Is L2 Summer coming? A comprehensive guide to StarkNet technology and ecosystem.

Original Title: "L2 Summer is Coming? Master the StarkNet Technology and Ecosystem with This Article"

Original Source: "Biteye" Community

1. Layer2 Summer Prelude  

Arbitrum's DeFi ecosystem has begun to take shape, and its decision to distribute airdrops has solidified its position as a leader in the Layer2 ecosystem. Since the release of the airdrop rules and the start of the claiming process, Arbitrum One's TVL has accounted for 66.61% of the entire Layer2 ecosystem, with active users skyrocketing by 400,000 in just two weeks. 

 （Data source: https://l2beat.com/scaling/tvl）  

（Data source: https://dune.com/Henrystats/arbitrum-metrics）

The former four Layer2 giants: Optimism, Arbitrum, zkSync, and StarkNet, now only the latter two have not announced airdrops. Optimism and Arbitrum have practiced the strategy of ecological accumulation and airdrop to attract users, and the results have been reflected in the market share of the Layer2 ecosystem. With the maturity of the Layer2 ecosystem and the significant reduction in Rollup costs brought by EIP-4844, seizing users will become the core factor for winning in Layer2. In the current market situation, there is not much time left for zkSync and StarkNet to seize the market, and the competition between projects and the wealth effect brought by users' fomo have already made the Layer2 Summer imminent.

(Note: EIP-4844 is an improvement proposal for the Ethereum network, which is expected to reduce the cost of Rollup by 10-100 times. It will introduce a new transaction type to Ethereum, which can carry transient data called blobs. The availability of data previously stored in Calldata can be changed to be stored by blobs, which are much cheaper to store than Calldata. In terms of user experience, the most intuitive perception for users is that L2 fees will be greatly reduced, which will provide an important foundation for the explosion of the L2 ecosystem.)

As the highest valued project among the four Layer2 giants (parent company StarWare valued at 8 billion US dollars), the value of the StarkNet ecosystem project goes without saying, as evidenced by its recent trading activity.

StarkNet announced the deployment of its native token $STRK on the Ethereum mainnet on November 16, 2022, which is used for voting, staking, and paying fees. The token distribution is yet to be determined. The following sections will introduce StarkNet and its key projects within the ecosystem. If you are interested in the ecosystem projects, you can directly read the third section.

(Data source: https://l2beat.com/scaling/activity)

2. StarkWare Introduction  

2.1 Project Overview

StarkNet's parent company, StarkWare, was founded in 2018 and is headquartered in Israel. Its two main products are the scaling engine StarkEx, built on the Ethereum mainnet, and the general-purpose ZK-Rollup StarkNet. The StarkWare technical team has over a decade of research and engineering experience in the field of ZKP. In 2018, they were the first to propose using STARKs for proof of validity to solve Ethereum's scalability problem and achieve large-scale scalability.

StarkEx: A Layer 2 scalability engine designed for applications, StarkEx provides dedicated Rollup technology services for each application. It has been officially launched on the Ethereum mainnet since 2020 and is relatively mature. Currently, there are well-known projects based on StarkEX such as Sorare, immutableX, dYdX, ApeX, etc.

StarkNet: A general-purpose Rollup that can deploy any smart contract without the need for custom development for specific applications. StarkNet was launched on the Ethereum mainnet in November 2021 and currently has 50+ projects on the mainnet and 100+ projects on the testnet.

StarkWare has raised a total of $273 million in seven rounds of financing. In January 2018, it completed a $6 million seed round of financing, and in July of the same year, it received a $12 million grant from the Ethereum Foundation. In March 2021, it completed a $75 million Series B financing led by Paradigm, and in November of the same year, it completed a $50 million Series C financing, with investors including Paradigm, Alameda Research, and Three Arrows Capital. On May 25, 2022, StarkWare completed a $100 million Series D financing at a valuation of $8 billion, led by Greenoaks Capital, Coatue, Tiger Global, and other participants.

