Overview
StarkNet is a permissionless ZK rollup built by StarkWare Industries, founded in 2018 by Eli Ben-Sasson (co-inventor of STARKs), Uri Kolodny, Michael Riabzev, and Alessandro Chiesa. StarkWare first proved its ZK technology through StarkEx, a permissioned scaling engine used by dYdX, Immutable X, and Sorare.
StarkNet launched its mainnet alpha in November 2021, with progressive improvements toward full decentralization. The STRK token was launched in February 2024 via airdrop. The project is distinguished by its use of STARK proofs (requiring no trusted setup) and the Cairo programming language, a purpose-built language for provable computation.
StarkWare has raised over $280M from investors including Paradigm, Sequoia, and Vitalik Buterin. The company is led by world-class cryptographers, giving it arguably the deepest ZK research team in the industry.
Technology
Rollup Architecture
StarkNet is a validity rollup using STARK proofs — a type of ZK proof that requires no trusted setup ceremony, relies only on hash functions for security (quantum-resistant), and scales sub-linearly with computation. Transactions are executed in the CairoVM (not the EVM), and validity proofs are posted to Ethereum L1. StarkNet uses a custom execution environment where smart contracts are written in Cairo.
Performance
Current throughput is approximately 10-30 TPS, with significant room for improvement through recursive proof aggregation and Volition (optional off-chain data availability). Transaction costs have decreased significantly with EIP-4844, averaging $0.01-0.10. Proof finality on L1 typically takes minutes to a few hours.
Innovation
STARKs are arguably the most advanced proving technology available: no trusted setup, transparent assumptions, quantum resistance, and excellent scalability properties. Cairo is designed specifically for provable computation, enabling formal verification of programs. Recursive proofs allow StarkNet to compress many transactions into a single proof cheaply. The Blockchain OS (Blockchain Operating System) vision extends this to fractal scaling.
Security
Bridge Security
Assets on StarkNet are secured by STARK validity proofs verified on Ethereum L1. The bridge verifies that every state transition is mathematically valid. However, bridge contracts are upgradeable by StarkWare with a timelock (currently being extended). A Security Committee provides additional oversight.
Proof System
STARK proofs provide the strongest security guarantees among L2 proving systems: no trusted setup eliminates a class of attacks that affect SNARK-based systems, and reliance on collision-resistant hash functions provides post-quantum security. The proving system is mature (battle-tested through StarkEx) but the prover remains centralized.
Track Record
StarkNet has not experienced a major protocol exploit. StarkEx has secured billions in transactions without loss. The code has been audited by multiple firms. A significant bug in the Cairo compiler was found and fixed in 2023. The team's deep cryptographic expertise provides confidence in the proof system's soundness.
Decentralization
Sequencer
The sequencer is currently centralized, operated by StarkWare. A decentralized sequencer roadmap has been published, with plans for a consensus protocol among sequencer nodes. However, implementation is still in progress. The centralized prover is also a bottleneck — only StarkWare currently generates proofs.
Governance
The Starknet Foundation oversees governance and ecosystem development. STRK token holders can vote on protocol proposals, but the governance framework is still maturing. StarkWare retains significant influence through its token allocation and operational control. The governance model has been criticized as insufficiently decentralized.
Upgrade Mechanisms
Protocol upgrades are controlled by StarkWare with a multi-day timelock. A Security Committee can authorize emergency actions. The upgrade path is being progressively decentralized, but StarkWare currently retains de facto control over protocol changes.
Ecosystem
dApp Landscape
StarkNet's ecosystem is smaller than competing L2s due to the Cairo language barrier. Key protocols include Jediswap and MySwap (DEXes), Ekubo (concentrated liquidity), zkLend (lending), and Argent (wallet with built-in DeFi). TVL ranges from $200M-500M, significantly lower than EVM-based L2s.
Developer Tools
Cairo is a powerful language for provable computation but requires developers to learn a new paradigm. This is StarkNet's biggest adoption barrier. Tooling has improved with Scarb (package manager), Starknet Foundry, and Madara (Starknet app-chain framework). Documentation is comprehensive but the learning curve remains steep.
Growth Metrics
Daily transactions on StarkNet range from 100K-400K. Unique addresses have grown steadily but remain lower than EVM-based L2s. Gaming projects (Realms, Cartridge) and on-chain AI applications represent growth vectors. The ecosystem benefits from StarkWare's enterprise relationships.
Tokenomics
Token Overview
STRK has a total supply of 10 billion tokens. Distribution: 32.9% to StarkWare investors, 17% to StarkWare employees, 12.93% grants, 10% to the Starknet Foundation, 9% airdrop, and remaining to community provisions and rebates. The large insider allocation (nearly 50%) is a frequent criticism.
Utility
STRK is used for gas payments on StarkNet, governance voting, and future staking in the decentralized sequencer. Gas utility provides a direct demand driver absent in governance-only tokens. However, users can also pay gas in ETH, somewhat diluting STRK's gas demand.
Incentive Programs
The STRK airdrop in February 2024 distributed 900M tokens but was controversial due to allocation criteria. The Starknet Foundation funds ecosystem grants, developer onboarding, and DeFi incentive programs. StarkWare's ecosystem fund supports Cairo-native projects.
Risk Factors
- Cairo Language Barrier: Non-EVM architecture requires developers to learn a new language, severely limiting the potential developer pool and dApp migration.
- Centralized Operations: Both the sequencer and prover are operated by StarkWare, with decentralization plans that remain largely aspirational.
- Large Insider Allocation: Nearly 50% of tokens allocated to StarkWare team and investors creates significant sell pressure and concentration of power.
- Ecosystem Size: Small TVL and limited dApp diversity make StarkNet less attractive to users and developers in a network-effects-driven market.
- Complexity Premium: STARK proofs, while theoretically superior, are computationally expensive to generate, creating cost and latency trade-offs.
Conclusion
StarkNet represents the cutting edge of ZK technology. STARK proofs offer the strongest cryptographic guarantees in the L2 space — no trusted setup, quantum resistance, and transparent security assumptions. Cairo, while demanding, enables genuinely novel applications like on-chain provable games and verifiable AI inference.
The trade-off is clear: technical superiority at the cost of adoption. The non-EVM architecture has created a smaller ecosystem, and the centralization of operations remains a concern. The large insider token allocation has eroded community trust, and STRK's price performance has been weak.
StarkNet's bet is that the best technology eventually wins. If the ZK paradigm shift plays out as proponents expect, StarkNet's STARK-native architecture could prove prescient. But in the near term, the ecosystem needs significantly more growth and decentralization progress to justify its valuation.