SIP-4: SKL Burning & SKALE Expand Economics
Summary
SKL is the utility token of the SKALE Network, providing economic security for the Proof-of-Stake network on Ethereum and enabling governance participation. As SKALE continues to mature and network usage evolves, it is appropriate to more directly align token demand and supply with real economic activity.
This SIP proposes a framework to enhance SKALE’s economic value capture through expansion fees and the introduction of SKL burning mechanisms tied to application and user activity, while preserving SKALE’s core value propositions and positioning SKALE Expand for long-term success.
Background
The SKALE Network began as a single pool of validator nodes capable of supporting many SKALE blockchains, all coordinated through the SKALE Manager on Ethereum.
With the recent introduction of the SKALE Expand experiment through the first deployment on Base, the network has seen significant interest and a number of new opportunities. In response, the community has proposed several ideas that are consolidated in this proposal, with the goal of ensuring that SKALE continues to deliver value back to the core network as it grows.
SKALE Expand was an experimental initiative proposed by SKALE Labs CEO and Co-Founder Jack O’Holleran in late October. The goal of SKALE Expand is to bring SKALE’s technical innovations and unique value propositions to other EVM-compatible chains without sacrificing token value capture. This approach enables SKALE to expand its reach while maintaining strong economic alignment with the SKALE Network.
Through iterative discussion, the community has made the following principles clear for a successful SKALE Expand implementation:
- SKALE Expand should economically align with the goals of the SKALE Network and the SKALE DAO
- Parameters for individual SKALE Expand deployments should be managed independently, allowing each instance flexibility to experiment and grow within its local ecosystem
- Burning mechanisms should be introduced that scale with increasing demand for blockspace and SKALE Expand deployments
- SKALE Expand deployments are encouraged to explore the addition of Proof-of-Stake using SKL once established, at which point this proposal directly strengthens all deployments with active SKL staking
Proposal
This SIP proposes the following framework:
- Each instance of SKALE Expand, technically defined as a new deployment of SKALE Manager other than original SKALE Manager deployment on Ethereum, will be operated independently from the SKALE DAO
- Each SKALE Expand instance will share 50% of its individualized aggregate revenue with the SKALE Network; this contribution will either:
- be burned directly if denominated in SKL, or
- be used to purchase SKL, which is then burned
- Existing SKALE Ethereum economics and protocol design remain unchanged
Technical Specifics
- Aggregate revenue is defined as all sources of revenue related to the sale of blockspace or SKALE-chain-related compute and technology, including but not limited to:
- SKALE Chain subscriptions
- sChain gas fees
- The sale of compute credits
- Any deployment of SKALE Manager outside of the original Ethereum deployment is considered a SKALE Expand deployment and must adhere to SIP-4
- Burning is defined as the sending of SKL tokens to the 0x0000000000000000000000000000000000000000 address on Ethereum Mainnet
This proposal represents the aggregation of feedback shared publicly and allows the ecosystem to take a measured step toward aligning SKALE’s economic capture with how the ecosystem is evolving today. By tying SKL demand and burning directly to revenue growth, SKALE can strengthen its economic foundation while bringing a more robust set of products to the market.
Thank you to everyone who contributed feedback to this proposal!
TheGreatAxios
The next step is a SKALE DAO Vote on Snapshot