TL;DR
1. StarkWare has long established a technology-centric business model, and StarkEx is its main source of profit
2. The StarkNet ecosystem is still in the early stages of development, with many original and innovative projects, and technological progress is the main bottleneck
3. NFT and GameFi may become StarkWare's advantageous track.
Ethereum Layer 2 has obvious security and decentralization advantages over alt L1. Competing public chains are often exposed to downtime and security incidents, and Layer2 rarely has such news.
Among all Layer 2, the Layer 2 of the ZK Rollup system is the most orthodox branch of Ethereum. It is the most secure among all Layer2. Moreover, as the number of transactions increases, the transaction fee shared by each person will decrease, which has a better expansion effect.
For these reasons, ZK Rollup is widely supported as Layer 2. For example, the wallet project Argent once expressed its preference for the ZK system. Argent stated that it will not support the Optimistic Rollup ecology because it will focus on zkSync and StarkNet of the ZK system.
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StarkWare Overview
1 Introduction
StarkWare is a technical team dedicated to solving the scaling problem of Ethereum through zero-knowledge proof (ZKP). StarkWare has given two ZK Rollup Layer 2 solutions - StarkEx and StarkNet.
StarkEx is a scalability engine that earns service fees through to B. The well-known Immutable X, dYdX, DeversiFi, and Sorare are all based on StarkEx.
**StarkEx has played a great role in improving performance and reducing gas fees. ** It is reported that the gas fee of dYdX used to account for 90-100% of the revenue. StarkEx helped dYdX reduce the gas fee to 1/50, which saved dYdX nearly 300 million US dollars and promoted the business growth of 500 times.
However, the projects on StarkEx are independent of each other and cannot be combined. It may be for this reason that StarkWare launched StarkNet, which is more open. StarkNet is a real Layer2, any DAPP can be deployed on it, and applications can be combined.
With the successful case of StarkEx, the market is generally optimistic about StarkNet. From the perspective of data, StarkEx is undoubtedly successful, while StarkNet is still in the early stage of ecological development. Developing the StarkNet ecosystem should become the focus of the StarkWare team.
2. Team
The StarkWare team is known for their "technical competence".
Eli Ben-Sasson: Co-Founder and Chief Scientist. He is the world's top cryptography scientist. At present, the two most mainstream zero-knowledge proof systems SK-SNARKs and ZK-STARKs are jointly invented by him. He is also a founding scientist of the Zcash project and a professor of computer science at the Technion-Israel Institute of Technology.
Alessandro Chiesa: Co-founder and Chief Scientist, Professor of Computer Science at UC Berkeley. He is also the co-inventor of ZK-SNARKs and the co-founder of Zcash.
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Michael Riabzev, EliBen-Sasson, Uri Kolodny Source: Alpha Rabbit Research Notes
In addition to technical capabilities, the StarkWare team also has strong PR capabilities, and has a clear positioning for profitability and business models from the very beginning. This is largely thanks to co-founder and CEO Uri Kolodny, a serial entrepreneur who is at the helm of StarkWare both commercially and externally.
As early as 2018, StarkWare clarified its strategic line in its blog. "To build a business with sustainable income, based on the requirements for cash and income, the founding team's strategy is to first develop technologies that can meet the needs." . That is to say, technology is the core, and by developing technical solutions and providing technical services, we can ensure the continuous income of enterprises.
StarkWare continues to play their "technical" features and establish a "technical" image. The team started to build a technical blog very early, synchronizing their own understanding of what to do and scientific research results with external users at all times. Vitalik often gives suggestions to StarkWare's papers.
3. Financing
It is precisely because of its technical expertise and ability to deal with venture capital institutions that StarkWare is favored by investment institutions. Vitalik is their seed round investor. In addition to Vitalik, the list of investors also includes repeat investors such as Paradigm, Sequoia Capital, Pantera Capital, and Founders Fund.
