Competition - There are multiple L2 blockchains on the Ethereum blockchain
Fees - Among L2s on the Ethereum blockchain, this is comparatively more expensive

Basic Information

StarkNet is a type of scalability solution for Ethereum that utilizes ZK rollup technology (STARK Validity proofs). ZK rollups have the ability to lower transaction fees as more people use them, making transactions cheaper. However, this scaling technology does not compromise the security and decentralization of Ethereum. Vitalik Buterin, co-founder of Ethereum, expressed the belief that ZK rollups will prevail in all use cases in the long term.

What sets StarkNet apart from other ZK rollups is that it is not just a "zkEVM." This means that smart contracts must be written in a special programming language called StarkNet - Cairo. Cairo is a language optimized for ZK rollups, allowing developers to perform computations more efficiently and cost-effectively than on the traditional EVM.

StarkNet is backed by the StarkWare team, which develops various solutions for blockchains. Its founders are Elin Ben-Sasson and Uri Kolodny.

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Functioning of the Chain

StarkNet runs on Zk-STARKs (Zero-Knowledge Scalable Transparent ARguments of Knowledge), which were developed by StarkWare.

Computational Integrity (CI)

This means that for a given program 𝐀, input x, output y, and time limit T, it generates a proof chain 𝛑 that confirms the following statement:

"The output of 𝐀(x) is y within T computational steps."

ZK-STARKs combine two components:

Long Proof, which can be easily verified (helps with scalability)
Cryptographic hash function (helps with transparency)

Cryptographic proofs from Probabilistically-Checkable Proofs (PCPs)

A Probabilistically Checkable Proof (PCP) is a protocol between a PCP prover and a PCP verifier that allows determining the correctness of a Computational Integrity (CI) statement through random local checks, extending to a long proof.

Cairo

StarkNet is not directly compatible with the Ethereum Virtual Machine (EVM). Instead, it uses its own programming language called Cairo, which is designed specifically for the needs of the StarkNet infrastructure and smart contract development.

Cairo is a language that offers the ability to write verifiable programs. This means that users can create programs that contain proofs of correctness for the performed computations. This capability allows one party to convince another that the computation was performed correctly, and in accordance with expected rules.

Verifiable programs in Cairo work based on mathematical proofs that demonstrate the correctness of operations and results. This increases trust and security within the StarkNet environment because parties can mutually verify that their interactions and performed operations are correct, without any fraud or errors.

Starkgate Bridge

Starkgate is a token bridge developed by StarkWare, serving as a connection between Ethereum and StarkNet. This bridge enables users to easily transfer their ETH and ERC-20 tokens between the L1 (Ethereum) and L2 (StarkNet) networks.

Message Mechanismus

During the execution of a transaction on StarkNet, a message is sent from a contract on StarkNet to a contract on L1 using the L2→L1 transition. The message parameters, including the recipient contract on L1 and relevant data, are then attached to the corresponding state update, which includes this system call.

Upon confirmation of the state update, which includes the transaction and state update on L1, the message is stored in the StarkNet Core Contract on L1, and an event is simultaneously triggered (containing the message parameters).

In the future, the recipient address on L1 can access the message and utilize it as part of an L1 transaction by providing the message parameters again.

Sequencer

In StarkNet, a sequencer is used to order transactions and create blocks. After the block is created by a sequencer and approved by the consensus protocol, the provers take over and generate a proof for L1.

‍Shared Prover (SHARP)

The aggregation mechanism in StarkNet is used to combine multiple Cairo programs from different users, execute them together and generate a single proof that is common to all programs. Instead of directly sending the proof to the Solidity Verifier on Ethereum, it undergoes a recursive proof process involving a STARK Verifier program written in Cairo. This process helps reduce costs and improve efficiency within the StarkNet network. By leveraging exponential amortization, the protocol decreases the cost of verifying proofs as the computational load increases, making transactions more cost-effective and accessible for users.

The Verifier

STARK Verifiers are deployed on the Ethereum blockchain. They enable the verification of proofs for any program written in the Cairo language (including StarkNet and all deployments of StarkEx). They validate on-chain computations performed by the Provers.

StarkNet, being an L2 solution for Ethereum, has the capability to build on top of itself and establish L3 and L4 layers.

StarkNet offers various systems and functionalities to cater to different applications and needs. One of them is the availability of the Validium data layer, which is suitable for applications with extreme price sensitivity. This allows precise and up-to-date information to be obtained for such applications.

Another system leverages specific features of StarkNet for performance-focused applications. This includes the use of optimized storage structures and data availability compression, enabling better performance and efficiency of applications.

For scalability and fast transaction processing, StarkEx systems are utilized. These systems, which serve platforms like dYdX, Sorare, Immutable, and DeversiFi, utilize either the Validium or Rollup data layer. In this way, StarkNet provides immediate scalability benefits that have been thoroughly tested.