2.2 Technical Architecture and Others

Similar to the zk-rollup solution based on the validity proof, StarkNet and StarkEx also use the "off-chain computation-generate zk proof-on-chain verification" form to achieve scalability for Ethereum.

However, it achieves high transaction processing speed and low cost through its unique zk-STARK zero-knowledge proof algorithm, zk-friendly programming language Cairo, SHARP shared validator, and diverse data availability.

2.2.1 Validity Proof Based on STARK

ZK-STARK was proposed by Eli Ben Sasson, the founder of StarkWare, in a 2018 paper. It stands for Zero-Knowledge Scalable Transparent Argument of Knowledge and has excellent features such as scalability and transparency.

Transparency: ZK-STARK can work without a Common Reference String (CRS) in a trusted setup. Instead, it uses publicly verifiable randomness to establish interaction between the prover and verifier, reducing user trust assumptions and improving the security of STARK-based protocols.

Scalability: STARK has the logarithmic compression property of verification, which can achieve faster verification speed. When the time required to prove a proposition is T, the time required to verify the proof is only log(T). This feature allows STARK to achieve scalability through recursion, low cost, and reduced delay in large-scale combinatorial propositions.

  (Image source: https://medium.com/coinmonks/zk-starks-create-verifiable-trust-even-against-quantum-computers-dd9c6a2bb13d)  

STARK's advantages come with a series of trade-offs:

STARK's proof size is larger than SNARK's, so when the Layer2 transaction volume is low and it is difficult to share the proof cost, there will be significant confirmation delays. Currently, the final confirmation time for transactions on StarkNet is around 8 hours, due to the low transaction volume on StarkNet, which requires collecting enough transactions to share the cost of a validity proof. At the same time, zk-STARK needs to work with Cairo to generate validity proofs for transactions, which has a certain learning curve for developers.   

2.2.2 Cairo Programming Language 

Cairo is a Turing-complete programming language released by the StarkWare team in 2020, allowing developers who are not familiar with STARK to use Cairo to implement verifiable computation. In most existing proof systems, for each business logic or computation, a set of polynomial constraints representing the specific computation needs to be generated. The difficulty lies in how to unify the diverse execution results of smart contracts into verifiable polynomial equations.

Programs written in Cairo can directly convert computation results into provable polynomial equations through the STARK prover, enabling good compatibility between smart contracts and zero-knowledge proofs. Cairo is a programming language designed for STARK, and the combination of the two can maximize the potential of STARK. However, the disconnection between Cairo and the EVM ecosystem has always been a problem that needs to be solved. EVM compatibility is the high ground that various zk scaling solutions are vying for, and the StarkWare team is also working towards this goal.

By the end of October 2022, StarkNet announced the development of ZK-EVM using Cairo, while the Ethereum client Nethermind is working on developing a compiler from Solidity to Cairo to achieve StarkWare's compatibility with EVM. The team claims that Wrap currently supports rewriting Uniswap V3 as Cairo code. As StarkNet is truly put into production, the actual effect of compatibility between different solutions will be tested.

2.2.3 SHARP Shared Proof Generator 

SHARP, which stands for SHARed Prover, is a prover that generates zero-knowledge proofs for StarkEx and StarNet. SHARP can generate validity proofs for both StarkEx and StarNet simultaneously, allowing for the aggregation of different StarkEx applications and transactions occurring on StarkNet into a single STARK proof. This increases the capacity of STARK proofs, resulting in faster transaction processing speeds and reduced latency.

Recursive proof is a cutting-edge technology of the next generation, which is not only applicable to some hard-coded logic, but also to general computing. When combined with SHARP and STARK, it can enable the entire StarkWare ecosystem to achieve the recursive property of transactions, bringing ultimate scalability.

