Starknet On-Chain Vote: What Is STRK And Why Has It Been Rallying?

Starknet, the leading layer-2 scaling solution on Ethereum, is conducting its first-ever on-chain vote starting today. This vote will mark the network’s significant step towards decentralization. The expectations around this on-chain vote have built up momentum around the STRK token’s price. The overall altcoin market has seen a bearish sentiment in September 2024, which major tokens like Ethereum and XRP seeing more than a 5% decline in the past week. However, STRK has gained nearly 10% with the ongoing hype around its first on-chain polling.

So, what is Starknet, and how is it different from other networks? How will the on-chain vote impact Starknet’s token holders? Here’s a detailed analysis.

Key takeaways

• Starknet is a layer-2 scaling solution on Ethereum using ZK-Rollups to provide faster and cheaper transactions.
• The on-chain vote allows STRK token holders to decide on the staking system and token minting mechanism, part of its journey towards full decentralization.
• The vote will introduce staking, allowing STRK holders to lock their tokens to secure the network and earn rewards. It will also determine the minting curve for token rewards, balancing inflation and network security.

What is Starknet?

Starknet is a decentralized layer-2 (L2) scaling solution built on top of Ethereum. It leverages ZK-rollups (zero-knowledge rollups) to enable faster and cheaper transactions while maintaining the security and decentralization of Ethereum. The key innovation of Starknet lies in its use of STARK (Scalable Transparent Argument of Knowledge) cryptography, which enhances the scalability of the Ethereum network without compromising on security or composability.

Starknet community governance vote: Everything you need to know

This vote, running from 9 to 13 September, allows STRK token holders to influence key aspects of the network’s staking mechanism. The primary proposal involves deciding the minting curve for staking rewards. This curve will manage the issuance of new tokens and ensure sustainable rewards for validators and delegators who stake their tokens, contributing to network security.

The minting mechanism under consideration balances the need to encourage staking while controlling inflation, ensuring the network’s long-term health. STRK holders will also vote on how this minting system’s parameters can be adjusted over time, allowing the community to fine-tune the rewards and staking dynamics as the network evolves.

Voting is facilitated through Snapshot X, a gasless, fully on-chain governance protocol that verifies voting power based on STRK holdings without moving tokens across chains. This cost-effective system enhances security and reduces barriers to participation. The results of this vote will shape the future of Starknet’s staking mechanism, with staking expected to launch by October 2024.

How has STRK price reacted to this on-chain vote?

The price of STRK has responded positively to the ongoing on-chain governance vote. Over the past week, STRK has seen a price increase of around 10%, reflecting growing interest in the token as it moves towards decentralization with this first-ever community vote on staking mechanisms. As of time of writing, STRK is trading at approximately $0.41, rebounding from an all-time low of $0.32 in early August 2024.

Market analysts suggest that the on-chain vote, which allows STRK holders to influence key parameters related to staking and minting, has sparked heightened trading activity. This price surge has pushed Starknet’s market capitalization higher, placing it among the top 100 cryptocurrencies by market cap.

However, some traders remain cautious, as short positions in the derivatives market indicate uncertainty about the sustainability of this price rally.

Looking ahead, STRK could see continued upward momentum, especially if community participation in the vote remains strong and the broader crypto market conditions stay favorable. Some forecasts predict the token could reach $0.50 or even higher if current trends hold.

What is happening in this vote?

Starknet is asking its community (people who hold its STRK tokens) to vote on how the staking system should work. Staking is a way for people to lock up their tokens to help secure the network, and in return, they can earn rewards. The vote focuses on two key things:

1. How rewards for staking should be distributed.
2. How the system can adjust over time to keep things balanced.

Think of this as a town meeting where everyone in the community gets to vote on how much water everyone should receive from the town’s water supply, based on how much work they do to keep the water clean. The more water they help keep clean, the more they get — but if too much water is given out, the town might run out. So, the community has to vote on a fair system to balance the rewards.

How will it change Starknet?

• Decentralization: This vote is part of making Starknet a more decentralized system, meaning no single person or company controls everything. The vote is like letting everyone in the town have a say in how the town is run. After this vote, more decisions will be made this way, giving the community more control.
• Introduction of staking: Once the vote is completed, staking will officially be introduced to Starknet. This means people who hold STRK tokens can lock up their tokens to help keep the network running smoothly, and in return, they will earn rewards (more STRK tokens). Imagine it like a bank where you deposit money, and the bank uses that money to keep operations running, while giving you interest in return. The more people stake their tokens, the stronger the network becomes.
• Controlled inflation: The vote also includes deciding on how many new tokens should be created over time. If too many tokens are created, their value might decrease (like printing too much money), so the community will decide how to keep inflation under control. This is like deciding how much new money the town should print to avoid making it worth less.

What should we expect?

