Matthew Warholak

Given events like X2Y2’s decision to drop NFT royalties and the cascading effects of the FTX bankruptcy, many in Web3 are left wondering how a system built on decentralization is so vulnerable to the actions of a few. While there are exceptions, many decentralized alternatives lack the resources to compete with legacy Web2 applications.&nbsp;



<a href="https://skale.space/" target="_blank" rel="noreferrer noopener">SKALE</a> Labs CEO &amp; co-founder Jack O’Holleran believes that if Web3 wants to compete with Web2 solutions, it needs a sustainable architecture that can infinitely scale dApps. SKALE uses a modular approach to Web3, which not only keeps gas fees at zero, but also provides a healthy ecosystem – one not dependent on third-party intermediaries or recursive tokenomics.&nbsp;



We sat down with Jack to learn more about SKALE’s architecture and how it supports next-generation dapp development.&nbsp;



<h3 class="wp-block-heading">What is sustainable architecture?</h3>



Web3 architecture is generally referred to as the computational layer of a blockchain enabled ecosystem of online applications. Perhaps the greatest technical obstacle facing this layer is the blockchain trilemma. It’s a belief that a blockchain, such as Bitcoin or Ethereum, can only exhibit two of three of the following properties at a time: security, scalability, and decentralization. Sustainable Web3 architecture is an approach that solves the three properties in a way that enables it to compete with with the efficiency of web2. 



One way to achieve this sustainability is through using a modular multichain blockchain design instead of a monolithic one. O’Holleran explains how monolithic chains are unsustainable by equating them to a rideshare platform with a fixed number of drivers.&nbsp;



That fixed supply is only optimal between a narrow window when demand is high enough for driver profitability and low enough to offer fair prices to users. Monolithic blockchains struggle this way in that it is difficult to securely adjust blockspace so that users and validators are happy. When demand is too high, users either have to deal with high latency and/or high fees. And when demand is too low, the protocol struggles to offer sustainable revenue to validators.&nbsp;



Conversely, a modular design, like SKALE’s, adds scalability through decoupling components of their stack and/or their resources so that total supply of computing power can easily be adjusted to meet demand.&nbsp;



Additionally, with their model, SKALE chains pay for compute resource vs. paying per transaction, making a modular design more sustainable from a business perspective. For example, instead of renting a car and paying per mile, you rent a car’s engine for unlimited use over X amount of time. With a pay for capacity vs. per transaction cost model, the modular design’s economic viability is an order of magnitude greater.&nbsp;



<h3 class="wp-block-heading">Why interoperability is essential to sustainability</h3>



But if this car is limited to a single town or neighborhood, then this model has very little value. This type of limitation is why SKALE never set out to be an “ETH killer.” SKALE chains are EVM compatible, which means that users can transact across both SKALE and Ethereum – connecting NFT, liquidity, and gaming hubs across both ecosystems.&nbsp;



This type of Interoperability is a core component of its architecture and enables dApp users to get the same benefits and functions of Ethereum, such as staking, slashing, node rotation, node assignment, key generation, and more.



A big challenge to the multichain model is preventing the fragmentation of liquidity and common resources. If each new chain needs its own exchange and NFT marketplace, then much of the computing resources are duplicated throughout the network – ultimately making it inefficient to move liquidity from one app to another. SKALE addresses this challenge through dedicating specific chains called SKALE Hubs for the specific <a href="https://skale.space/blog/modular-skale-chains-and-the-new-hub" target="_blank" rel="noreferrer noopener">purpose of providing liquidity, swapping, and marketplace services</a>. Each hub can have its own specialization. For example, there is the <a href="https://www.calypsohub.network/" target="_blank" rel="noreferrer noopener">Calypso NFT Hub</a>, the Europa Liquidity Hub, and the forthcoming Nebula Gaming Hub.



<h3 class="wp-block-heading">The importance of an efficient zero fee model&nbsp;</h3>



Lastly, and perhaps most important for user adoption, is the fee model. With SKALE, there are no gas fees. Fees are paid up front by developers in native SKALE tokens. The setup also prevents MEV and uses S-Fuel to protect against spam. The end result is that users can trade on DEXes like <a href="https://blog.ruby.exchange/how-skale-solves-the-front-running-problem/" target="_blank" rel="noreferrer noopener">Ruby Exchange without front-running</a> bots and traders extracting value from their trades. But the efficiency isn’t limited to exchanges, it improves user experience throughout the ecosystem by eliminating the cost to transact.



