StarkWare (StarkNet - STRK)

Starkware is implementing zk-STARKs in various blockchains including Ethereum.

Basics

• Based in Israel (28-4-2022).
• The advantage of zk-STARKs over zk-SNARKs is that it doesn’t require a trusted setup, although the cryptographic proof sizes become much larger.
• As the invested Consensys Ventures explained: "Starkware, co-founded by Eli Ben Sasson, a leading professor in cryptography and founding scientist of ZCash, uses their novel zero knowledge cryptography of zk-STARKs to improve scalability and privacy on blockchains. Starkware is well positioned to become a leader in the growing application of zero knowledge proofs within blockchain systems for scalability and privacy, a trend on which we are very bullish."
• "According (7-1-2020) to StarkWare’s “measurements (not approximations, nor estimates),” Ethereum’s scalability has the potential to improve by 2,000 times over Ethereum Layer-1 after the Istanbul update. StarkWare said it would launch its mainnet “soon,”"

Audits & Exploits

• Bug bounty program can be found [insert here]. None according to Blockchain Security DB (29-6-2020), which does show 1 audit (2-2020) for StarkEx.

Governance

Admin Keys

• From a critical post condemning their decentralization path a naked cash-out opportunity (16-6-2022):

"Today, a single party (@StarkWareLtd) fulfills all the roles in [its] system - it (1) bridges tokens L1 → L2, (2) sequences txs, (3) batch executes those txs inside of a STARK proof, and (4) sends the results back. In a PoS system, the threshold of control is 33%. Just based on the team's ownership alone (30.1%) plus the un-allocated portion of the foundation's tokens means that the sequencing will effectively be controlled by a single party (@StarkWareLtd). This is not decentralized.

Let's talk about governance. What parameters are being governed? And by what mechanism (token-weighted voting, presumably?) are they changed? It's very unclear, although "major updates to the StarkNet operating system" require the majority of the token holders.

Lastly, the final use of the token is "fees to operators on StarkNet". But StarkNet has only one operator: @StarkwareLtd & their prover is closed-source. No discussion of open-sourcing that technology at all, which is where the majority of the economic value will accrue.

#Starknet users are paying a subsidy to "core developers" (like ZCash does). Since the core developers will largely consist of the original team members, their ownership will become *more concentrated* over time."

Token

Launch

• Token got announced after long speculations and hints (13-7-2022):

"Yet this reached fever pitch on July 12 when Zhu broke his silence on Twitter and shared screenshots of two emails. These emails contained reference to a StarkWare token and a purchase agreement, implying that Three Arrows Capital had invested in a potential token. It was this unexpected disclosure that prompted StarkWare into making today’s announcement."

Token Allocation

• From Messari (16-6-2022):

"@StarkWareLtd has minted 10B tokens off-chain, which is not a fixed supply. +It will be an inflationary asset. There is no planned airdrop for early adopters — heavy emphasis is placed on avoiding rewarding mercenary behavior. Starknet plans to allocate 49.9% of tokens to insiders."

But according to The Block's reading of it, there will be community allocations later on:

"StarkWare said that next year, there will be token allocations to the community based on “verifiable work.” StarkWare added that when such allocations are announced, they will refer only to snapshots prior to the announcement date and will filter for airdrop farmers. StarkWare claimed that it would be “futile to attempt to game the network for speculative purposes.”"

Utility

• Fees, consensus and governance (16-6-2022).

Tech (StarkNet)

• Whitepaper can be found [insert here].
• Code can be viewed [insert here].
• Built on: Ethereum

• Programming language used: StarkNet is based on the Turing-complete Cairo language (26-1-2021).

Transaction Details

• Capacity (TPS):
• Latency:

How it works

• From Coin98 (28-4-2022):

"It has 2 core products:

StarkEx is an off-chain scaling engine that is tailored to fit the needs of specific tasks such as trading (dYdX, DeversiFi), NFT (ImmutableX, Sorare)

StarkNet is the bigger version of StarkEx but permissionless"

• From Messari (16-6-2022):

"StarkNet is a permissionless ZK-Rollup built to scale Ethereum. It uses STARK validity proofs to verify transactions. Even though STARK proofs are more computationally intensive, they can be moved off-chain in comparison to SNARKs, which leads to higher scalability. Alpha launched on a public testnet last year and migrated to mainnet recently."

• From a critical post condemning their decentralization path a naked cash-out opportunity (16-6-2022):

"Today, a single party (@StarkWareLtd) fulfills all the roles in [its] system - it (1) bridges tokens L1 → L2, (2) sequences txs, (3) batch executes those txs inside of a STARK proof, and (4) sends the results back. In a PoS system, the threshold of control is 33%. Just based on the team's ownership alone (30.1%) plus the un-allocated portion of the foundation's tokens means that the sequencing will effectively be controlled by a single party (@StarkWareLtd). This is not decentralized."