So far, StarkWare has completed 6 rounds of financing, namely seed round, grant, round A, round B, round C, and round D, with a total financing of 273 million US dollars. Especially in the latest round of financing, the financing amount reached 100 million U.S. dollars, and StarkWare’s valuation directly quadrupled to 8 billion U.S. dollars. Valuation ranks first among all Layer2.
4. Data on the chain
From the perspective of data dimension, StarkEx has been successful. There are a total of 4 projects in the StarkEx ecosystem—Immutable X, dYdX, DeversiFi, and Sorare. The lockup volume and transaction data of each project can be unique in Layer2.
As of July 6, the StarkEx ecosystem had a TVL of US$696 million, processed a total of 196 million transactions, with a total transaction volume of US$635 billion, and minted a total of 60.5 million NFTs. StarkEx is the main source of profit for StarkWare.
In contrast, the StarkNet ecosystem is still in its early stages of development.
**Number of independent addresses:** Less than 20,000. The number of independent addresses of StarkNet lags behind the four major OP and ZK Rollup projects (Arbitrum, Optimism, zkSync, StarkNet). The number of independent addresses is an order of magnitude smaller than that of the other three major ecosystems.
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StarkNet daily transactions and daily active addresses source: Dune Analytics
Therefore, on the whole, in terms of ecological development progress and ecological activity, the Layer 2 of the ZK system lags behind the OP system, and the progress of StarNet and zkSync is close. It may be because zkSync has promised that there will be ecological native tokens, so it surpasses StarkNet in the number of independent addresses.
**Gas fee: **In the past month, the gas fee generated by the StarkNet network is lower than that of Ethereum, and the TPS is also lower than that of Ethereum as a whole.
Although StarkNet has better performance than Ethereum (Ethereum can process 7 transactions per second, and the StarkWare ecosystem can process thousands of transactions), the actual number of transactions processed by StarkNet per second and the resulting Gas fees are different. lower than Ethereum.
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StarkWare ecological application
On the whole, StarkNet ecology and zkSync have a similar ecology in the early stage. There are not many online projects in StarkNet. However, StarkNet's tracks are relatively balanced, unlike zkSync, which is inclined towards DeFi.
Including StarkEx, Beep News has counted 33 projects that have been launched in the StarkNet ecosystem. DeFi, DEX, GameFi, NFT, bridge, and infrastructure are 5, 3, 6, 6, 4, and 5 respectively.
1，DEX
Similar to zkSync, projects on StarkNet are mainly native projects. There are 5 DEXs counted by Beep News, all of which belong to the StarkNet ecosystem. Among them, the three DEXs that have been launched are JediSwap, MySwap, and StarkSwap.
They are all AMM-like DEXs with a little innovation. For example, the "ZAP" function of JediSwap can convert a single token into LP for farming. The StarkSwap interface has added a "faucet" function. All aim to improve user experience.
2，DeFi
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Source of DeFi projects on StarkNet: Beep News
Stark DeFi is the DeFi Hub on StarkEx. It is the fifth project using StarkEx after dYdX, Immutable X, Sorare, and DeversiFi. It will be launched soon and deserves attention. In addition, Brine Finance, which provides an order book DEX, also has decent quality.
3，GameFi
Compared with other tracks, there are more GameFi projects on StarkNet, among which there are 3 building block combination split games, or games similar to logic.
The Ninth, Dope Wars, and Philand are GameFi projects that have been mentioned more in the StarkNet ecosystem. Among them, The Ninth is a metaverse game that supports the sale, upgrade, and pledge of land. On the whole, the gameplay of the GameFi project on StarkNet is relatively rudimentary, and the quality is not high.
4，NFT
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Source of NFT projects on StarkNet: Beep News
5. Infrastructure
Like zkSync, StarkNet has the uniqueness of ZK Rollup Layer 2 in the bridge and wallet infrastructure, and the general-purpose wallet and bridge do not apply to these two ecology.