To maintain transaction privacy, there is also the option to utilize the so-called Privacy Instance StarkNet. These instances allow for conducting transactions that are kept private and are not part of the public StarkNet. This ensures the privacy and protection of sensitive information within the network.

In the picture, you can see a presentation of the relationship between L3 and its supporting layers, L2 and L1, in the system architecture.

To ensure the secure operation of L3 on L2, state monitoring and the implementation of smart contract verifiers are carried out at L2 level. State monitoring enables the maintenance and updating of network and transaction state information on L2, and smart contract verifiers are responsible for verifying the validity and correctness of transactions.

ZK-Stark

Scalability relates to the speed and efficiency of the verification process, and ZK-STARKs offer advantages in both of these areas. The Prover can generate a proof with nearly linear runtime, while the Verifier, the party receiving the proof, has an exponentially smaller runtime compared with replaying the computation.

Regarding the compatibility between the Ethereum blockchain and StarkNet, this will be handled by a transpiler that converts the Solidity language into the Cairo language. This transpiler is being developed by the Warp team from Nethermind. The transpiler allows developers to write smart contracts in Solidity, then translate them into the Cairo language used on StarkNet. In this way, existing smart contracts from Ethereum can be easily transferred and operated on StarkNet.

Development History

2021 ‍

June - The Alpha testnet was launched
July - The testnet was upgraded to Alpha 1
September - The testnet was upgraded to Alpha 2
October - The testnet was upgraded to Alpha 3
November - The testnet was upgraded to Alpha 4
At the end of November 2021 - The Alpha version of StarkNet was launched on the mainnet

2022

January - The Alpha 0.7.0 update was released
March - The Alpha 0.8.0 update was released
April - The StarGate Alpha was launched
June - The 0.9.0 update was released
July - Proposals for decentralization, governance and the StarkNet token design were presented
September - The Alpha 0.10.0 update was released and also the proposal for the new Cairo 1.0 upgrade was introduced
November - The StarkNet Foundation was established and also the StarkNet token was deployed (not offered for sale as there was no token distribution mechanism)

2023

January - Cairo 1.0 was released for developers, the Papyrus Node, which provides the foundation for the StarkNet Sequencer, was deployed and also the Braavos hardware wallet was introduced
June - The Alpha 0.11.0 upgrade was launched on the testnet, supporting the Cairo 1.0 programming language
April - Plans for the year 2023 were released

None of the released applications or programs from StarkWare have been open-source, which doesn't contribute much to decentralization. Therefore, StarkWare has decided to release some of its programs, like Cairo and Sequencer, under the open-source Apache 2.0 license.

Team

StarkWare is behind the creation and development of the StarkNet blockchain.

Its founders are:

Elin Ben-Sasson - Co-Founder and President
Elin has been researching cryptographic and zero-knowledge proofs of computational integrity ever since he received his Phd in Theoretical Computer Science from the Hebrew University in 2001. Elin is a co-inventor of the STARK, FRI and Zerocash protocols and a Founding Scientist of the Zcash Company. Over the years, he has held research positions at the Institute for Advanced Study at Princeton, Harvard and MIT and, most recently, was a Professor of CS at Technion, which he left to co-found StarkWare.

‍

‍Uri Kolodny - Co- founder and CEO
Uri has a B.Sc. (Magna cum Laude) in Computer Science from the Hebrew University, and an MBA from MIT Sloan. Uri is a serial entrepreneur, and has co-founded several technology companies, among them OmniGuide (an MIT spinoff developing optical fibers for endoscopic surgery), and Mondria (developer of tools for the visualization of big data). Previously, he also served as an EIR with two Israeli VC firms, and as an analyst at McKinsey.

StarkWare commenced its operations in 2018 with a team of 10 members and financial backing of 6 million USD. Since then, the company has gained valuable experience and gradually expanded its team. Currently, it has over 100 members working in various areas of the project. Additionally, StarkWare collaborates with a range of advisors who offer their expertise and strategic guidance to the project. Through these expansions, StarkWare is capable of innovating effectively and providing the best solutions in its vision of blockchain and the crypto world.

Governance

StarkNet’s native token is STRK.

Its usage is:

Staking
Paying for transactions
Governance

At this moment (May 26, 2023), the STRK token cannot be purchased anywhere, though it has been distributed among early core contributors and investors. StarkNet is currently in its initial phase as it moves towards decentralization. To facilitate this, the StarkNet Foundation has established a governance committee consisting of Deven Matthews (Nethermind), Sylve Chevet (Briq), and Manor Bareli (StarkWare).

