A review of the acclaimed Starknet (STRK) project — is this the future of L2?
One such solution is Starknet, one of the most anticipated projects of 2023-2024. We find out if the project has met the expectations of the community, what are the features of Starknet and what are its prospects.
What is Starknet?
At first glance, Starknet may seem like a typical L2 solution for scaling the Ethereum network, but it is not. Starknet is a technology based on ZK rollups with zero resolution (Zero Knowledge Proofs or ZK-Proofs). This technology enables data validation without revealing the contents of the data while still ensuring the privacy and security of transactions.
In addition, zk-rollups technology allows the network to scale to huge sizes, keeping it operational when millions or even billions of users use it.
Starknet was created by StarkWare Industries, an Israeli technology company founded in 2018. Incidentally, one of the project's founders, Eli Ben-Sasson, is also the founder of the popular confidential Zcash protocol.
In 2020, the StarkWare Industries team introduced its first solution, StarkEx, a network for scaling Ethereum based on the same technology used in the Starknet blockchain. However, unlike Starknet, StarkEx relied on permissions.
Later, in November 2021, the genesis blockchain of Starknet, a layer 2 (L2) network without permission for transaction validation, was released. Another year later, the native cryptocurrency STRK was released. Still, it did not become publicly available until early 2024 and was distributed in a large-scale airdrop (free cryptocurrency distribution) to active users and early adopters of Starknet. This project was one of the most funded in the Web3 industry and raised about $282 million in several rounds of investment.
Like other L2 solutions, Starknet's developers aim to solve the classic blockchain trilemma and present a secure, scalable, decentralized network.
How does Starknet work?
Starknet works differently from other L2 networks, such as Polygon and zkSync, which use entirely different zk-rollups, although each exploits zk-Proofs technology. For example, Polygon uses its zkEVM technology, combining a transaction confirmation mechanism based on zk-rollups with the Ethereum Virtual Machine (EVM).
Among other protocols, zk-SNARKs (Zero-knowledge Succinct Non-interactive Argument of Knowledge) was in demand, a non-interactive zero-disclosure proof that assumes trust between nodes when validating transactions in a blockchain network. The zk-SNARKs technology started to be used in the privacy-oriented Zcash protocol.
Starknet uses its own zk-STARK technology, which stands for Scalable, Transparent Argument of Knowledge, and consists of two main components: sequencers and proofs. The Starknet blockchain protocol was created in Cairo's proprietary programming language.
Starknet cryptocurrency
STRK is a native cryptocurrency released on Starknet's blockchain in February 2024, even though the mainnet (mainnet) was launched as early as November 2022. Before STRK's cryptocurrency, Starknet used a wrapped ETH token to pay for gas.
Since February 2024, users have been able to use the native STARK cryptocurrency to pay the network's fees. Still, as of March 2024, its functionality was limited because the developers have not yet implemented a steaking mechanism in the blockchain.
STRK holders have access to voting, through which they can participate in decision-making on the development of the Starknet ecosystem, which already includes more than 100 decentralized (DeFi) protocols such as:
- Nostra,
- zkLend,
- Ekubo,
- mySwap,
- JediSwap, and many others.
As of March 2024, 728 million STRKs had been issued — just 7.28% of the maximum issue, which is 10 billion. The remaining tokens will be unlocked over the next 8 years, with about 80% of them hitting the market by 2027.
Starknet's challenges
Despite its claimed great performance, Starknet's fees were quite high compared to those of many other L2 solutions, such as Polygon, Optimism, zkSync, and even Arbitrum, which had an average cost of regular transactions as high as $1.5.
However, according to Dune Analytics, since the release of the Ethereum Dencun update on March 13, 2023, the cost of commissions on the Starknet network has dropped approximately 200 times from $2 to $0.01.
Outlook for Starknet
Starknet holds great promise, as analysts at major funds such as VanEck predict L2's growing dominance in terms of transaction volumes in the EVM ecosystem. This has already begun to happen. Analysts at Into TheBlock noted that transaction volume on L2 networks has grown 91% since the beginning of 2024.
The Dencun update could amplify this growth, as the cost of transactions in Layer 2 blockchains has dropped tens and hundreds of times since its release, while the Ethereum network itself has remained virtually unchanged.
Even though at the time of writing, STRK cryptocurrency was launched less than a month ago, it ranked 67th in terms of capitalization in the overall CoinMarketCap ranking and 6th among L2 networks, ahead of Manta Network (MANTA), Loopring (LRC), Metis (METIS) and Skale (SKL). As of March 2024, STRK's capitalization exceeded $1.7 billion, although Starknet is still far from the performance of Polygon, Optimism, Mantle, and Arbitrum. However, this may change soon, as Starknet has already become one of the most cost-effective networks in terms of fees.
