The Investor’s Guide to the Multichain Future
SKALE’s network of networks delivers an unparalleled Web3 experience and provides the springboard for multichain technology to reach its full potential
Graphic by Crystal Le
The blockchain industry has evolved significantly from its early years. A novel move to provide the world with peer-to-peer digital cash has birthed several multi-billion dollar networks and applications with the potential to improve the global financial system.
However, the current state of blockchain technology is far from perfect and is akin to building multiple highways to a single destination. Over 1,000 blockchain networks offer the same use case: powering decentralized applications. Users interact with too many protocols and still pay ridiculously high fees to access the most popular blockchains. The rest of the networks are lonely highways with little to no user traffic or developer activity.
The idea of a multichain future has emerged in recent years as a solution to the highly-fragmented state of blockchain networks. This piece explores a new definition of the multichain future where one network is home to multiple chains. This is in contrast to the previously recognized definition of multichain where various dApps are designed to interact with a handful of layer-1 blockchains. A well-known example is the decentralized exchange Pancake Swap, which is on both the BNB Smart Chain and Ethereum.
To illustrate this new definition, the following article will dive into a cutting-edge project named SKALE that adopts a unique approach to building high-performance networks fit for mainstream adoption.
The current state of blockchain networks
Blockchain networks provide the underlying infrastructure for users to access the myriad of decentralized applications built by developers. Yet, user experience on different blockchains varies dramatically, and the poor interoperability between these systems makes it difficult for developers and users to switch from one network to another seamlessly.
A classic example of such difficulty is when users try to interact with different blockchains by moving funds across different networks using bridge protocols. Aside from a confusing user experience on bridge protocols and limited interoperability, users take on immense security risks, as evidenced by the over $2 billion stolen from blockchain bridges in the past year.
These risks exist because every blockchain network and their respective bridges have its own sets of rules and protocols. Since there are so many blockchain networks with segmented developer communities, innovation is fragmented across those networks, which adds to a confusing user experience. In this reality, no one wins. When developers and users are spread across L1s and L2s, innovation is dispersed or hidden away in silos.
With all this in mind, it’s unsurprising that the Ethereum mainnet remains the most widely used blockchain despite its relatively high gas fees. The complexities of going cross-chain by adopting layer-2s or the newest layer-1 blockchains impedes on user adoption. The power of Ethereum’s network effects are hard to overstate for users and even harder to overcome for up-and-coming blockchains.
Is a new multichain model the key to scaling blockchains?
The perfect idea of a multichain future is one where developers and users can glide across different networks and applications seamlessly and intuitively. However, the prospect of such a multichain world grows increasingly bleak with each new blockchain that arrives on the scene. The diverse set of protocols and systems involved makes interoperability increasingly tricky. While blockchain technology depends on an inherently decentralized structure far from any singular governing authority, there’s still a long-ignored opportunity in the space for establishing standardization in the industry. An example of standardization in the traditional financial system is the requirement for publicly listed US companies to adhere to generally accepted accounting principles (GAAP). This enables investors to research two companies and know they’re comparing apples to apples.
Similarly, Web3 could benefit from the efficiencies enabled by standardization, and perhaps a new multichain model built from the ground up is the solution. SKALE is a modular blockchain network that offers a multichain experience to power mainstream-level applications. SKALE’s infrastructure consists of EVM-compatible, app-specific blockchains and hubs dedicated to different categories of Web3 applications. Hubs can be thought of as service stations that, according to SKALE co-founder and CEO Jack O’Holleran, “provide liquidity, swapping, and marketplace services to dApp chains” dedicated to gaming, NFTs, and other use cases. This Hub Architecture connects each individual, yet still interoperable blockchains called SKALE Chains.
SKALE launched its mainnet in 2020 and has rapidly scaled its solution with a focus on providing zero gas fees to users. The SKALE network taps into the Ethereum network’s security to achieve consensus through mainnet smart contracts, known as the SKALE Manager, that controls staking delegations, validator nodes, SKALE chain deployment, and other core functionalities. The network’s validator incentives are derived from the costs incurred by developers who pay a fee to launch and sustain application-specific SKALE chains.
While the multichain future is uncertain to industry observers, they acknowledge that “it could revolutionize the way we use blockchain technology.” SKALE’s version of multichain is the perfect platform for developers and users to realize the desired outcome.
SKALE is an accessible platform for the broadest community of blockchain developers because each chain is EVM-native. Each application-specific chain’s high throughput and scalability enable developers to offer zero gas fees to users while building a wide range of compute-intensive dApps like Exorde, which is currently unimaginable with other blockchain networks. This zero-gas environment is enabled by SKALE fuel or sFuel. This unique approach to network security prevents spam transactions or DDoS attacks through this gas token. Because it’s valueless, it is a purpose-built tool to help developers focus on scaling on secure chains without the distraction of speculation.
