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SKALE Staking and Rewards Primer

by Mara SchmiedtJuly 23, 2020
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UPDATE: For up to date instructions on the SKALE launch on September 3rd, please see the SKALE Sale Guide.

The following post will offer a primer on the SKALE staking mechanism and provide an overview of the anticipated rewards you can expect when staking your Skale tokens with a validator. 

Register on Activate to purchase SKALE tokens in the upcoming auction, calculate your anticipated rewards and begin staking your tokens. 

What is SKALE? 

SKALE Network is an elastic blockchain network that gives developers the ability to easily provision highly configurable fully decentralized sidechains that are instantly compatible with Ethereum. SKALE sidechains can execute sub-second block times with over 2,000 transactions per second on every chain, and run full-state smart contracts, in addition to decentralized storage, and machine learning in EVM. 

In simpler terms, the SKALE network operates as a decentralized cloud compute and storage provider, bringing performance and scalability to the Ethereum blockchain. 

Today, over 40 dApps are currently building on SKALE, ranging from games to DeFi to streaming audio and more.

What is Staking?

Staking is the process of locking tokens in a cryptocurrency wallet to directly support the security and performance of a decentralized network. It is the mechanism by which consensus in a Proof of Stake network is determined. In return for staking your tokens, participants receive rewards.

Staking on the SKALE Network

The Skale Token (SKL) is the native hybrid utility token that represents both a right to work and payment token on the SKALE network. SKL token holders can stake their tokens to validate transactions and secure the SKALE network. dApps developers can access a share of the network’s resources by deploying and renting an Elastic Sidechain by paying rental fees denominated in SKL. 

To stake on the Skale Network, token holders can either stake their tokens with a validator of their choice or operate their own staking validator. In return for maintaining the security and resiliency of the network, stakers are rewarded monthly through a percentage of the SKL rewards pool. The rewards pool is composed of aggregated protocol reward issuance and dApp fees. The amount of rewards received by stakers is proportional to the total number and duration of tokens staked. Please see Rewards section for more details or jump straight to Activate to calculate your anticipated staking rewards.

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Step 1: Becoming a SKALE Token Holder

To start staking on the SKALE Network you first need to own SKL tokens. Early adopters can purchase SKALE tokens on Activate after registering and verifying their ID. You can pre-register for the SKALE token launch on Activate and create an account in just a few minutes. 

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SKALE tokens will be sold in a Dutch auction that will go-live on August 17th at 12:00pm EST. After registering, you can use Ether, USDC or DAI to participate in the auction. All public launch participants that have successfully submitted a bid during the auction, will receive their tokens within 3 weeks of conclusion of the auction.

All token holders who plan to receive tokens upon mainnet launch will be required to consent and complete Proof of Use, which requires 50% of a token holders portfolio to be staked for the minimum delegation period of 90 days, before being able to unlock token transferability outside of the network. Proof-of-use ensures that token holders actively support the network while limiting speculation. Of course, stakers will be able to compound staking rewards throughout the Proof of Use period. 

Step 2: Staking your SKALE Tokens

Once you receive your SKALE tokens you are ready to become an active participant in the network. Activate provides you with a seamless interface to claim, manage, and stake your tokens. 

To participate and earn staking rewards for contributing to the network’s security:

1. Compare validator options on Activate participation portal

2. Select a validator, input the amount you wish to stake, and the staking duration (3, 6, or 12 months)

3. Use your connected web3 wallet to submit your staking request

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Once approved, your tokens will begin staking upon the commencement of the first epoch. Once the delegation request is accepted by the validator(s) specified tokens are locked and cannot be undelegated until the specified delegation period concludes. If for some reason the validator rejects your request, you can stake with another validator before the next staking period begins. 

Step 3: Receive Staking Rewards

Staking rewards are distributed to token holders throughout the specified delegation period and distributed at the beginning of each calendar month.

The amount of staking rewards you’ll earn depends on the following variables:

  1. Amount of Tokens You Stake: The total number of tokens you are staking. 

  2. Duration of Delegation: The available duration of your delegation, which can be 3, 6 or 12 months. The annualized reward multipliers are 1x, 1.5x and 2x respectively.

  3. Network Issuance Rate: The rate of tokens minted by the protocol that is available for distribution to all nodes in the network. The network issuance rate begins at 9.3% of the total pre-minted supply (5.5% of total supply) in the first year, and decreases at a 0.55% rate every year over the first 6 years. 

  4. Total Staked in the Network: The total number of tokens staked in the network is inversely proportional to the reward rate given the fixed network issuance rate. At the target stake rate of 40% the reward rates are 9.9%, 19.8% and 29.7% for the 3, 6 and 12 month delegation periods respectively (see below). 

  5. Network Fee Generation: The total number of tokens in reward pool accrued from dApp s-chain rental fees

  6. Validator Fee Cut: The % reward cut that your chosen validator charges for delegation

  7. Reward Compounding: Your decision to compound and re-delegate rewards

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You can calculate your estimated staking rewards by using our SKALE calculator.

Step 4: Withdrawing your SKALE Tokens

At the end of each month, your earned staking rewards become available to withdraw. Once you withdraw your rewards, you can use them to delegate or transfer them for other purposes once you have successfully met the Proof of Use requirements.

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Register on Activate to purchase SKALE tokens in the upcoming auction, calculate your anticipated rewards and begin staking your tokens.

Got more questions? Check out our FAQ.

Written by Mara Schmiedt