Fees

• From Messari (16-6-2022):

"StarkNet’s fee structure upgrade, now requiring fees for settling on @ethereum"

Interoperability

• StarkWare’s plans for layer 2 interoperability, aiming at q1 2021:

1. "StarkEx 2.0 (Nov 2020) will offer L2-L1 interoperability (Fast Withdrawals), using on-chain Conditional Txs.
2. StarkEx 3.0 (Feb 2021) will offer L2-L2 interoperability across StarkEx systems, using off-chain Conditional Txs."

Other Details

Volition

• From EthHub #118 (15-6-2020):

"Volition is a hybrid on-chain/off-chain data solution that allows users to dynamically pick where they want their data stored. StarkEx will support Volition soon."

Oracle Method

• Has integrated dYdX and ChainLink (21-4-2021).

Their Projects

Adamantium Protocol

• From Week in Ethereum (30-5-2021):

"Adamantium protocol from StarkWare is a flavor of Validium where a user can keep their own offchain data."

Cairo

• From Yield Farmer (28-8-2020):

"Cairo is the first production-grade platform for generating STARK proofs for general computation. It is Turing Complete, and highly efficient."

dAMM

• From their blog (29-7-2021):

"We first presented dAMM in March 2021 as Caspian but, due to a trademark issue, Caspian was renamed (long live dAMM). dAMM is an L2 AMM that aggregates liquidity in a single L1 pool and enforces logic with an L1 contract."

• From EthHub (6-4-2021):

"Caspian is a new L2-powered AMM design from StarkWare. This AMM leaves assets on L1, resulting in defragmented liquidity, and better capital efficiency. StarkEx 3.0 (Coming in June 2021) will support Caspian. It will include two new primitives required for implementing Caspian: L1 Limit Orders, and Batch-Long Flash Loans."

DeFi Pooling

• DeFi Pooling from StarkWare, a yearn-style vault on layer 2 to save gas (25-1-2021). Built on StarkEx.

DeversiFi DEX

• Untitled DEX that is being implemented in partnership with (27-1-2020) DeversiFi.

dYdX - StarkEx

• This partnership seems to end now that dYdX is moving to its own chain (7-2022).
• From their announcement (18-8-2020):

"Our engineering teams are collaborating on a Layer 2 scaling solution for Perpetual Contracts, based on StarkWare’s StarkEx scalability engine and dYdX’s Perpetual smart contracts. Our Perpetual Contracts will be powered by StarkEx by the end of this year."

• From Bankless (18-11-2021):

"Through the significant usage StarkEx applications have facilitated, the network has demonstrated a rate of over 9,000 TPS for trades and 18,000 TPS for transfers. With Ethereum’s ~15 TPS for trades, it is a ~600x increase in scalability. On top of that, StarkEx has also reached a peak batch size of 13.5k transactions."

Immutable X

• Gods Unchained is building (8-5-2020) an NFT exchange with StarkWare.

OpenZKP

• From EthHub Weekly #83 (15-10-2019):

"OpenZKP is a fully open-source Rust implementation of zero-knowledge proofs (ZKPs). OpenZKP includes a partial implementation of the STARKs protocol variant that was pioneered by StarkWare in the StarkDEX testnet demo."

Reddit

• From EthHub #116 (1-6-2020):

"StarkWare Reddit Onboarding Demo

Using StarkEx, the StarkWare team trustlessly onboarded to Ethereum Mainnet 1.3M accounts with initial balances, effectively demonstrating how an entire subreddit the size of r/FortNiteBR (with its Brick tokens) could be brought onto Mainnet. The amortized price per transfer: 600 gas.

The team created no network congestion in the process. They did it over a ~12 hour period while using 2.5% of the network. We paid gas prices that were on average 30% below the average block gas price during this time."

StarkDEX

• Has designed StarkDEX together with 0x to address DEX scalability with the use of STARK's.
• StarkEx 3.0 went live. From EthHub (3-8-2021):

"StarkEx 3.0 brings with it 2 new major features - L1 vaults and SHARed Prover (SHARP) enabling DeFi pooling and dAMM."

VeeDo

• Stark-based VDF, PoC live on mainnet (23-6-2020).

Roadmap

• Can be found here (26-1-2021):

"We’re building StarkNet in four steps:

1. Foundations (completed*)
2. Planets: Single-App Rollups
3. Constellations: Multi-App Rollups
4. Universe: A Decentralized Rollup

We expect to have Step I deployed in a few short months, and be well on our way to Steps II & III by the end of 2021."

Usage

• From Coin98 (28-4-2022):

"120+ projects are on StarkNet and StarkEx. TVL of Projects using StarkEx is over $1.1B."

• StarkEx has settled over $200 billion worth of trades, facilitating about 50 million transactions (16-11-2021).

