for each node. In Q1, there were no DKG events.

Since launch, most validator rewards have come from inflation. SKL has a fixed total supply, with one-third allocated to validator rewards. So far, around 48% of this validator allocation has been distributed. At the end of Q4’23, SKL’s annualized inflation was at 5.7%. Note that this figure measures the annualized rate of tokens issued for validator rewards (67.4 million SKL in Q1’24) compared to the genesis supply of tokens allocated for non-staking rewards purposes (4.69 billion SKL). The inflation rate will continue to decline until all tokens are liquid.

SKALE subscription fees aim to replace inflation as the primary payment to validators. The proposal’s goal is to have 90% of validator rewards come from fees, instead of inflation, by Q4 2027. In Q1, just under 4% of validator rewards came from fees.

Beyond validator rewards, there is also inflationary pressure coming from token unlocks to other buckets of SKL’s initial distribution. Genesis supply liquid measures the percentage of tokens from the initial distribution that are liquid, excluding tokens for staking rewards. By the end of Q1’24, SKALE’s genesis supply liquid was at under 86.0%, with another 3% unlocking in Q2 to the team.

While the majority of validator rewards currently come from inflation, SKL’s real yield has still been positive since not all tokens are staked. As of the end of Q1’24, SKL’s real yield was 5.7%.

Token-Based Governance

On the last day of Q2’23, a Snapshot vote to institute a proposed governance system passed, with 1.3 billion SKL voting affirmatively. Staked SKL can participate in governance votes, whose scope will initially include network economic parameters such as subscription fees, inflation, slashing penalties, minimum stake requirements, and more. Voting will occur on offchain voting platform Snapshot. In order to execute proposals onchain, the plan is to use SafeSnap, a Snapshot plugin that integrates Safe (formerly Gnosis Safe) with Snapshot. With SafeSnap, passed proposals will need to be executed onchain by the owners of the Safe multisig. The Safe owners will also have veto power over a passed proposal. For more details on this system, refer to the Q2 report.

Network Analysis


Average daily transactions increased by 18% QoQ and 242% YoY to almost 1.1 million. With the number of SKALE chains remaining constant QoQ, the increased activity was driven by more usage on the existing chains. Web3 protocol Exorde and gaming hub Nebula accounted for the majority of transactions across SKALE chains. See the Ecosystem Section below for a detailed breakdown of usage by SKALE chain.

Security and Decentralization

After remaining steady at 53 for most of 2023, the number of SKALE validators decreased to 45 in Q4’23 and remained there in Q1’24. The total number of active nodes in the network remained at 115. Validators receive an even split of SKL rewards, assuming they meet the performance criteria. Splitting the rewards creates an incentive for entities to operate more than one validator. At the end of Q1, there were 27 entities running validators.

SKALE validator nodes are segmented into up to 128 virtualized subnodes via a containerized architecture. A single validator can have its various subnodes acting as validators for up to eight SKALE chains. The pool of virtualized subnodes rotates among SKALE chains, with assignments set by the SKALE manager smart contract on Ethereum. As noted above, no node rotations were conducted in Q1.

Total SKL staked also fell by 7% QoQ to 2.3 billion. However, total staked in USD increased by 57% QoQ to $277 million due to SKL’s price appreciation.

Upgrades and Roadmap

The SKALE network updated to Release 2.2 and then Release 2.3. The upgrades brought improved network performance, with block times increasing by 30%; enhanced Ethereum compatibility; oracle response verification capabilities; and more. There was also an update to SKALE’s Interchain Messaging Agent (IMA Bridge) that sped up transfers from SKALE chain to SKALE chain. The speed increased by 561% to 33.2 seconds, and transfers from SKALE chain to Ethereum increased by 10,976% to 23.2 seconds.