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StarkWare ecological features and advantages
1. There are many original projects, and NFT and GameFi can be used as a breakthrough
Because StarkNet is not compatible with EVM (Ethereum Virtual Machine), few projects in the Ethereum ecosystem are deployed in it, so most of the applications in the ecosystem are native applications.
**Different from zkSync, each track of StarkNet develops in a relatively balanced manner. **For zkSync, the NFT and GameFi tracks are relatively barren, but there are many projects on StarkNet. However, StarkNet also has a common problem in the Rollup ecosystem in the NFT and GameFi fields, that is, the project quality is generally not high.
Considering that Immutable X (focusing on the ecology of NFT and GameFi) and Sorare (a digital football NFT collection platform) on StarkEx have developed well, NFT and GameFi may serve as a breakthrough for StarkNet.
Since open ecology such as GameFi involves some complex interactions, the technical progress of ZK Rollup is also the primary problem faced by the StarkWare team.
2. Institutional investment in ecological projects is relatively conservative
Although in the two ecosystems of StarkNet and zkSync, investment institutions focus on investing in infrastructure, as well as high-quality and just-needed projects with a multi-ecological layout, but investment institutions in DeFi, NFT, and GameFi seem to be relatively conservative about the StarkNet ecosystem.
According to the statistics of Beep News, the investment of investment institutions in StarkNet is mainly concentrated in the four projects in the StarkEx ecosystem and the wallet Argent. Some DeFi innovation projects in the ecosystem, as well as NFT and GameFi projects have not found financing information. In contrast, the zkSync ecological project has more financing information.
3. StarkEx proves the success of the to B model
StarkEx's business model of providing customers with expansion solutions has been verified. Although only 4 projects have adopted StarkEx, the data of these 4 projects can be unique.
The StarkEx solution is effective for the project side. On the other hand, StarkWare has obtained continuous income through StarkEx.
But StarkEx is also facing some changes. dYdX announced that it will transfer to the Cosmos ecosystem to build its own application chain. According to the founder of dYdX, the StarkEx experience (actual TPS) is not as good as imagined. In addition, some powerful customers may indeed try to develop their own expansion solutions to capture the value of the underlying protocol.
In addition, StarkNet is currently not compatible with EVM, which has caused relatively great resistance to ecological development.
4. High valuation and strong investment lineup
StarkWare currently ranks first in Layer 2 both in terms of total financing amount and valuation. The total financing amount reached 273 million US dollars, and the valuation is as high as 8 billion US dollars.
In addition, StarkWare has also received investment from Vitalik, Paradigm, Sequoia Capital, etc. Therefore, StarkWare has sufficient funds, technical capabilities, and authoritative recognition to support the development of Layer 2 ecology.
StarkWare's challenges and future prospects
As mentioned earlier, the primary challenge StarkWare faces comes from the ZK Rollup technical problem.
ZK Rollup is progressing slowly, and cases like dYdX show that the actual expansion effect of StarkWare Layer 2 is still limited. For the StarkWare team, seeking breakthroughs in technology is still the top priority.
At the same time, Layer 2, the OP series, is aggressively expanding its ecology and expanding its first-mover advantage. Arbitrum launched the Odyssey campaign, and Optimism launched OP. This puts forward more urgent requirements for StarkWare's technological breakthrough.
On the issue of EVM compatibility, StarkNet is currently the only ecology that is not compatible with EVM among the four major Layer 2s. This will bring relatively great resistance to the ecological development of StarkWare. (The zkSync 2.0 testnet is already compatible with EVM, which may be related to technical difficulty. zkSync uses ZK SNARK technology, and StarkWare uses ZK STARK, which is an improved version of the former)
At present, StarkWare has established enough technical barriers. The way they combine technology and business model - StarkEx has also been verified. StarkEx is a roadmap that StarkWare can continue to adopt.
In terms of the development of the StarkNet ecosystem, in addition to the technological breakthroughs mentioned above, NFT and GameFi may become StarkWare’s advantage over other Layer2s.
Note: This article is not intended as investment advice
Note: This article is not intended as investment advice