Projects that use or built on it 

• For a complete ecosystem overview of Starknet, go check out their dashboard here (7-3-2022).
• From this tweet (12-10-2020):

"StarkEx will enable ParaSwap to offer inexpensive swaps at scale."

Work with 0x

• Starkdex — a project between Starkware and 0x — launched a PoC in June 2019. In October, they released OpenZKP, an open source rust implementation of ZKPs. 

• Together they are experimenting on:

“"zero knowledge proofs” or ZKPs for short. A zero knowledge proof allows someone to do a computation on some data and prove that they did this computation correctly, without revealing the data. For example, an account can prove that it summed up all of its expenses correctly without showing what those expenses were.

It is a technology that has been known for about two decades, but as often happens with cryptographic inventions the initial versions where impractically hard to use. In the last couple of years, and thanks to the hard work by Ben-Sasson and many others, ZKP technology has become practical in the form of zkSNARKS. Ben-Sasson and others have developed a new ZKP technology called zkSTARKs. They continue researching and developing this technology as a world-class team called Starkware. Compared to earlier ZKPs, it has better security and it’s easier to produce proofs. It is also refreshingly simple, like great inventions tend to be."

• Argent; partnered up with Starkware (11-2021).
• dYdX, DiversiFi, Rari Capital and Immutable X (9-3-2021)
• BadgerDAO; planning to deploy (17-3-2021)

Competition

• Other Layer 2 technologies like Rollups, Arbitrum and Optimism.
• Sidechains like xDai and Polygon.

Pros and Cons

Cons

• From a critical post condemning their decentralization path a naked cash-out opportunity (16-6-2022):

"Today, a single party (@StarkWareLtd) fulfills all the roles in [its] system - it (1) bridges tokens L1 → L2, (2) sequences txs, (3) batch executes those txs inside of a STARK proof, and (4) sends the results back. In a PoS system, the threshold of control is 33%. Just based on the team's ownership alone (30.1%) plus the un-allocated portion of the foundation's tokens means that the sequencing will effectively be controlled by a single party (@StarkWareLtd). This is not decentralized.

Let's talk about governance. What parameters are being governed? And by what mechanism (token-weighted voting, presumably?) are they changed? It's very unclear, although "major updates to the StarkNet operating system" require the majority of the token holders.

Lastly, the final use of the token is "fees to operators on StarkNet". But StarkNet has only one operator: @StarkwareLtd & their prover is closed-source. No discussion of open-sourcing that technology at all, which is where the majority of the economic value will accrue.

#Starknet users are paying a subsidy to "core developers" (like ZCash does). Since the core developers will largely consist of the original team members, their ownership will become *more concentrated* over time."

Team, Funding, Partners

Team

• Eli Ben Sasson; founder
• Uri Kolodny, Co-Founder & CEO

Funding

• Got invested in by Consensys Ventures
• In 2018 closed a $30M equity round lead by Paradigm, in addition to Pantera, Scalar Capital, Multicoin, among others.
• Vitalik Buterin has "Significant corporate shareholdings" in Starkware

• The Ethereum Foundation gave $4M with 6K ETH Performance-based Bounties to Starkware. Development of standards report and production-quality software for optimized STARK-friendly hash functions and tooling.
• According to DeFi Weekly (9-3-2021): "Backed by Paradigm, Sequoia, Naval and more".
• From The Block (24-3-2021):

"Raised $75M led by crypto VC firm Paradigm. Paradigm previously led StarkWare's $30 million fundraise in 2018.. Previous investors, including Sequoia, Founders Fund, and Pantera participated in the round alongside new investors like Three Arrows and Alameda Research."

• DeversiFi; one of the participants of a $5M private token sale for 12% of the DFV supply (18-5-2021).
• dYdX; was part of the dYdX Series C raise of $64M (15-6-2021).
• Raised $50m in a Series C raise (16-11-2021):

"The round was led by Sequoia Capital, with participation from existing investors, including Paradigm, Three Arrows Capital, Alameda Research, and Founders Fund. This was an "opportunistic" fundraise, StarkWare co-founder and CEO Uri Kolodny told The Block in an interview, meaning that the company is already profitable but secured new funds to grow its team and ecosystem as fast as possible."

• From The Defiant (25-5-2022):

"StarkWare announced the completion of a $100M Series D funding round at an $8B valuation. The funding round was led by FTX and Compound backer Greenoaks Capital, and Moonpay and Alchemy investor Coatue. Other investors in the Series D include Tiger Global."

Partners

• Partnered with Alchemy (8-3-2022).
• Worked together with Aztec. From their blog (29-1-2021):

"Polaris license under which StarkWare plans to release source code for its STARK prover; Aztec will use the same Polaris license for its PLONK provers (see their post)."

• Is a member of the Data Availability Committee of DeversiFi (6-2020).

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