Starknet Explained

Summary: Starknet, a Layer 2 scaling solution by StarkWare, employs its Cairo programming language and STARKs cryptography to enhance Ethereum's efficiency and security. It's decentralized, with a Total Value Locked (TVL) of $31.52 million, indicating strong adoption. Unique features like quantum-resistant STARK proofs and a focus on scalability and decentralization set it apart. Amidst risks, such as single sequencer operation, it remains a pivotal force in Ethereum's evolution and the broader DeFi ecosystem.

What is Starknet?

StarkNet, a cutting-edge Layer 2 scaling solution for Ethereum, is underpinned by its unique programming language, Cairo. Developed by StarkWare, Cairo is designed to enhance the creation of smart contracts and decentralized applications (dApps) with improved efficiency and security. 

Now live on the mainnet, Starknet employs a sophisticated cryptographic method known as STARKs (Scalable Transparent ARguments of Knowledge) to offload transaction processing from the Ethereum blockchain. This approach not only maintains robust security but also substantially decreases transaction fees, broadening accessibility for users. The network's current Total Value Locked (TVL) stands at $31.52 million, a clear indicator of its growing adoption and the trust it has garnered within the crypto community. 

These impressive metrics underscore Starknet operational capabilities and potential. With a flourishing ecosystem comprising diligent developers and burgeoning applications, StarkNet is set to significantly influence the evolution of decentralized finance (DeFi).

‍

How does Starknet Work?

Starknet operates as a permissionless decentralized ZK-Rollup, a Layer 2 scaling solution, enhancing the Ethereum network by enabling more efficient transaction processing. By leveraging zero-knowledge proofs, specifically STARKs (Scalable Transparent ARguments of Knowledge), Starknet can batch thousands of transactions off-chain and then submit a single proof to Ethereum. This process not only alleviates network congestion but also ensures transactions are secure and private.

Here's a breakdown of how Starknet achieves this:

• Batch Processing: Starknet aggregates multiple transactions into a single batch, significantly reducing the data footprint on the Ethereum mainnet.
• Cairo Programming Language: Utilizes its bespoke programming language, Cairo, to write scalable smart contracts and facilitate the creation of various decentralized applications.
• Zero-Knowledge Proofs: Employs STARKs to validate transaction batches, ensuring security without revealing underlying transaction data.
• Decentralization: As a permissionless layer, it allows any participant to interact with the network without requiring authorization, maintaining the ethos of blockchain decentralization.
• Gas Efficiency: By offloading computational work from Ethereum, it reduces the required gas fees for individual transactions, making processes more cost-effective.
• Security: Inherits the robust security of the Ethereum network while enhancing privacy and scalability through its advanced cryptographic methods.

Through this multi-faceted approach, Starknet not only enhances Ethereum's scalability but also maintains the network's security and decentralization, propelling the wider adoption of blockchain technology.

‍

Starknet Risks

StarkNet offers many features and benefits, but it has risks. Starknet currently operates with a single sequencer, which is a potential point of failure; if the sequencer goes down or engages in censoring, there is no mechanism to ensure transactions are included. Additionally, Starknet's system allows code changes without notice, which poses a risk of arbitrary modifications to the system's security.

The platform's reliance on correctly implementing the zkSTARKs proof system for its Zero-Knowledge proofs adds another layer of risk. Although zkSTARKs are robust, they are relatively new and complex, and any improper implementation could lead to loss of funds. Another concern is the permission nature of certain operations within the Starknet ecosystem. For instance, only whitelisted proposers can publish state roots on L1, which means withdrawals could freeze in the event of a proposer failure.

‍

Starknet vs Other ZK Layer 2's

Starknet distinguishes itself within the landscape of zero-knowledge (ZK) layer 2 solutions with its unique approach and proprietary technology. The term "zero-knowledge" refers to the cryptographic proof mechanism that enables these networks to process transactions off the main Ethereum blockchain, ensuring scalability while maintaining security. 

