Starknet Trading Debut Sees Initial Excitement Fade As STRK Plummets Over 50%
February 20 2024 - 9:00PM
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In a highly anticipated move, Starknet (STRK), an Ethereum (ETH)
roll-up protocol, commenced trading on prominent cryptocurrency
exchanges including Binance, Bybit, Bitfinex, and OKX on
Tuesday. The token’s launch was accompanied by an airdrop,
distributing a staggering 728 million tokens to over one million
addresses, making it one of the largest airdrops of the year.
However, the initial excitement was dampened as the token
experienced a significant retracement of 53.8%, plummeting to a
current price of $2.04. However, to better grasp the protocol’s
capabilities and assess its potential future price actions, it is
crucial to delve into the underlying technology and the buzz
surrounding this player within the top 60 cryptocurrencies,
boasting a substantial market capitalization of $1.4 billion.
Unveiling Starknet Starknet operates as a Layer 2 solution,
offering scalability and Ethereum-level security by generating
STARK proofs off-chain, which are relayed on-chain. Developed
by StarkWare Industries, a blockchain firm based in Israel,
Starknet was specifically designed to address Ethereum’s
scalability concerns. The protocol was fully launched in February
2022 as a permissionless Layer 2 network, allowing developers
worldwide to build decentralized applications on its
infrastructure. StarkWare also developed another platform
called StarkEx, which has been live since June 2020. However,
StarkEx is a permissioned network tailored to specific
decentralized app (Dapp) requirements. Related Reading: Cardano
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ADA Surges 14% Founded in 2018, StarkWare has garnered support from
renowned investors such as Sequoia Capital, Paradigm, and Coatue,
solidifying its position within the industry. In a Series D funding
round held in May 2022, the company raised $100 million, valuing
StarkWare at an impressive $8 billion. StarkWare has raised
$261 million in funding, demonstrating strong investor confidence
in its vision and technology. With that noted, a prominent
decentralized finance (DeFi) researcher who goes by the pseudonym
“DeFi Ignas” has identified three key catalysts that could fuel the
long-term growth of Starknet. STRK Airdrop And DeFi
Incentives The researcher highlights Starknet’s utilization
of STARKs, a cryptographic proof system, to validate transactions
on the Ethereum network. In contrast to other zero-knowledge rollup
solutions that employ SNARKs, STARKs offer quantum resilience and
the potential for numerous scalability improvements. In
addition, DeFi Ignas believes that the use of the Cairo Development
Language ensures that the protocol is resistant to “lazy copy-paste
forks,” thereby increasing its “technical robustness.” Ignas
suggests that Starknet’s differentiators, such as “Quantum
Resilience” and the comparison between SNARKs and STARKs, present
an intriguing potential that is yet to be fully realized. By
effectively communicating these distinctive features, Ignas
suggests that Starknet can capture the imagination of the wider
audience, generating increased interest and adoption. Furthermore,
Ignas identifies several factors that could contribute to the
growth of the Starknet ecosystem. Firstly, the airdrop of STRK
tokens is believed to create a “wealth effect,” attracting capital
into the ecosystem. Additionally, Starknet plans to allocate
50 million STRK tokens to incentivize DeFi protocols, which, in
turn, will drive growth in Total Value Locked (TVL). Protocols
operating on Starknet are expected to distribute new tokens to
users through airdrops. Related Reading: Crypto Analyst
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On top of that, the STRK token has a “robust” utility model for
Ignas, serving as a means to pay gas fees, distribute voting power
through delegates, and facilitate native staking for governance and
security. The initial staking Annual Percentage Yield (APY)
is set at 12%, incentivizing users to stake their tokens rather
than sell them. While some individuals expressed dissatisfaction
with not receiving the airdrop, Ignas notes that 27% of survey
respondents (3.4k people) received STRK tokens, indicating
potential for growth within the Starknet ecosystem but not
necessarily for the STRK token itself. Featured image from
Shutterstock, chart from TradingView.com
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