diff --git a/src/cloud-api-adaptor/podvm-mkosi/mkosi.presets/system/mkosi.conf.d/fedora.conf b/src/cloud-api-adaptor/podvm-mkosi/mkosi.presets/system/mkosi.conf.d/fedora.conf
index 08891dda9..33ae482f4 100644
--- a/src/cloud-api-adaptor/podvm-mkosi/mkosi.presets/system/mkosi.conf.d/fedora.conf
+++ b/src/cloud-api-adaptor/podvm-mkosi/mkosi.presets/system/mkosi.conf.d/fedora.conf
@@ -7,7 +7,7 @@ Release=40
 
 [Content]
 CleanPackageMetadata=true
-SkeletonTrees=../../resources/binaries-tree
+SkeletonTrees=../../mkosi.skeleton-rootfs,../../resources/binaries-tree,
 Packages=
     kernel
     kernel-core
@@ -23,6 +23,7 @@ Packages=
     iptables
     afterburn
     neofetch
+    e2fsprogs
 
 RemoveFiles=/etc/issue
 RemoveFiles=/etc/issue.net
diff --git a/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/etc/crypttab b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/etc/crypttab
new file mode 100644
index 000000000..c91cea6d4
--- /dev/null
+++ b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/etc/crypttab
@@ -0,0 +1 @@
+scratch /dev/disk/by-label/scratch - try-empty-password
diff --git a/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/etc/neofetch/coco.ascii b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/etc/neofetch/coco.ascii
similarity index 100%
rename from src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/etc/neofetch/coco.ascii
rename to src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/etc/neofetch/coco.ascii
diff --git a/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/etc/neofetch/config.conf b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/etc/neofetch/config.conf
similarity index 100%
rename from src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/etc/neofetch/config.conf
rename to src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/etc/neofetch/config.conf
diff --git a/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/etc/profile.d/10-alias.sh b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/etc/profile.d/10-alias.sh
similarity index 100%
rename from src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/etc/profile.d/10-alias.sh
rename to src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/etc/profile.d/10-alias.sh
diff --git a/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/etc/profile.d/20-ssh-banner.sh b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/etc/profile.d/20-ssh-banner.sh
similarity index 100%
rename from src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/etc/profile.d/20-ssh-banner.sh
rename to src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/etc/profile.d/20-ssh-banner.sh
diff --git a/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/usr/lib/systemd/system/afterburn-checkin.service.d/10-override.conf b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/usr/lib/systemd/system/afterburn-checkin.service.d/10-override.conf
similarity index 100%
rename from src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/usr/lib/systemd/system/afterburn-checkin.service.d/10-override.conf
rename to src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/usr/lib/systemd/system/afterburn-checkin.service.d/10-override.conf
diff --git a/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/usr/lib/systemd/system/gen-issue.service b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/usr/lib/systemd/system/gen-issue.service
similarity index 100%
rename from src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/usr/lib/systemd/system/gen-issue.service
rename to src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/usr/lib/systemd/system/gen-issue.service
diff --git a/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/usr/lib/systemd/system/kata-agent.service.d/10-override.conf b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/usr/lib/systemd/system/kata-agent.service.d/10-override.conf
new file mode 100644
index 000000000..61dac7f50
--- /dev/null
+++ b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/usr/lib/systemd/system/kata-agent.service.d/10-override.conf
@@ -0,0 +1,2 @@
+[Service]
+ExecStartPre=sh -c '[[ -f /run/peerpod/mount-scratch ]] && mount /dev/mapper/scratch /run/kata-containers'
diff --git a/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/usr/lib/systemd/system/process-user-data.service.d/10-override.conf b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/usr/lib/systemd/system/process-user-data.service.d/10-override.conf
similarity index 100%
rename from src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/usr/lib/systemd/system/process-user-data.service.d/10-override.conf
rename to src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton-rootfs/usr/lib/systemd/system/process-user-data.service.d/10-override.conf
diff --git a/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/usr/lib/repart.d/30-scratch.conf b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/usr/lib/repart.d/30-scratch.conf
new file mode 100644
index 000000000..cabcc9ef5
--- /dev/null
+++ b/src/cloud-api-adaptor/podvm-mkosi/mkosi.skeleton/usr/lib/repart.d/30-scratch.conf
@@ -0,0 +1,5 @@
+[Partition]
+Type=linux-generic
+Label=scratch
+Encrypt=key-file
+Format=ext4