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.
• From L2beat regarding StarkNet (31-10-2022):

"Funds can be stolen if

1. a contract receives a malicious code upgrade. There is no delay on code upgrades (CRITICAL).

Funds can be lost if

1. the proof system is implemented incorrectly.

Funds can be frozen if

1. the operator censors withdrawal transaction.

Users can be censored if

1. the operator refuses to include their transactions.

MEV can be extracted if

1. the operator exploits their centralized position and frontruns user transactions."

Bugs/Exploits

• StarkEx patched a double-spend vulnerability thanks to a responsible disclosure by Vlad Bochok (9-2022).

Governance

Admin Keys

• Starkware devs are capable of locking and accessing peoples funds (31-8-2023).
• From L2beat regarding StarkNet (31-10-2022):

"The system has a centralized operator. The operator is the only entity that can propose blocks. A live and trustworthy operator is vital to the health of the system. The Operator is the hot wallet of the StarkNet service submitting state updates for which proofs have been already submitted and verified. There is no general mechanism to force the sequencer to include the transaction. There is no generic escape hatch mechanism as StarkNet cannot be frozen."

This is interesting, since all other Starkware based L2s on L2beat do have this mechanism, and Starkware's flagship StarkNet does not.

"The system uses the following set of permissioned addresses:

1. Governor 0x3DE5…F5C6 (EOA) Can upgrade implementation of the system, potentially gaining access to all funds stored in the bridge. Can also upgrade implementation of SHARP Verifier, potentially with code approving fraudulent state. Currently there is no delay before the upgrade, so the users will not have time to migrate.
2. StarknetCore Governor 0xD5fB…B263 (EOA) Can upgrade implementation of the StarknetCore contract, potentially allowing fraudulent state to be posted.
3. Operator 0x2C16…0CA7 (EOA) Allowed to post state updates. When the operator is down the state cannot be updated.
4. MakerDAO Governance 0x0a3f…dDC0 (Contract) In DAI bridge it can set max deposit per bridge and per user. In DAI escrow it can approve token transfers."

• 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

• From X (8-12-2023):

"We have plans to allocate over 1.8bn STRK tokens across multiple initiatives to drive the adoption and growth of the Starknet blockchain."

• Token went live (16-11-2022) on mainnet, but was not yet live for retail. Which created speculation that vesting for the team and investors has already started, without the token actually being out for the public. Airdrop snapshot got taken (1-12-2023).
• 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 CoinYuppie (1-11-2022):

"The initial issuance of StarkNet tokens is 10 billion, with 17% distributed to StarkWare investors, 32.9% to core contributors, and 50.1% to the Foundation. At the same time, the token has an additional issuance mechanism, and a portion of the new minted tokens and transaction fees will be granted to core infrastructure developers and smart contract developers.

The 51 per cent allocated to the Foundation for specific purposes are:

• 9% – Ecosystem developers, users and communities. Includes some users who interacted with StarkEx before June 1.
• 9% – Community Rebates – Rebates of StarkNet tokens to partially cover the cost of joining StarkNet from Ethereum.
• 12% – Funding researchers and workers for developing, testing, deploying, and maintaining the StarkNet protocol.
• 10% – Strategic reserve to fund ecosystem activities consistent with the Foundation’s mission.
• 2% – Donation to outstanding institutions and organizations in related fields, such as universities, NGOs, etc., at the discretion of StarkNet token holders and foundations.
• 8.1% unallocated – to further support the StarkNet community, in a manner determined by the community.

49.9% of investors and core contributors will have a 4-year lock-up period, and tokens will be released in a 1-year cliff and linear fashion."

• 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].
• "The entire Starknet core stack is now open-source." (6-9-2023).
• Built on: StarkNet is a general purpose ZK-Rollup built using STARK cryptographic proof system. It is currently launched with a single Sequencer (31-10-2022).
• Programming language used: StarkNet is based on the Turing-complete Cairo language (26-1-2021).

Transaction Details

• Capacity (TPS):
• Latency:

How it works

• From L2beat regarding StarkNet (31-10-2022):

"Each update to the system state must be accompanied by a ZK Proof that ensures that the new state was derived by correctly applying a series of valid user transactions to the previous state. Once the proof is processed on the Ethereum blockchain the L2 block is instantly finalized. All data required to reconstruct rollup state is published on chain. State diffs are publish on-chain as calldata on every state update. The state diffs contain information on every contact whose storage was updated, and additional information on contract deployments. From diffs full system state can be recovered."