The foundation will present proposals for changes to the StarkNet blockchain, which will be deployed on the testnet and discussed on the community forum. Users will have a 6-day period to express their views and vote on the proposal's deployment to the mainnet. If the proposal is approved by the voters, it will be deployed on the mainnet within 24 hours. In this phase, a 50% majority vote, unaffected by any quorum, will be sufficient to pass the proposal.

Participants in the first-phase voting include:

STRK token holders:

Investors and core contributors
Developers and other parties involved in network maintenance and upgrades (tokens will be distributed to these parties at a later stage)

Delegates:

Delegating voting power allows STRK holders to transfer their administrative and governance rights to involved, informed, and professional community members (delegates). This brings several advantages:

STRK holders can prioritize representative decision-making over direct democracy
Dedicated and talented community members can play a key role in governance and management based on their reputation, without the need to own tokens

The delegation process requires responsibility and commitment. Delegates must go through a rigorous learning process for each decision and provide well-informed and independent decisions for the benefit of StarkNet and its long-term vision.

To ensure effective delegation, it is crucial to have a group of high-quality delegates. Becoming a delegate does not require any authorization, but for those who are interested, there is a forum where potential delegates can share their profiles. STRK holders have the freedom to choose any Ethereum L1 address to delegate their voting power to.

The StarkNet Builders' Council:

The expert committee was appointed by the StarkNet Foundation to implement governance mechanisms based on community involvement and professional reputation, rather than token ownership alone.

The main responsibilities of the Builders' Council include conducting a rigorous learning and discussion process for each decision, leading to well-informed actions for the benefit of StarkNet and its long-term vision. In the initial phase, they actively participate in discussions and voting, ensuring transparency in the decision-making processes. They are also available to the community through open discussions on the StarkNet community forum.

The Builders' Council consists of 17 members appointed by the foundation, and their mandate applies during the initial phase of StarkNet governance, which lasts for several months.

Voting in the first phase will be distributed as follows:

Investors: 33.3%
Early core contributors: 33.3%
Foundation representatives: 33.3% (Builder Council - 23,3 %, Delegates from the fund - 10 %)

During the first phase, StarkWare will not vote. The Starknet Foundation will not vote directly but will delegate its votes to the Builders' Council and a few delegates from the fund.

Until STRK becomes freely available and tradable, all fees on the StarkNet blockchain are paid in ETH.

Revenue & Tokenomics

During the fundraising rounds in 2021 and 2022, StarkWare successfully raised over 225 million USD from investors. These financial resources are being used to actively develop their product ecosystem, including StarkNet, which represents their proprietary blockchain platform and also generates revenue through transaction fees. Since the launch of the mainnet at the end of 2021, these transaction fees have reached a value of 51 million USD. This growth in revenue is driven by increased activity on StarkNet and users' interest in utilizing its services for various operations and transactions.

STRK distribution is:

32.9% - Core contributors
17% - StarkWare investors
12% - Research and development
10% - Strategic reserver
9% - Community provisions
9% - Community rebates
8.1% - Unallocated (future support for the ecosystem will be determined by the community)
2% - Donations

The STRK token is already deployed on the Ethereum blockchain but is not yet tradable as of 25 May 2023.

The Uniqueness of the Chain

Cairo

One of the major highlights of StarkNet is its programming language, Cairo, which is a high-level programming language designed to be easily usable and accessible for developers who are already familiar with common programming languages like Python and JavaScript. Its specific design focuses on efficient application development for the StarkNet platform, and therefore includes features that allow developers to harness the unique capabilities of StarkNet. These capabilities include high scalability, enabling the manipulation of large amounts of data and the performing of complex operations off the blockchain itself.

ZK-Starks

ZK-Starks enables blockchains to offload computations to off-chain STARK provers, then verify the integrity of these computations using an on-chain STARK verifier. In this way, L2s can leverage the benefits of scalability by performing a large number of transactions in a batch using STARK, and subsequently using a single STARK proof to confirm the validity of these transactions on-chain.

With this approach, the costs of on-chain operations can be shared among all the transactions in a batch, resulting in lower gas costs for each individual transaction on the Layer-2 network. This leads to higher efficiency and reduces the burden on the main chain.

By moving computations off chain and utilizing STARKs, the scalability of blockchains is also enhanced as it allows for processing a larger volume of transactions off the main chain. This is significant for systems with high user activity and a need to handle a large flow of transactions.

How the Network is Secured

The processing of transactions on the StarkNet blockchain is managed by a sequencer. Currently (as of May 27, 2023), the sequencer is not public and is under the control of StarkWare. A new open-source sequencer node called Papyrus is under development.

Papyrus will enable greater involvement for sequencer nodes and, consequently, greater decentralization of the network.

The correctness of information is verified by the Prover and Verifier nodes after the sequencer. Currently, these nodes are also managed by StarkWare, but work is being done on an open-source solution.

Since October 2022, StarkNet has been running a bug bounty program in collaboration with Immunefi. Rewards range from 30,000 to 1,000,000 USD.