This model puts protocol scalability in the hands of people creating real world use cases with blockchain. So when developers come up with a killer app, they can develop a business model that bakes in the necessary computing power needed to scale with demand. This sustainable architecture is enabling a new class of applications like <a href="https://exorde.network/" target="_blank" rel="noreferrer noopener">Exorde’s</a> decentralized mechanism for crawling and validating information on the web. It is being used to create a global prediction market and crowd intelligence platform – use cases that O’Holleran says are “impossible on any of any other chain.”&nbsp;



<h3 class="wp-block-heading">How does the SKALE zero-gas-fees model help dapps compete with centralized ones?&nbsp;</h3>



The real value of dApps is the ability to deliver solutions that don’t require trust. But as O’Holleran put it, “What are the things you would actually want to be trustless?” He sees payments, reputation scores and social networks as some of the most important applications that could compete with centralized alternatives. And SKALE’s zero-fee model enables developers to create trustless solutions that can meet the full demand of their competitors.&nbsp;



O’Holleran listed a new gated content media ecosystem as an example of one of these killer apps utilizing their zero fee model. The current web2 model exploits content creators by dictating ad revenue sharing rates and censoring content. As a result, creators have been on the hunt for better solutions. Web3 has the potential to offer an alternative by removing the need for a third party intermediary like Twitter, YouTube or Instagram. It can enable a permissionless ecosystem where creators maintain full ownership of their business model.&nbsp;



This idyllic vision for the future is what ignited the enthusiasm for Web3. But it requires a complex system of micropayments that can get expensive quickly on the Ethereum network. This friction slowed much of that initial momentum in Web3 but SKALE’s zero fees is providing the grease needed for it to pick back up.&nbsp;



For example, <a href="https://firesidechat.com/" target="_blank" rel="noreferrer noopener">Fireside Chat</a> is a new Web3 media platform implementing this decentralized model on the SKALE network. It was founded by Falon Fatemi and Mark Cuban and recently partnered with SKALE Labs to kickstart the transition to Web3. Creators like <a href="https://www.businesswire.com/news/home/20221209005340/en/Tyler-Henry-Launches-The-Tyler-Henry-Collective-on-Fireside-The-First-Interactive-Streaming-Service-to-Reach-Fans-Globally">Tyler Henry</a>, a world-famous clairvoyant medium, are using the platform to engage their audience in new creative ways. In Tyler’s case, the platform provides the tools needed to host readings in a private or in a live group setting.&nbsp;



While these use cases are an exciting step for Web3, not every application requires the same network conditions. SKALE’s multichain architecture provides the customizability needed to expand and utilize the computing power of a blockchain – without the block size debates and governance bottlenecks. This sustainable architecture is what makes blockchain a solution that can finally scale to provide fundamental value to users and builders.



This content is sponsored by <a href="https://skale.space" target="_blank" rel="noreferrer noopener">SKALE</a>.



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Finally, Web3 Gets Sustainable Architecture

Ben Strack

<div id="highlights-block_6165cd2143305" class="highlights">
 <ul>
 <li>Treum is the company behind EulerBeats an Ethereum-based NFT music and art project that features algorithmically-generated art and audio tracks</li>
 <li>ConsenSys believes art, sports and loyalty programs in particular could be “very meaningful opportunities” in the NFT space</li>
 </ul>
 
</div>



ConsenSys has acquired Treum’s team and NFT platform from Web3 incubator Mesh in a move that will allow the Ethereum software company to advance its NFT technology offering for creators, brands, rights owners, game publishers, sports teams and leagues.



The purchase of <a href="https://www.treum.io" target="_blank" rel="noreferrer noopener">Treum</a> — a blockchain and supply chain company — follows the creation of the <a href="https://palm.io" target="_blank" rel="noreferrer noopener">Palm NFT Studio</a>, an ecosystem that ConsenSys launched with HENI Group and Heyday Films in March.&nbsp;&nbsp;



Johnna Powell, executive director of ConsenSys’s strategic initiatives, said during a webinar on Tuesday that NFTs go beyond redefining collectibles to a broader vision of rebuilding the world in a digital format.



“Investors are bullish, brands, artists and celebrities continue creating, sales continue to increase and even where we see that there have been cycles of NFT popularity and less popularity, there are so many indicators in the market that point to continued growth,” she said. “We feel very strongly that we’re just at the beginning.”



Powell said in a statement that ConsenSys is focused on making Web 3 easy to use, access, and build on, noting that it was “an obvious decision” to accelerate the development of its NFT platform for end-users and builders.&nbsp;



She wrote to Blockworks in a message during the webinar that the company believes art, sports and brand or loyalty programs, in particular, could be “very meaningful opportunities” in the NFT space.