2.2.4 Data Diversity and Availability

The general logic of proof of validity is "off-chain computation-generating zk proof-on-chain verification". This means that users send transactions on Layer2, which are collected, sorted, and executed by the Sequencer. After the computation is completed, the transaction is submitted to the Prover, which generates a proof of validity. The proof is then submitted to the Verifier contract on the mainnet, which verifies its validity. If the verification is successful, the state is confirmed on the mainnet.

Data availability: In Rollup mode, after the proof generated by the Prover is verified, the new state becomes valid and the specific information of the state (such as account balance) will be written into the mainnet. Users can initiate new transfers based on the state information confirmed by the mainnet without trust, because the mainnet has the latest user balance, that is, data availability on the chain.

In fact, most of the gas consumed by the mainnet is used for data availability storage rather than verification proof. That is, the mainnet incurs a lot of costs when it has data availability. Therefore, StarkNet proposes a solution called Validium, which transfers data availability to off-chain storage, and only saves the hash value of the verified state on-chain.

In this scheme, data availability is stored by the Data Availability Committee (DAC), which is composed of independent members of a statutory number, responsible for supervising the correct updating of the status and retaining copies of processed data. When a user wants to extract Layer2 funds in a new state, DAC signature is required to provide specific ledger information. Validium can significantly reduce Rollup costs, but at the same time sacrifices decentralization and is suitable for data availability of non-critical transactions.

Based on the two basic modes of Rollup and Validium, StarkWare also provides the Volition mode, which allows users to choose the data availability storage method between Validium and Rollup modes at the transaction level. Users can choose to save each individual transaction using either Validium or Rollup mode. In summary, the three data availability (DA) modes provided by StarkWare allow dApps and users to choose based on the importance of the data, and the team claims that all three modes are currently available in production. However, regardless of which DA mode is used, the validity of all transactions will be guaranteed by STARK validity proof.

Rollup: The ledger is directly published on the blockchain.

Validium: Data Availability Consortium (DAC) ensures the security of the ledger, with only the hash value saved on the chain.

Volition: The application allows users to choose the DA mode, Rollup or Validium, for each transaction when initiating it.

2.3 Workflow 

2.3.1 StarkNet Workflow

1. Users initiate transactions and send them to Squencer for validation, sorting, and execution, and to package batches. Currently, there is only one Sequencer in the StarkNet system, which is controlled by the official StarkWare team, but the team plans to decentralize Squencer in the future. Squencer plays the role of EVM by executing transactions through Cairo OS.

2. The Squencer submits the transaction trace to the Prover, which generates a validity proof for computational integrity. Recording the execution trace is a zk-friendly feature of the Cairo language and is essential for generating zkp. The Prover here also generates validity proofs for StarkEx and can aggregate transactions from different StarkEx applications and StarkNet for sharing.

3. Squencer and Prover send validity proofs and global state changes to full nodes for recording. Full nodes are built on a P2P network and are responsible for recording the transaction history of the entire Layer2 network and transactions related to Layer2 on the Ethereum mainnet.

4. Prover submits the validity proof to the Verifier on the mainnet. The Verifier is a smart contract deployed on the Ethereum mainnet, responsible for receiving and verifying the validity proof provided by the Prover.

5. The Verifier sends the verified results to the StarkNet Core contract on the Ethereum mainnet for recording and storage. The StarkNet Core contract is deployed on the Ethereum mainnet and is used to receive Layer2 global state change information, including state hashes and data availability. The verified result is a string of state hashes, which is written into a new Layer1 transaction by the Verifier and passed on to the Core contract for storage.

6. After receiving the verification result (state hash), the StarkNet Core contract receives the data availability in the form of "Call data" from Layer2 and saves it. This data is synchronized to the full node of Layer2 for decoding, to ensure that the full node can record and reconstruct the historical transactions of Layer2. In the Validium solution, the StarkNet Core contract does not save data availability, only the state hash.   