Lastly, a uniform set of tools support all SKALE chains’ interoperability, allowing users to freely move assets without the risks associated with contemporary multichain bridges. For example, SKALE’s Metaport is a UX widget that allows users to interact with underlying API layers and bridge their assets between SKALE chains. So if someone wants to transfer a game token from the Nebula Gaming chain to the Europa Liquidity chain to yield farm, and back again, Metaport allows them to do this safely and intuitively.
SKALE’s multichain model delivers huge benefits
The opportunities for a multichain network with mainstream-level capacity for dApp developers and users are limitless. SKALE’s current infrastructure brings the following outstanding benefits to users, developers, and businesses:
1. Ease of adoption
In 2022, SKALE recorded more than 30 million transactions spanning over 240,000 users. While these are strong numbers, the SKALE ecosystem is hoping to maximize the unique opportunities of the bear market to continue onboarding new users and empower developers to build high-performance dApps on the protocol.
The key to a protocol’s long-term success is continuous developer investment, and as such, SKALE is compatible with Solidity and the entire EVM suite of products. This uniform set of protocols and applications makes SKALE easier for developers to build on and ultimately benefits users with a better experience on more applications.
2. Sustainability
SKALE implements a highly sustainable proof-of-stake consensus model that allows each validator to serve as a sub-validator for up to eight SKALE chains. Furthermore, the adoption of application-specific chains allows the network to scale sustainably.
Adding new chains or increasing network usage does not impact hardware requirements for network validators. Existing validators are randomly assigned to new SKALE chains, while developers only add new chains as their user base increases. As dApps grow their user base and/or transaction count, their SKALE chain will be able to linearly scale without needing to worry about high costs or network congestion.
3. Predictable fees for developers and users
As mentioned earlier, SKALE is the only blockchain that guarantees zero gas fees for end users. The network achieves this by using a two-way subscription model. Initially, developers pay a one-time fee (via staking SKL) determined by SKALE governance to launch their chain.
Next, each entity that creates a SKALE chain pays a monthly subscription fee (paid from the staked SKL) to cover the resources needed to operate the chain. Because the subscription fee largely depends on dApp usage on their chain, developers and businesses can predict costs while offering users a gasless experience. The staking of SKL and payment to validators are controlled by the SKALE manager on Ethereum.
4. Interoperability across SKALE chains and Ethereum (and other networks)
SKALE’s modular blockchain design allows for increased interoperability within the different chains in the ecosystem. SKALE unlocked this interoperability with its recent V2 upgrade, which among other things, enables the smooth transfer of assets across chains using its Metaport widget.
SKALE is already interoperable with Ethereum, hosting 25 of its core smart contracts on the legacy network. Additionally, users can mint Ethereum-generated tokens (such as ERC-20 and ERC-721) and use them directly on the SKALE network. SKALE’s interoperability with Ethereum and its Hub Architecture solves the persistent problem of liquidity fragmentation, as SKALE dApps can easily tap into liquidity from across the EVM ecosystem. The Europa Hub solves for this liquidity fragmentation seen so often through intensive on-chain applications such as gaming and NFTs.
5. Better user experience
So far, the lack of an intuitive user interface has held back much of Web3’s innovations from gaining the adoption of Web2 apps. But the future of Web3 must be user-friendly, offering the same level of convenience as its predecessor. SKALE’s multichain technology offers a clear roadmap to a drive at such an outcome by allowing multiple Web3 use cases to run in the background while users benefit from a simple yet capable interface.
Because SKALE users do not need SKL to pay transaction fees, they can focus on dApp experiences without worrying about fee spikes or network congestion. Users can also easily migrate assets across SKALE chains using Metaport, which replaces the current complexities posed by contemporary cross-chain bridges that connect different blockchains. These complexities are a common complaint lodged against Web3, and enterprises would benefit the most from a viable solution. A consensus is growing louder that Web3 won’t fully hit the mainstream until it provides an almost Web2 look-and-feel for users. The argument is well made that the average user doesn’t have the time or interest in learning a new suite of tools to interact with Web3. If that’s the case, enterprises would be smart to implement tools like Metaport that allow for “invisible” Web3 experiences where users don’t even know they’re necessarily using Web3.
The future is multichain
SKALE is setting the tone for the multichain future by pioneering a novel approach to scaling Ethereum. SKALE provides interconnected application-specific chains that tap into Ethereum’s security while supporting all EVM-compatible dApps and assets.
A multichain world where users adopt different blockchains simultaneously is highly unsustainable since diverse networks implement different protocols and rules, making them less interoperable. Plus, the user experience is greatly diminished with high transaction fees and the complexities of migrating from different blockchains.
But SKALE chains set themselves apart by being highly interoperable with full capacity to host dApps from different Web3 verticals. Everyone wins — users enjoy a gasless experience while developers are able to access a dedicated infrastructure with infinite scalability. SKALE’s network of networks delivers an unparalleled Web3 experience and provides the springboard for multichain technology to reach its full potential.
This content is sponsored by SKALE.
Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.
Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.
Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.
The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.
