Hi all,

I believe most everyone in the community is aware of the details behind the cause for the delay of the auction and change of plan. If not, please read this ConsenSys blog post before referencing this FAQ. https://codefi.consensys.net/blog/skale-network-launch-update

The summary is that there was immense demand to buy in the auction. Over $57M in purchase intent was going through KYC and over $43M was approved to be ready to bid by the start of the auction. There were also over 12,000 people who signed up to commence the process and over 4,533 passed full KYC/AML and the competence quiz prior to the auction start date.

The reality is that doing auctions in this environment in a fair and performant way, with so much demand and many people running personalized front-running software is very difficult. Everyone has seen this recently with other projects running auctions on other platforms. There will be a shift in the coming months away from auctions to other mechanisms. The SKALE Activate distribution will be the first of many to modify in response to the current environment.

The plan now is to optimize for breadth of token distribution, fairness, and building a strong community. Therefore the token will be distributed in two waves through the ConsenSys Activate platform. The first wave will have an option to purchase an equal share to other purchasers at a fixed price. The second wave will use a lottery/random selection for large purchasers who passed a more thorough KYC and diligence process to purchase the remaining large chunks that are left following the first wave. This sets up the network and token economics in the best possible manner for success post launch. It satisfies smaller holders who are important for community development, and still gets larger chunks to high value large purchasers with a similar probability for success then they would have had in an auction.

I’m sure you all have many questions. We’ve addressed as many as possible in the FAQ below. If you have thoughts, concerns, or more questions, please feel free to share in the Telegram chat. I kindly ask that we all abide by common rules of etiquette and speak with respect to one another. We welcome descent and discussion, but please do so in a way that meets the standards of this community.

FAQ

These answers will be updated in real-time as we gather more information.

1. What is the new date of the token distribution process?

Please read ConsenSys’ latest announcement on the sale date and details here: https://codefi.consensys.net/blog/skale-token-launch-update

The commencement of Wave 1 will be September 3rd, 12:00pm EDT, and it will end September 5th, 12:00pm EDT. Participants will have 24 hours to log in and claim their tokens.

Wave 2 dates will be finalized after wave 1, but there is a placeholder for commencement on Sep 10th at 12:00pm EDT concluding on Sept 11th at 12:00pm EDT.

2. What is the new token launch process?

The token will be distributed in two waves through the ConsenSys Activate platform.

The first wave will give all qualified participants who successfully passed KYC prior to the auction an option to purchase an equal quantity of tokens in comparison to other purchasers at a fixed price. As an example, if there were 100 purchasers and 100 tokens, each participant could purchase 1 token.

Any remaining tokens not acquired during the first wave will be sold in a second wave that will prioritize larger purchasers who passed a more scrutinous KYC and diligence process to purchase the remaining tokens.

3. What if I did not pass KYC prior to the auction start time on Monday, August 17th?

Only individuals who completed KYC prior to the auction start time will be allowed to participate in the new process. This decision was made to ensure fairness and distribution to those that submitted KYC early and in time for the auction. Many people submitted in the last week and many in the last days with missing information and were not accepted prior to launch as their forms required manual review. We empathize to all of you who put forth effort and who did not get accepted via the ConsenSys review process. We will endeavor to have more opportunities for all of you to participate in the network in the future and to access SKALE tokens.

4. What is the price and how will the price be set given that it was a Dutch Auction before and it is now a fixed price?

There was overwhelming demand for the token at the auction fixed price of $.035 with a total quantity of tokens set at 125,000,000. From a price discovery perspective it was clear to the ConsenSys team that $.035 is a desirable benchmark.

However, optimizing on price or funds raised is not the goal of a Proof-of-Use Network Launch. The goal is to get as many tokens in the hands of as many token delegators as possible while maintaining price integrity (value=network security) and staying within bounds of a max cap in CHF which can be raised in the effort per the Anstalt’s Liechtenstein license.

Network Token Economics were also given careful consideration. A dramatic change in supply is not desirable to any participants at this stage.

Considering these factors, the token price is set for $.030 and additional 50 million tokens will be issued increasing the total public issuance via Activate to 175,000,000 SKL tokens (this represents 40% increase in public allocation) or 4.2% of total supply at genesis. These tokens will be moved from the ecosystem fund where they were already in an unlocked position to the public issuance allocation. Total circulating supply on Day 61 (the first day after Proof of Use period) is not changing.

5. What are the benefits of the new approach?

The benefits of the proposed approach are that it is a more fair and equitable process to get tokens into the hands of a much larger number of people. It eliminates the advantage of using bots or scripts for frontrunning, and creates a more level economic playing field.

The network will be stronger and more decentralized if more tokens are held by more people. Had the auction worked on the first attempt, we may have had a “successful” auction from the perspective of how the auction worked, but a failure in decentralization. There were high probabilities that only 50-100 people may have successfully completed the auction based on the supply, demand, and purchase limits in the prior model.

6. What are the downsides of the new approach?

The reality is that there is no perfect option that makes everyone happy. It is helpful to remind ourselves that the auction would have left over 90% of participants without tokens. This is true regardless of quantity of investment. There were many large purchasers ready to spend large quantities of gas to expedite their bid. The current option creates better decentralization and distribution, but does have downsides.

The primary downside is that the approach eliminates the competitive element of an auction. Most people in crypto appreciate the game theory and competition, where token distribution is based on merit and money rather than issuing via equal proportions. Also, we are all very aware that larger token holders are disproportionately impacted by a “fair split” of tokens to everyone and have empathy even though their odds of placing a winning bid were not in their favor.

ConsenSys understands this and is making an effort to balance this impact by giving larger purchasers prioritized access to the remaining tokens post wave 1 of the token distribution.

7. What are the new dates of the network launch following the auction?

The launch will be delayed for a few weeks minimum due to this hiccup. We will also be nearing the end of one network epoch and the start of another. Therefore the target date for the Phase 2 Network Launch and beginning of the first epoch will be October 1st. This means participants will be able to access their tokens the last week of September and will have 1 full week to delegate them. One epoch on the SKALE Network equals a one month period of network activity.  Validator bounties, delegator rewards, and token inflation are calculated and distributed at the end of each epoch.  

Please note that the new phase 2 network launch will not disrupt dApp access timelines as many SKALE Chain features scheduled to be worked on in late September will now be prioritized and shifted up to occupy newly opened space in the sprint calendar.

8. Will the “Proof of Use” period be altered based on this delay?

The Proof of Use period has been shortened from 90 to 60 days.

9. How do I make sure that I will be able to participate? Will Activate email me and will there be any communication on the website on my eligibility status?

If you successfully passed KYC and were approved for the auction, you will receive email communications from the Activate team with specific instructions. Your website user ID will be linked to the platform and you will only need to log in to participate assuming you were cleared to participate prior to the last auction by passing KYC/AML/diligence.

10. Why were the Activate servers unable to hold the load right before the launch of the auction on August 17?

On the morning of the auction, just hours before the scheduled launch, ConsenSys Activate observed extremely high amounts of site traffic, attempted pre-auction bids, and aggressive bot-like behavior. This strained the ConsenSys Activate systems and provided inconsistent user experiences. Thankfully, security mechanisms kicked into gear, stopping any “frontrunning,” warding off nefarious attacks, and successfully informing ConsenSys Activate of the emerging issues so the team could proactively avoid a launch that would not have been successful by our standards.

Please read more here: https://codefi.consensys.net/blog/skale-network-launch-update