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2.3.2 StarkEx Workflow

1. Users initiate interactions within the application, which are executed by the application and generate transactions. These transactions are directly sent to the StarkEx server by the application. The StarkEx server is a Cairo program customized by StarkEx for a specific application.

 2. StarkEx servers batch transactions and send them to the SHARP Prover, generating validity proofs.

3. Prover sends the generated proof of validity to the Verifier on the chain for verification.

 4. After verification, the Verifier sends the state hash to the StarkEx contract; the StarkEx server sends the updated entire state to the StarkEx contract on the mainnet. Throughout the process, user and application interactions occur off-chain, while the process of the application sending transactions to the StarkEx server occurs on-chain.   

  (Image source: https://docs.starkware.co/starkex/overview.html)  

(Note: The content is already in English, so no translation is needed.)

StarkNet is a universal Layer2 launched by StarkWare, which adopts a validity proof scheme to obtain the security of the main network. In the field, it belongs to zk-rollup. "zk-rollup vs op-rollup: who will dominate the future" is a topic that has been discussed for a long time. The mainstream view is that op-rollup will occupy the dominant position in the short term because of its low technical implementation difficulty and good EVM compatibility. In the long term, with the further outbreak of the Ethereum ecosystem, the interactive solution of op-rollup will be limited, and zk-rollup will dominate the market with its non-interactive and concise validity proof.

In the subdivision track of zk-rollup, StarkNet did not lead the way in the hot direction of zkEVM, but opened up a new path through STARK+Cairo, committed to maximizing the potential of validity proof technology and fostering a native ecosystem for StarkNet.

Currently, the entire Web3 has not yet achieved mass adoption, and the ecosystem of StarkNet is only in its early stages. The low transaction volume makes it difficult for StarkNet to accumulate enough transactions to spread the cost of proof of validity, resulting in longer transaction confirmation times and an inability to achieve maximum scalability.

However, with the gradual increase in the penetration rate of Web3, StarkNet will leverage its unique technological advantages to accommodate a large number of users and transactions, bringing diversity to the Ethereum ecosystem while allowing more users to enjoy a good Web3 experience.   

3. Inventory of StarkNet ecosystem key projects  

StarkNet official display: There are over 100 projects deployed and launched on StarkNet, among which 53 have been launched on the mainnet, covering various project types such as wallets, DID, cross-chain bridges, DeFi, NFT, and games. The following will introduce key projects in the key types. More projects can be learned through the StarkNet ecosystem list.

3.1 Wallet

3.1.1 Argent X

Argent X is a StarkNet wallet launched by Argent, and it is the first wallet to support StarkNet. It utilizes the native account abstraction feature of StarkNet to achieve multi-signature and non-mnemonic features, while leveraging StarkNet's excellent performance to achieve lower transaction fees and faster confirmation times for transactions.

Argent X users can use Argent in two ways: through iOS and Google plug-ins. Its built-in DeFi functions, such as exchange, staking, and lending, allow users to complete one-stop DeFi operations in the wallet.

Argent also provides biometric verification and guardian mechanisms to give users a web2 experience. The contract security of Argent X has been certified by three auditing companies, Trail of Bits, Solidified, and G0 Group.

Argent raised $40 million in Series B funding in April 2022, led by Fabric Ventures and Metaplanet.  

3.1.2 Bravvos

Bravvos is also a self-hosted account abstract wallet running on StarkNet. Bravvos is committed to providing a seamless Web2.0 user experience that can be used on iOS, Android, and multiple browsers, while eliminating mnemonic words, allowing users to recover their accounts.

Bravvos also plans to provide DeFi services such as staking and borrowing. Bravvos also supports account splitting, separating long-term (high amount) savings and daily (low amount) expenses by supporting withdrawal restrictions and withdrawal delay time, and allowing users to view the details of each transaction to achieve fine management of on-chain funds.

Bravvos announced the completion of a $10 million financing round in October 2022, led by Pantera Capital.  