Blockchain and DTL

Critical - 40,000 to 500,000 USD
High - 30,000 USD

Smart Contract

Critical - 50,000 to 1,000,000 USD
High - 30,000 USD

Nodes

Currently (as of May 27, 2023), it is not possible to launch a sequencer node on the StarkNet blockchain. You can only run a full node, such as Pathfinder and Juno, which allows you to query all data from StarkNet.

Road Map

StarkNet is currently actively working on the development of the Papyrus full node, which is a crucial step towards further enhancing and improving the StarkNet blockchain. The Papyrus full node will be capable of supporting the deployment and operation of multiple sequencers within the blockchain itself. This innovation will lead to increased network speed and throughput, enabling more efficient processing of transactions and operations across the entire StarkNet blockchain. With the increased capacity of sequencers, the network will be better equipped to handle high transaction loads and provide users with an enhanced experience in terms of speed and reliability. This development marks an important milestone in the ongoing efforts to optimize and expand the functionality of StarkNet as one of the leading blockchain solutions.

Ecosystem

StarkNet, within its DeFi ecosystem, has 7 active projects.

The three largest among them are DEX (Decentralized exchange) projects:

JediSwap
10KSwap
mySwap

The StarkNet Foundation has established the Early Adopter Grants (EAG) committee. The EAG committee has a budget of up to 10,000,000 STRK tokens for project grants, which will be distributed in several rounds. The committee has already initiated the first round of grants, for which the selection criteria include:

Innovation (1-5 points)
Significance for the StarkNet ecosystem (1-5 points)
Past activity within StarkNet (1-5 points)
Team size and effort (1-3 points)

Each point corresponds to 10,000 STRK.

The committee will evaluate the applications, determine eligibility, and allocate grant amounts based on the scoring system. STRK distribution process may vary depending on the project's deployment status, and the final decision on its allocation will be made by the StarkNet Foundation.

Community

The StarkNet Discord community is large and vibrant, with a well-organized server, providing a seamless and intuitive experience. You can find a wide range of sections covering all possible topics related to inquiries and blockchain operations. The responses to your queries are incredibly prompt and helpful, especially from the moderators who do an excellent job in their role.

Twitter is used to keep users updated on news and the overall happenings within the ecosystem, including collaborations and events. The team tweets daily updates from the StarkNet ecosystem as well as global developments regarding Web 3.0.

The YouTube channel managed by StarkWare is a good source of information on their ecosystem and the StarkNet platform. On the channel, you will find a wide range of videos, primarily from conferences, that provide detailed descriptions of how StarkWare's products function, and their integration into the world of cryptocurrencies. These videos offer valuable insights and presentations that will help you better understand their technologies and innovations.

The StarkNet Community Forum serves as a platform for submitting proposals to enhance the StarkNet blockchain, and engaging in discussions with the community. Through this forum, the community provides valuable feedback, contributing to the indirect improvement of the entire StarkNet ecosystem. Additionally, the forum facilitates better connectivity among community members, fostering a stronger sense of collaboration and cohesion. It serves as a central hub for sharing ideas, exchanging knowledge, and fostering a vibrant, community-driven environment.

Partners

Investors

‍Partners

There is a company Alameda Research among the investors in StarkNet, which is associated with the now-defunct CEX (Centralized Exchange), FTX. In my opinion, once Alameda Research's tokens are released, it is possible for them to sell them all in order to repay their outstanding debts.

Where to Buy

STRK is currently unavailable for purchase.

Supported Wallets

Braavos - Software wallet

Argent X - Software wallet

Ledger plans to implement StarkNet into its software during 2023.

Analyst Opinion

StarkNet is an intriguing Layer-2 (L2) technology built on the Ethereum blockchain, offering various benefits despite higher transaction fees. However, these fees are offset by a higher level of security, which convinces me that the price is acceptable.

Although the StarkNet project shows promise, it is important to note that it is still in its early stages of development. The question remains as to whether complete decentralization can be achieved, as StarkWare still holds a significant leadership position, which it claims that it will gradually relinquish. Nonetheless, thanks to the financial support StarkWare has obtained, the project is capable of growing and further evolving smoothly.

One aspect that concerns me about the project is the absence of STRK in circulation. From my understanding, it is deployed on the Ethereum blockchain and is being gradually distributed among investors and core contributors. However, its release for sale, whether through an airdrop or listing on a centralized exchange (CEX), is likely to be accompanied by significant sell-offs. Due to the possibility of purchasing from scam projects, I would wait for the official launch of StarkNet and refrain from making any purchases in the initial days following the launch.

Despite these concerns, StarkNet remains an intriguing project that offers prospects for improvement and innovation within L2 technologies on the Ethereum blockchain. I will continue to monitor its development and results to ascertain its long-term potential.