The most significant upcoming release is Levitation and SKALE Ganymede (SKALE G), which were proposed in a SKALE Improvement Proposal in Q2’23. The Levitation protocol aims to enable ZK-rollups to connect to the SKALE Architecture with rollup connectivity to the Ethereum Mainnet. In addition, SKALE G will be a general-purpose ZK-rollup launched as a SKALE chain. These solutions will increase the amount of security on SKALE chains derived from Ethereum, further scaling capabilities. They will also introduce a different revenue model with gas fees. For more details on Levitation and SKALE G, refer to the Q2 report.

Ecosystem Overview

The growth in transactions across all SKALE chains was driven by Web3 protocol Exorde and gaming hub Nebula, whose average daily transactions grew QoQ by 28% to 499,000 and 39% to 490,000, respectively. The SKALE network features both dapp-chains, like Exorde, and hubs. Hubs are chains that are shared by multiple applications, often from a similar sector.

Exorde is an information platform that incentivizes users to collect and submit data from social networks. Exorde uses said data to create sentiment ratings, identify trends, and to power other analytical tools.

Nebula’s growth continued to be driven by games that launched in the past year, notably P2E motorcycle game MotoDex and fantasy football platform 5tars. In Q1, role-playing game World of Dypians launched and has since been one of the top applications on Nebula by activity. Other Nebula launches in Q1 include Ballers City, Paradise Brawl, Heroes Battle Arena, Hatchy Rampage, Roco Finance, and Sportzchain.

NFT hub Calypso’s average daily transactions fell by 25% QoQ to 48,000. The decrease was largely driven by reduced activity on Untitled Platformer, which previously accounted for the majority of activity on Calypso following its Q2’23 launch. Untitled Platformer features P2E platform games. New launches on Calypso in Q1 include Dmail Network, Solo Network, and DripVerse Protocol.

CryptoBlades featured the fourth-highest transaction count among chains at 21,000, a 78% QoQ decrease. CryptoBlades is a multichain Play-to-Earn PVP game.

Nebula continued its strong growth from the second half of 2023, increasing its average daily active addresses by 56% QoQ to 187,000. Near the end of January, Nebula reached daily highs of over 277,000. This high activity was sustained for around a month before dropping back down to around 150,000 near the end of February. These movements were largely driven by a rise and fall in activity in MotoDex.

Similar to its transactions trend, Calypso’s average daily active addresses fell by 17% QoQ to 20,000. Other top SKALE chains by average daily active addresses include Exorde (2,300), CryptoBlades (1,800), StrayShot (1,500), and Europa Hub (200).

Nebula continued to account for the majority share of new addresses on the SKALE network. Its daily new addresses increased by 178% QoQ to 183,000. As with transactions, Nebula’s daily active addresses were driven by MotoDex. Nebula’s Q1 average daily new address figure was around 98% of its average daily active address figure, which could suggest that its average daily active address figure may be driven by inorganic activity from MotoDex. Beyond MotoDex, Nebula supports over 35 games on the chain.

Calypso’s average daily new addresses decreased by 52% QoQ to just under 1,500. Other top SKALE chains by average daily new addresses include StrayShot (731), Exorde (210), Europa Hub (128), and Titan Hub (84).

Titan Hub is a community hub for AI projects that launched in Q4’23. Its growth in Q1’24 was driven by the launch of PaLM AI, which offers a multi-platform chatbot powered by Google’s AI suite. PaLM AI also launched NFT Studio, a marketplace for NFTs created with its bots.


The Europa Hub aims to solve potential liquidity fragmentation problems that arise with app-chain ecosystems by providing a central DeFi liquidity hub. Europa development is led by the Ruby Exchange team, with plans to eventually transition to a community-owned Hub.

Ruby Exchange is an AMM-based DEX featuring a “4Pool” consisting of stablecoins USDP, DAI, USDT, and USDC. At the end of Q1, TVL in the 4Pool stood at $180,000, a 50% QoQ decrease.

