Source: DepositPhotos

Starknet is a layer 2 scaling solution for Ethereum that utilizes Zero Knowledge Rollup based on the trustless "STARK" proofs developed by Starkware Industries. Starknet is one of several layer 2 (L2) scaling solutions available for Ethereum today. STRK is the native token of Starknet.

1. What is Starknet? Is it a Scam?

Before diving into Starknet, let’s briefly discuss the major drawbacks of the current Ethereum (ETH) network. Despite being the largest smart contract platform, Ethereum faces significant scaling issues. This results in high transaction fees that are unsuitable for everyday small transactions.

Transaction Fees on Ethereum

As shown in the image, to execute a token swap directly on the Ethereum network, users currently face fees of up to $5.48. This high cost presents barriers to the broader adoption of cryptocurrency in daily life.

However, this situation also opens up opportunities for solutions that address these challenges. Leveraging the security of the Ethereum network, several projects have emerged. These projects are built on Ethereum and utilize technologies like Rollup to facilitate faster transactions at lower fees. Such solutions are referred to as Layer 2 (L2). Starknet is one of these L2 solutions.

It is evident that the execution fees for the same task on Starknet are significantly lower compared to Ethereum. Starknet achieves this by employing Zero Knowledge Proof STARK (zk-STARK) technology, innovated by Starkware Industries, which ensures the integrity and privacy of blockchain computations using modern cryptographic proofs and algebra.

L2 Landscape

While both Starknet and other solutions like Arbitrum or Optimism utilize Rollup technology, Starknet follows the zk Rollup approach. Rollu technology is defined in that it batches multiple transactions into a single transaction, which is then submitted to the main blockchain, reducing costs and increasing throughput. Some believe that ZKP is superior as it does not require a dispute-resolution mechanism. This might explain why Starknet has garnered attention from investors; despite STRK being a relatively new coin, it has already entered the top 100 coins by market capitalization.

L2 landscape. Source: Thirdweb

Starknet Metrics

At the time of writing, data from Dune indicates that although there has been a decline in network activity compared to peak times, there is still a noticeable community engagement. Moreover, in a comparison of L2 solutions, transaction fees on Starknet are relatively low compared to others in the same category. Evaluating whether Starknet is a scam depends on various factors, including time, the development team, and user feedback. However, at present, it offers an optimal option for conducting transactions on the Ethereum network.

That said, the negative price fluctuations of STRK (the native token of Starknet) since its launch have led some in the community to question the legitimacy of Starknet. Nevertheless, let’s continue to monitor and analyze to form accurate assessments on this issue in the following sections.

2. Development of the Starknet Project Over the Years

Behind Starknet is Starkware, founded in January 2018 by Eli Ben-Sasson (co-inventor of STARK, a former CS expert at Technion, and founding scientist of Zcash), Uri Kolodny (entrepreneur), Michael Riabzev (co-inventor of STARK), and Alessandro Chiesa (founding scientist of Zcash and CS expert at UC Berkeley). At that time, Starknet was one of two strategic solution sets from Starkware (the other being StarkEx) aimed at scaling development and user outreach.

Starknet Team

Starkware launched the alpha mainnet of Starknet in November 2021. It has undergone several iterations since then, peaking in September 2023 when anticipation for an airdrop surged, leading to throughput nearly surpassing Ethereum's mainnet.

In July 2022, ConsenSys announced a partnership with Starkware by integrating Starknet into the MetaMask wallet and Infura. At that time, Starknet's appeal had the community eagerly awaiting an airdrop event for the native token (STRK). The project's development team announced plans for the airdrop, but unfortunately, it faced multiple delays. However, a recent funding round in May 2022 valued Starkware at $8 billion, quadrupling their previous valuation.

Initially, the STRK token was set to launch in September 2022, but it wasn't until February 20, 2024, that the Starknet Foundation conducted an airdrop of 700 million STRK tokens to 1.3 million user wallet addresses on the blockchain. Over half of these tokens were airdropped to previous Starknet users. At that time, it had a total value locked (TVL) of $180 million. Other eligible recipients included users of applications like dYdX, ImmutableX, Rhinofi, and Sorare—all of which utilize StarkEx, Starkware's first scaling technology.

3. What is the STRK Token? Detailed Specifications

As mentioned earlier, STRK is the native token of the Starknet L2 network. According to the project's official whitepaper, 10 billion Starknet tokens were initially created by Starkware in May 2022 and minted on-chain on November 30, 2022. The distribution plan for these 10 billion STRK tokens is illustrated below.