Treum will be able to leverage ConsenSys’s massive pipeline of customers and products, Treum co-founder Tyler Mulvihill wrote to Blockworks during the webinar’s Q&amp;A session. Among those products is MetaMask, which passed <a href="https://consensys.net/blog/press-release/metamask-surpasses-10-million-maus-making-it-the-worlds-leading-non-custodial-crypto-wallet/" target="_blank" rel="noreferrer noopener">10 million monthly active users</a> in August. The offering is a mobile app and browser extension that functions as a cryptocurrency wallet for interacting with the Ethereum blockchain.



“We bring that expertise, capability, team and platform ready to go under the ConsenSys umbrella,” Mulvihill said. “With the ConsenSys scale, we think our exponential journey is really just starting.”



Treum earlier this year introduced <a href="https://eulerbeats.com/" target="_blank" rel="noreferrer noopener">EulerBeats</a>, an Ethereum-based NFT music and art project that features algorithmically generated art and audio tracks. Its second collection of tracks sold for $3 million in March following the successful launch of “Genesis” earlier this year, and the platform has distributed millions in royalties and staking rewards to its user base. 



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="931" height="470" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-12-eulerbeat.jpg" alt="" class="wp-image-9268" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-12-eulerbeat.jpg?w=931 931w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-12-eulerbeat.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-12-eulerbeat.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-12-eulerbeat.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-12-eulerbeat.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-12-eulerbeat.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-12-eulerbeat.jpg?w=80 80w" sizes="auto, (max-width: 931px) 100vw, 931px" /><figcaption>Eulerbeats: Genesis LP 1; Source: <a href="https://eulerbeats.com/genesis/21575894274" target="_blank" rel="noreferrer noopener">Eulerbeats</a></figcaption></figure>



The legality of NFT-based royalty distribution is an open question. Crypto exchange FTX <a href="https://help.ftx.us/hc/en-us/articles/4410399400215-Solana-NFT-FAQ" target="_blank" rel="noreferrer noopener">recently said</a> it would not list collections that distribute the royalties from sales to NFT holders, as it looks to ensure compliance of US securities laws.



Mulvihill noted in a statement that Treum will continue to serve its major intellectual property customers, deepen its development of the metaverse, launch bleeding-edge NFT drops, and onboard the next 100 million users to the Web3 community.



The acquisition comes after ConsenSys is <a href="https://cms.blockworks.co/consensys-valued-at-3b-next-fundraise-may-make-it-so/" target="_blank" rel="noreferrer noopener">reportedly raising money</a> in a funding round that would value the company at $3 billion. It had closed a <a href="https://cms.blockworks.co/consensys-raises-65-million-to-bring-defi-to-traditional-finance/" target="_blank" rel="noreferrer noopener">$65 million “formation round”</a> in April to accelerate the convergence of DeFi and Web3 applications on Ethereum with enterprise blockchain infrastructure.



<h3 class="wp-block-heading">An evolving space</h3>



NFT sales volumes hit $10.7 billion in the third quarter, according to data from market tracker DappRadar, which was up from $1.3 billion in the prior quarter. Sales volumes on NFT marketplace OpenSea <a href="https://cms.blockworks.co/opensea-hits-3b-in-monthly-nft-volume/" target="_blank" rel="noreferrer noopener">reached more than $3 billion in August</a> alone.



Jack O’Holleran, co-founder and CEO of SKALE Labs, said during the webinar that he has witnessed NFTs move from collectibles to what he called “engagement continuums” for users and communities.



“I think there’s a definite trend of thinking of NFTs now as a means for access and experience,” he explained. “Eighty percent of the value actually comes from the engagement and community growth, while 20% is revenue-oriented.”



In terms of offering NFT buyers access and experience, the “Gold Edition” of Major League Baseball’s latest stadium series, for example, included a ceremonial first pitch, two tickets, a stadium tour and a meet-and-greet.



Mulvihill said he believes that NFTs will be used in the future to get into concerts or reserve a table at a new restaurant. That utility, he added, is going to drive transactions and ultimately the success of NFTs.&nbsp;



O’Holleran added that while it can be easy for some to dismiss <a href="https://boredapeyachtclub.com/#/" target="_blank" rel="noreferrer noopener">Bored Ape Yacht Club</a> or <a href="https://www.larvalabs.com/cryptopunks" target="_blank" rel="noreferrer noopener">CryptoPunks</a> NFTs as speculative art, they also represent communities of people. Collab.Land, a tokenized community-management system, can authenticate that you own a specific NFT and get you access to certain groups.&nbsp;&nbsp;&nbsp;



“I really do think community is everything,” Powell said. “It’s all about utility and community, and it’s just been set to fire. It’s like NFTs are rocket fuel for it.”