3.2 Cross-Chain Bridge 

3.2.1 StarkGate

StarkGate is the official cross-chain bridge for Ethereum Starknet developed by StarkWare, which helps users achieve cross-chain transactions of ETH and ERC-20 tokens between Ethereum and StarkNet.

StarkGate communicates with Ethereum through the message passing mechanism of StarkNet, and achieves low-cost interaction based on the computational compression capability of STARK.  

3.2.2 Orbiter Finance

Orbiter Finance is a decentralized cross-Rollup bridge that allows users to transfer assets across ETH mainnet, StarkNet, zkSync, Loopring, Arbitrum, Optimism, Polygon, ZKSpace, Immutable X, dYdX, Metis, BNB Chain, and Boba.

Orbiter Bridge provides users with excellent experiences such as low fees and fast speed through its unique market-making model, but it currently only supports transfers of four currencies: ETH, USDC, USDT, and DAI.

Orbiter completed its first round of financing in November 2022, with participation from Tiger Global, Matrixport, A&T Capital, StarkWare, Cobo, imToken, Mask Network, Zonff Partners, among others. The amount of financing has not been disclosed. In addition, Vitalik has donated 16 ETH to it.  

3.3 DID

3.3.1 StarkNet ID

StarkNet.id is the domain service of StarkNet (.stark), allowing users to mint decentralized identities based on StarkNet for free. Users can also attach any data to their StarkNet identity, including identity labels such as social media accounts from Web2 to ENS domains from Web3. The team plans to launch a complementary StarkNet identity dashboard and more features in the future, making it easier for users to manage and build more comprehensive decentralized identity systems.

According to the data, the total number of StarkNet.id currently minted is 148.05K, with 85.28K holding users. The floor price is around 0.015eth, and the total trading volume is 1.16eth (as of March 26, 2023).  

3.3.2 WIW Protocol

WIW is an on-chain identity protocol that focuses on privacy protection. It can generate corresponding tags based on users' on-chain behavior to help users build an identity system. It mainly covers three application scenarios:

Personal Branding: WIW can help users showcase their on-chain achievements, build on-chain resumes, and establish users' on-chain credibility to enable them to potentially receive airdrops and credit lending opportunities.

Social Activities: WIW's precise analysis of user identity allows users to find and join matching communities, and meet like-minded people.

Providing Tools for Builders: WIW's tags allow builders to analyze users without touching their privacy, and also enable precise marketing activities.

3.4 DeFi

3.4.1 10KSwap

10KSwap is the first open-source AMM protocol deployed on StarkNet. It aims to leverage the performance of rollup for AMM protocols, bringing lower fees, less friction, and better liquidity to the L2 world.

Currently, 10KSwap supports swapping between five types of tokens: ETH, USDC, DAI, WBTC, and USDT. Similar to traditional swaps, users can also provide liquidity to 10KSwap to earn market-making profits.

Currently, the liquidity of 10Kswap is about 1.2 million US dollars, and the daily trading volume is about 828,600 US dollars (as of March 26, 2023), still in the early stage.   

3.4.2 Nostra

Nostra is a decentralized lending protocol deployed on StarkNet. It is the first protocol on StarkNet to support flash loans and also provides the first native stablecoin $UNO on StarkNet.

Nostra aims to build the liquidity layer of StarkNet, consisting of three products: Nostra Money Market, UNO, and Nostra Swap.

Nostra Money Market: It is the core product of the liquidity layer, providing users with coin minting and lending services similar to MakerDAO (minting $UNO); Nostra also provides features such as collateral risk isolation and intelligent liquidation, further enhancing users' borrowing experience and achieving better asset security; The money market also provides income for Nostra Swap and UNO minters, helping the entire liquidity system complete the logical loop.