STRK Token Distribution. Source: Starknet

At the time of writing, data from CoinGecko indicates that the circulating supply of STRK is nearly 786 million tokens. Similar to other projects, Starknet plans to gradually unlock the tokens allocated to various stakeholders. This linear token unlock plan follows the schedule below.

Token Unlock Plan. Source: Starknet

Value of Starknet Coin: Should You Invest Now?

Before delving into the evaluation of the potential and investment opportunities with STRK, let’s examine its price fluctuations since launch.

Price Fluctuations of Starknet Coin

At the time of writing, STRK is trading at $0.3973. Data from coinmarketcap shows this price represents a decline of nearly 89% from its all-time high of $3.66 on February 20, 2024. Notably, due to the absence of a presale or ICO like other projects, the current price of STRK is close to its lowest point recorded on Aug5, 2024, during a general market downturn (flash crash).

STRK Price Fluctuations. Source: Coinmarketcap

With a price decline of -7.50% in the last 7 days, Starknet (STRK) is underperforming the global cryptocurrency market which is down -2.60%, while underperforming when compared to similar Ethereum Ecosystem cryptocurrencies which are up 12.70%.

4. Pros and Cons of Starknet: Is STRK a Good Investment Right Now?

In reality, an 88% drop from peak levels is not uncommon in the cryptocurrency market. Even Bitcoin has historically recorded drops of 25% to 30% in short periods. The volatility surrounding STRK has led to a loss of community trust, stemming from four main reasons, which also highlight existing drawbacks of the project:

Community Expectations: The community became overly FOMO (fear of missing out) and placed high expectations on the project. The continuous delays in the token launch during the airdrop waiting period caused impatience. With a strong development team and backing from prominent VCs, many believed STRK would shine in this year's uptrend. However, the price movements did not align with investor expectations, raising doubts about the project's potential.

Tokenomics Controversies: There are ongoing debates regarding the tokenomics and unlock schedule for the development team and investors. The initial vesting period for the STRK token minting in November 2022 was extended from one year to April 2024, which seems to favor insiders over new buyers. Token vesting typically starts after launching on exchanges, but STRK's release occurred nearly two years before the public announcement. This means seed investors will have 13.1% of the supply unlocked in April 2024, with subsequent unlocks each month, potentially leading to significant selling pressure.

Airdrop Issues: There were incidents related to the STRK token airdrop for ETH stakers and ImmutableX users, causing community unrest. Fortunately, these issues were resolved. However, the airdrop faced challenges due to user errors and network congestion, with over 5 million tokens claimed in the first few minutes, resulting in overload.

Technical Glitches: Despite high community expectations in terms of technology, Starknet experienced a block outage for four hours on April 5, 2024. This may have been a result of rapid growth leading to unmanageable issues.

Ranking of Ethereum L2s. Source: L2Beat

Overall, there are too many inconsistencies surrounding a project that the community had high hopes for, leading to a drop in its ranking among Layer 2 (L2) solutions, even behind zkSync. Nevertheless, with strong backing from major investors and a capable development team, Starknet remains in the top 10 L2 solutions. With the right strategy and current resources, Starknet still has the potential to regain its standing in the future.

5. STRK Token Price Predictions

While there are many pessimistic signals, most price prediction platforms offer an optimistic outlook for STRK. These platforms use historical data combined with market fluctuations to forecast future prices. Here’s what some predictions indicate:

• Coincheckup : The price of STRK will rise by 48.81% in the next 7 days and reach $0.5861. The long-term forecast for StarkNet is bullish, as their StarkNet price prediction estimates that the STRK price will reach $1.05 1 year from now, which would represent a 167.32%

  
  

• AMBCrypto: Predicts STRK will range between $0.88 and $1.33 in 2024; between $1.85 and $2.78 in 2025; and between $74.09 and $111.13 by 2030.

  
  

• Coinedition: Forecasts a peak of $2.67 in 2024; a maximum of $5 in 2025; and $15 by 2030.

6. Summary

Coincodex: The price of StarkNet is predicted to rise by 226.90% and reach $ 1.279175 by November 1, 2024. According to  technical indicators, the current sentiment is Bearish while the Fear & Greed Index is showing 42 (Fear). StarkNet recorded 18/30 (60%) green days with 7.70% price volatility over the last 30 days. Based on the StarkNet forecast, it's now a bad time to buy StarkNet.

Starknet (STRK), a ZK-Rollup solution, offers significant scalability and security for decentralized applications (DApps). Despite existing drawbacks in its development phase, predictions indicate substantial growth potential. With an advanced approach and current market position, STRK could be a noteworthy investment in the industry. However, investors should monitor its development and market trends to make informed decisions.