What is SKL?
The SKALE Network is a expandable multichain blockchain network with the stated goal of serving as a secure Ethereum scalability solution. SKALE architecture is built to support an expanding set of dApp-specific chains. It uses the Ethereum mainnet to manage and orchestrate network operations in an effort to enhance overall network security and transparency.
SKL tokens can be utilized to access and leverage the SKALE Network. Developers can rent SKALE chains that each act as a private Ethereum-compatible smart contract platform with faster block times and the ability to process more transactions per second than the native Ethereum network. According to core developer SKALE Labs, SKALE chains can run full-state smart contracts, support decentralized storage, execute rollup contracts (a layer-2 scaling solution), and run machine learning algorithms using the Ethereum Virtual Machine. SKALE Network aims to allow Web3 apps to compete with traditional apps on a cost and performance basis.
SKL tokens were designed on the ERC-777 token standard, which supports delegation on the token level. With ERC-777, a delegator no longer needs to send the token to a delegation smart contract, but instead shares the secure delegation key with the staking provider while storing the tokens. This allows token transfers to occur in one transaction, rather than two on the ERC-20 standard. The token is backwards compatible with ERC-20, which means it may be broadly supported by the Ethereum ecosystem.
How does SKL compare to Bitcoin?
SKL differs from Bitcoin in a few important ways.
First, Bitcoin is a “coin” and SKL is a “token.” That is because Bitcoin powers the Bitcoin blockchain, and it is mined by a decentralized network of computers that solve complicated maths puzzles to verify transactions. By contrast, SKL is a token that runs on the Ethereum blockchain. On Ethereum, ETH is the only coin that can be mined and miners mine ETH to process SKL transactions. It is what is known as an ERC-20 token, the name applied to the generic token standard for the Ethereum blockchain.
Being an ERC-20 token has perks. Blockchains aren’t great at speaking to each other—you can’t get an Ethereum contract to work with a Bitcoin smart contract without some complicated engineering. However, it’s very easy for ERC-20 tokens to speak to one another, which means that SKL can be used in most other decentralized finance applications.
In addition, unlike Bitcoin, SKL is a utility token. While, like Bitcoin, SKL can be used as a means of payment or a store of value, its market price may be very volatile and so it may not be useful for payments or storing value.
Finally, SKL’s market capitalization is smaller than Bitcoin’s. As of May 2022, SKL’s market capitalization was estimated to be $285 million, as compared to Bitcoin’s market capitalization of $600 billion.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:
No Canadian securities regulatory authority has expressed an opinion about SKL, including an opinion that SKL is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of SKL prior to making it available on Wealthsimple Crypto and has concluded that SKL is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.
We evaluated SKL based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of SKL, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created SKL;
- The supply, demand, maturity, utility and liquidity of SKL;
- Material technical risks associated with SKL, including any code defects, security breaches and other threats concerning SKL and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
- Legal and regulatory risks associated with SKL, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of SKL.
Like all other crypto assets, there are some general risks to investing in SKL. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Each of these risks are described in more detail in our in-app Product Disclosure.
Further to these general risks, SKALE Network, the SKALE development team and other affiliated entities are not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of SKL have no recourse to SKALE Network or Wealthsimple if SKL declines in value for any reason.
Given that SKL tokens provide holders with access to utility on the SKALE Network, they have a use or purpose other than investment and speculation based on the efforts of SKALE Network, and their value can be attributed to the potential utility received. As a result the market price of SKL is affected by factors other than the efforts and actions of the SKALE Network.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading SKL. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.
Last updated: June 1, 2022
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