Nostra Swap: A stablecoin trading platform within the Nostra system, similar to Curve, used to support UNO's peg and growth. Users can provide LP on Nostra Swap to earn trading fees and interest in the currency market, as well as exchange $UNO and other stablecoins.

UNO: is the first native stablecoin of Starknet, which can be minted by users through over-collateralization or obtained through exchange on Nostra Swap. $UNO will be used in various supported scenarios, including DeFi, gaming, NFT, real-world payments, etc.

3.4.3 ZKX

ZKX is the first perpetual futures trading platform on StarkNet with self-custody and community governance. The protocol aims to provide further scalability through a decentralized node network and an upgraded trading experience, offering perpetual swaps and derivatives to any user on StarkNet and Ethereum.

ZKX has introduced a series of measures to encourage users to engage in transactions, including earning USDC through trading and pledging, increasing trading volume to unlock advanced ZKX features, and more.

ZKX announced the completion of a $4.5 million seed round financing in July 2022, with investors including StarkWare, Alameda Research, Huobi, Amber Group, and Crypto.com.  

3.5 NFT

3.5.1 Aspect

Aspect is the first NFT trading platform in the StarkNet ecosystem, launched in August 2022. Users can mint, upload, and trade NFTs on the platform. Currently, its trading volume is still relatively small and in the early stages.   

3.5.2 Mint Square

Mint Square is another NFT creation and trading platform based on StarNet, dedicated to providing users with a cheaper and faster confirmation speed NFT trading experience. It is also deployed on zkSync Era. Currently, its trading volume is slightly higher than Aspect, but it is also relatively early.  

3.6 Game

3.6.1 cartridge.gg

Cartridge is a chain game integration platform on StarkNet, similar to the Steam game store in Web2. On the one hand, Cartridge can help users filter chain games and interact with friends. On the other hand, as a chain game infrastructure, Cartridge can also combine DID, wallets, etc., to provide players with a richer on-chain experience.   

3.6.2 Briq

Briq is a 3D block-building NFT type chain game built on StarkNet, allowing anyone to build a separate virtual world storage on the chain. Users can use Briqs to build ERC-1155 standard NFTs and construct chain games.

Currently, the total minting quantity of Briq NFT is 119.11K, with 98.43K holding users, a floor price of approximately 0.12 ETH, and a total trading volume of 98.57 ETH (as of March 26, 2023).

3.6.3 Influence

Influence is an immersive space strategy sandbox MMO, with the project token $SWAY. Players own exclusive asteroids and engage in mining, construction, trade, research, and combat by manipulating crew members of different professions. Currently, Influence has conducted three rounds of rewarding tests and is actively developing, with no final release date yet.

Currently, the total trading volume of Influence Asteroids assets is 1384eth, with a floor price of 0.0349eth (as of March 26, 2023).  

  3.6.4 lootrealmsLoot Realms 

Developed by game studio Bibliotheca DAO, $LORDS is a large-scale, multiplayer, composable strategy game ecosystem on the blockchain. The gameplay is similar to Web2 military sandbox games such as EVE and Rise of Nations, where players need to build a sustainable economic system to produce resources and protect and compete for them by constructing military forces.

LootRealms game world consists of 8000 Realms, with a total trading volume of 6532 ETH and a floor price of 0.4799 ETH (as of March 26, 2023). 

Summary 

StarkNet has taken a unique path in the Layer2 solution with its strong technological advantages and capital support. By leveraging STARK+Cairo, it fully unleashes the potential of validity proof and can handle a large number of transactions more easily compared to other solutions.

StarkNet has temporarily abandoned good EVM compatibility, but this also means that StarkNet can break free from the constraints of the EVM framework and gain a more flexible development experience, attracting a diverse range of developers.

In the long run, it has more potential to undertake the explosion of the ecosystem, while also bringing diversified features to the Ethereum ecosystem. Currently, the ecosystem of StarkNet has just begun to take shape, but it is still in its early stages, which is also a good opportunity for users to get involved.  

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