What is Starknet and how does it work?

Scalability remains a major challenge for blockchains, especially Ethereum. As the number of users and transactions on a blockchain network increases, speed slows, and costs rise. This is where Ethereum scaling solutions, such as Starknet, come into play. Starknet is designed to enhance the speed and affordability of Ethereum transactions.

In this article, we will look into what Starknet is and how it operates.

What is Starknet?

Starknet is a validity rollup, commonly known as a zk-rollup, that functions on the Ethereum network. Rollups process the majority of transaction operations outside of Ethereum and then provide proof of those transactions to Ethereum, reducing the Layer 1 blockchain's load and resulting in faster and cheaper transactions.

Starknet was developed by StarkWare Industries, an Israel-based blockchain firm, to scale Ethereum. Starknet launched fully in February 2022 as a permissionless Layer 2 network, allowing anyone to build decentralized applications or dapps on it. StarkWare also developed another platform called StarkEx, which has been live since June 2020, but it is a permissioned network tailored to the specific requirements of dapps.

Founded in 2018, StarkWare is backed by high-profile investors, including Sequoia Capital, Paradigm and Coatue. The company was valued at $8 billion when it raised $100 million in a Series D funding round in May 2022. StarkWare has raised a total of $261 million in funding to date.

How does Starknet work?

As a Layer 2, Starknet processes transactions on its network and settles them on Ethereum to enhance scalability. It accomplishes this by compressing thousands of transactions into a data structure known as a "proof," which is then submitted to Ethereum as a transaction. This substantially improves throughput, or the number of transactions processed per second, and significantly reduces the cost per transaction.

StarkNet utilizes a proprietary proof system called zk-STARK, or zero-knowledge scalable transparent argument of knowledge. This system verifies the correctness of transactions without disclosing confidential data, improving privacy and security.

Starknet has two core components: Sequencer and prover. Sequencers are responsible for executing transactions and proposing blocks. They can process significantly more transactions per second than Ethereum nodes. Provers, on the other hand, provide a mathematical guarantee of the validity of the block transactions, which are then finally settled on Ethereum.

Starknet is set to have its native token called STRK, which is expected to unlock in April 2024. StarkWare deployed the STRK token on Ethereum in November 2022. The total supply of STRK tokens is ten billion, and STRK will be used for covering transaction fees, governance and staking within the Starknet network.