Here's how StarkNet stands out when compared to other ZK Layer 2s:

• Cairo Language: StarkNet distinguishes itself with Cairo, its programming language designed specifically for STARK proofs, enabling more complex and efficient smart contracts. This specialization offers developers on StarkNet an advantage in flexibility and performance, unlike other ZK Layer 2 solutions (e.g. zkSync) that often utilize more general-purpose languages like Solidity.
• STARK Proofs: Utilizing STARK proofs sets StarkNet apart from other ZK Layer 2s that might deploy SNARKs. STARKs offer quantum resistance and eliminate the need for a trusted setup, positioning Starknet as a more secure and forward-thinking protocol.
• Scalability and Efficiency: Starknet excels in scalability and maintains low transaction costs through its unique approach to transaction batching and off-chain processing, efficiently addressing congestion issues commonly associated with Ethereum.
• Decentralization and Permissionlessness: Starknet architecture emphasizes decentralization and permissionless access more explicitly than some other ZK Layer 2s, reinforcing its commitment to these foundational blockchain values.

In summary, Starknet sets itself apart from other ZK-based Layer 2s with its bespoke Cairo language, the adoption of STARK proofs, and a strong focus on scalability, decentralization, and fostering a developer-friendly ecosystem, underlined by its growing adoption metrics.

‍

Starknet DeFi Ecosystem

The ecosystem has been showing a mix of performance across different protocols. As of the data snapshot, the Total Value Locked (TVL) stands at $31.52 million, with the stablecoins market capitalization at $3.16 million. The ecosystem has seen a trading volume of $12.93 million in the last 24 hours.

Key protocols in the Starknet DeFi ecosystem include JediSwap, mySwap, zkLend, 10KSwap, and Ekubo, each with varying degrees of TVL and recent performance metrics. JediSwap leads the pack with a TVL of $9.2 million, though it has experienced a 34.27% drop over the last month. Similarly, mySwap and 10KSwap have TVLs of $7.65 million and $4.33 million, respectively, both also witnessing declines over one month. zkLend, on the other hand, stands out with a 6.23% increase in TVL over the same timeframe, reaching $4.89 million.

Overall, Starknet’s mainnet in terms of engagement, TVL and applications has underperformed zkSync and Scroll’s launches. For perspective, zkSync currently boasts over $435 million in total value locked and Scroll has $40 million within its first two weeks.

‍

Will Starknet Airdrop a Token?

Starknet aims to evolve into a decentralized entity similar to Ethereum. This ambition hinges on the StarkNet Token, designated for staking, governance, and transaction fees, as outlined in their decentralization plan. A native token is crucial for rewarding community members and protecting StarkNet from external economic impacts. Presently, StarkNet and StarkEx transactions don't demand the StarkNet Token, with Ether (ETH) being the accepted currency. 

Currently, there's no confirmation of a Starknet token airdrop and individuals should be wary of scams and fake claims. Information on token distribution, circulation, and total supply is detailed in the official blog. Tokens allocated are locked for four years with conditional releases, restricted for trading. The initial supply of ten billion tokens will increase as the protocol issues new tokens, although specifics are not determined.

‍

Who Created Starknet?

Starknet was created by StarkWare, a company specializing in scaling solutions for blockchain technology. StarkWare was co-founded by Eli Ben-Sasson, Uri Kolodny, Michael Riabzev, and Alessandro Chiesa. The team behind StarkWare has extensive experience in computational integrity and privacy, bringing significant expertise to the development of Starknet. The network leverages the power of STARK technology, a zero-knowledge proof mechanism, to improve the scalability and privacy of blockchain transactions.

‍

Bottom Line

In conclusion, Starknet, crafted by the innovative team at StarkWare, emerges as a potent force in the Ethereum ecosystem. By harnessing the robust STARK technology and the Cairo programming language, it enhances scalability, security, and efficiency. Starknet's role in fostering a rich DeFi ecosystem and its clear roadmap toward decentralization, coupled with carefully considering potential risks, positions it as a significant player in the blockchain domain. Its potential for growth and evolution continues to captivate the crypto community, reflecting its promise to shape the future of decentralized finance.