SKALE does not currently support any native stablecoins; each of the four is bridged from Ethereum. The Europa bridge employs a multisig on top of the underlying inter-messaging agent (IMA) bridge. The IMA bridge is trustless, as it uses the same mechanisms for security as SKALE’s consensus protocol. As such, the multisig can introduce additional trust assumptions depending on the level of control the chain owner gives to the multisig. The Europa bridge uses a 3/5 multisig with the following signers:

  • Ruby Exchange, an AMM-based DEX.
  • Impossible Finance, a launchpad that facilitated the RUBY initial DEX offering (IDO) on Binance Smart Chain.
  • Boot Finance, a DeFi protocol that planned to build on SKALE prior to a hack. It has not had any activity on its Twitter or Medium account since May 19.
  • 01Node and Stakin, both staking operators on SKALE.

As noted above, the Ruby Exchange team plans to move chain control to a community-owned, onchain governance structure to minimize multisig-related attack vectors.

Beyond the 4Pool, Ruby Exchange also features pools that pair USDP with other tokens, including RUBY, SKL, ETH, and more. At the end of Q1, TVL in these pools stood at $499,000. However, DefiLlama classifies these pools in its Yield category so they were excluded in this report to avoid double counting.

In Q1, Transak launched its fiat onramp solution on SKALE, which will improve user onboarding for its DeFi, gaming, and other applications. To improve interoperability, LayerZero launched its protocol on the SKALE Europa testnet.

Development and Growth

SKALE Labs announced partnerships with several projects in Q1 that plan to launch later in 2024, including gaming platform Arena Games, gaming platform Life Games, role-playing game Land of Chasers, gaming metaverse GangstaVerse, gaming platform GameXPad, 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.

For the Game Developers Conference (GDC) in March, SKALE announced that it would be distributing up to $2 million in grants for projects and developers attending.

Near the end of March, SKALE Labs also announced a partnership with Antier Solutions to launch an accelerator program for SKALE projects. Antier Solutions will help drive the growth of new clients and enterprises building on SKALE.

Other growth efforts will be driven by the SKALE Ecosystem Accelerator Program (SEA Program) and the N.O.D.E. Foundation. The SEA Program, launched in Q3’23, aims to help projects grow by leveraging infrastructure and content creator partnerships. The N.O.D.E Foundation is still allocating from its $100 million ecosystem fund announced in February 2022 to attract new projects and partners.

Closing Summary

Q1 marked a significant shift in SKALE’s development with the launch of chain payments. Instead of charging end users via transaction fees, SKALE generates fees by charging developers a subscription fee in SKL for operating a SKALE chain. The launch transitioned SKALE out of a loss leadership model, where grants mainly covered chain payments. Throughout the quarter, chain payments totaled over 2.6 million SKL ($228,000).

Average daily transactions across all SKALE chains grew by 18% QoQ to 1.1 million. Gaming hub Nebula led growth among SKALE chains, increasing its average daily transactions, active addresses, and new addresses grew QoQ by 39%, 56%, and 178%, respectively. Its growth was largely driven by play-to-earn motorcycle game MotoDex. To further growth, the N.O.D.E. Foundation will continue partnering with applications to launch on SKALE. In Q1, it signed on 68 new applications, a 106% QoQ increase. Beyond gaming, AI has been a popular sector for projects building on SKALE, with new launches and partnerships in Q1 including PaLM AI, GPTVerse, Fusionwave AI, ChainGPT, and Dmail.

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This report was commissioned by SKALE Labs. All content was produced independently by the author(s) and does not necessarily reflect the opinions of Messari, Inc. or the organization that requested the report. The commissioning organization does not influence editorial decision or content. Author(s) may hold cryptocurrencies named in this report. This report is meant for informational purposes only. It is not meant to serve as investment advice. You should conduct your own research, and consult an independent financial, tax, or legal advisor before making any investment decisions. Past performance of any asset is not indicative of future results. Please see our Terms of Service for more information.

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