• 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 CoinYuppie (1-11-2022):

"Currently, fees in StarkNet are paid in ETH. But next, the project expects fees to be paid only using the native StarkNet token."

• From Messari (16-6-2022):

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

Different Implementations

• Currently, there are two teams developing a StarkNet full node. There is s Pathfinder by Equilibrium, implemented in Rust, and Juno by Nethermind, who are working towards the first official version of their Golang implementation. They are working on Papyrus, a Rust implementation of a StarkNet full node (11-1-2023).

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."

BTC L2 through OP CAT

• From Messari (19-7-2024):

"Starknet, known for its zk-STARK technology on Ethereum, aims to become a Layer-2 solution on Bitcoin, addressing industry issues of scalability and high transaction fees.

On July 17, 2024, they introduced zero-knowledge proofs to Bitcoin's Signet test network. These proofs use OP_CAT, which was reintroduced through a Bitcoin Improvement Proposal (BIP) in October 2023. However, full integration is still pending. This upgrade aims to restore functionality that Satoshi Nakamoto removed from the early blockchain software in 2010 due to concerns about high memory usage.

As a Bitcoin Rollup Layer-2 solution, the verifier script uses StarkWare's open-source Stwo prover. This prover has updated its hash function from Blake2s to Sha256, a more widely adopted cryptographic algorithm. Additionally, the STARK verification process is split into ten standard Bitcoin transactions by CAT (Concatenate), with each transaction progressively validating a part of the proof.

Starknet believes, six months after adopting OP_CAT, that it will become "the first network to settle transactions simultaneously on both Bitcoin and Ethereum, scaling Bitcoin to thousands of transactions per second."

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."

Circle STARK

• From the announcement (22-2-2024):

"A collaboration [with Polygon] of several months between our teams culminated in the Circle STARK protocol over the Mersenne prime field M31. This protocol is the foundation for another leap forward in scaling blockchains with STARK proofs. In a nutshell, Circle STARK works with a 2-smooth P+1 (as opposed to P-1), unlocking the uber-efficient M31 field for STARKs."

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."

Starknet Appchains

• After Polygon, Arbitrum and Optimism, now Starknet will also let anyone spin up 'their' stack and have an 'ecosystem' between them. These will be called Starknet Appchains (19-7-2023).

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

• Starkware has agreed to re-enable access to its outdated wallets after temporarily locking users out of $550,000 worth of their own money (31-8-2023). This showed heavy centralization.
• Had investment from 3AC, Sequoia and Alameda Research/FTX. This could mean fall-out risk since this equity will likely be sold due to bankruptcy, Alameda for instance had ~$12.5M worth of equity from multiple rounds (8-12-2022). Also ~$31k worth of tokens.
• The StarkNet system has a centralized operator (31-10-2022).
• 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
• From CoinYuppie (1-11-2022):

"Starkware’s team is from Israel, and the main members are computer science and cryptography developers with backgrounds from Hebrew University and Technion, which is arguably the strongest team in the field of zero-knowledge proofs.

The team currently has 77 members, plus 7 subject advisors and 5 other advisors."

• Alessandro Chiesa: Co-Founder & Chief Scientist, Professor of Computer Science at the University of California, Berkeley. Co-inventor of zk-SNARKs, core developer of libsnark, a leading open-source library for concise zero-knowledge proofs.
• Michael Riabzev: Chief Architect, Co-Founder & Co. Ph.D. from Israel Institute of Technology, worked at Intel and IBM.
• Oren Katz, Vice President of Engineering. Graduated from Hebrew University with a degree in Computer Science, MBA from Tel Aviv University, senior engineer with 20 years of experience.
• Eric Wall disclosed himself as an angel investor and/or supporter (24-1-2023) and a boardmember.

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."

• 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."

• Bitlayer; part of the huge list of investors in the $5.5m raise (3-4-2024).
• 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).
• Espresso Systems; part of their $28 Series B (21-3-2024).
• Lava Network; part of the $15M seed raise (15-2-2024).
• Starkware participated in the $10M raise for Braavos (31-10-2022).
• Taproot Wizards; part of their $7.5M raise (7-11-2023).

Partners

• Launch partner for the NEAR DA Layer (8-11-2023).
• 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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