• More community control: Starknet will increasingly rely on its users to make decisions, making the system more democratic. This on-chain vote is just the beginning, and over time, more votes on other important issues will follow. It’s similar to a company moving from having a single CEO to a board where all employees get to vote on big decisions.
• Improved network security: Once staking is live, more people will be encouraged to stake their STRK tokens, making the network more secure. The more tokens are staked, the harder it becomes for anyone to attack the network, just like having more security guards makes a building harder to break into.
• Fair and sustainable growth: The outcome of the vote will ensure that the rewards for staking are sustainable over time. If too many tokens are given out as rewards, it could make STRK less valuable. The vote is a way to make sure this doesn’t happen by controlling how fast new tokens are created.

What makes Starknet unique compared to other layer-2 solutions?

• Zero-knowledge rollups (ZK-rollups): Starknet uses ZK-Rollups, which aggregate multiple transactions off-chain and submit a single proof back to the Ethereum mainnet. This significantly reduces the amount of data that needs to be processed on-chain, allowing for much lower gas fees and faster transactions. ZK-Rollups are known for their strong security guarantees because they allow for instant finality and cryptographic proof of correctness without needing to rely on a centralized entity.
• STARK cryptography: Unlike traditional ZK-Rollups that rely on zk-SNARKs, Starknet uses STARK proofs, which are more scalable and transparent because they don’t require a trusted setup. STARKs are designed to handle larger computations, making Starknet more efficient in processing complex smart contracts. This cryptographic method provides robustness against future advancements in computing, such as quantum computing.
• Generalized smart contracts: Starknet supports a fully composable smart contract environment, enabling developers to build any decentralized application (dApp) on its platform. This is distinct from some other Layer-2 solutions that focus primarily on specific use cases like payments or exchanges. Starknet allows developers to use the Cairo programming language to write more flexible and sophisticated smart contracts.
• Security and decentralization: By operating as a validity rollup (ZK-Rollup), Starknet inherits Ethereum’s security model, meaning that even if Starknet itself were compromised, users’ funds and data would remain secure on the Ethereum mainnet. Its decentralized approach contrasts with other Layer-2 solutions like Optimistic Rollups, which rely on fraud proofs and can involve a delay in finalizing transactions.
• Gas efficiency: Starknet is designed to offer gas savings, making it one of the most cost-effective Layer-2 solutions. Its ZK-Rollup technology bundles multiple transactions and proves them with a fraction of the computational cost, significantly lowering fees compared to Ethereum’s base layer and some other Layer-2 networks.

Key features of the STRK Token

The STRK token is the native cryptocurrency of the Starknet ecosystem, an Ethereum Layer-2 scaling solution. It plays a critical role in governance, transaction processing, and the future staking system on Starknet. Here are the key functions and features of the STRK token:

1. Governance
STRK holders can participate in on-chain governance, allowing them to vote on proposals that shape the direction of the Starknet network. This includes decisions on protocol upgrades, staking mechanisms, and economic models. Starknet’s governance framework aims for full decentralization, enabling the community to control the network’s future.
2. Transaction fees
STRK tokens are used to pay transaction fees within the Starknet network. As Starknet handles off-chain computations and only posts proof to Ethereum, it significantly reduces gas fees for users. STRK will play a key role in these transactions, making it a utility token essential for interacting with dApps built on Starknet.
3. Staking
STRK will be integral to Starknet’s upcoming staking system, where token holders can lock their STRK to help secure the network. In return, stakers will earn rewards through a minting mechanism that balances network security with inflation control. The first on-chain vote on the staking mechanism is currently being processed.
4. Ecosystem utility
STRK tokens can be used in a variety of decentralized applications built on Starknet, from decentralized finance (DeFi) platforms to NFT marketplaces. As Starknet expands, the demand for STRK will grow, as it is required to interact with smart contracts across the ecosystem.

To sum it up, the STRK token is fundamental to Starknet’s operational, governance, and economic infrastructure, supporting its mission to offer scalable and secure solutions for Ethereum. The on-chain vote will make Starknet more democratic, introduce staking to reward users for securing the network, and help control the creation of new tokens to maintain their value.

Frequently Asked Questions

1. 01.

   When was Starknet launched?

   

   Starknet was officially launched in November 2021 as part of StarkWare’s initiative to provide scalable solutions on Ethereum using ZK-Rollup technology. The goal was to enhance the scalability and efficiency of the Ethereum network by performing off-chain computations and reducing on-chain data.

2. 02.

   What is Starknet on-chain voting?

   

   Starknet on-chain voting is a governance process where STRK token holders can participate in decision-making for the network. It allows the community to vote on key proposals, such as the staking mechanism and token distribution. The goal is to progressively decentralize control over Starknet, giving the community a direct say in its future.

3. 03.

   What is the STRK token?

   

   The STRK token is the native cryptocurrency of the Starknet network. It is used for transaction fees, staking, and governance. Token holders can stake their STRK to secure the network and earn rewards, as well as vote on governance proposals, influencing the network’s development.

4. 04.

   Is Starknet a good investment?

   

   Starknet is a promising Layer-2 scaling solution for Ethereum, leveraging ZK-rollups for faster and cheaper transactions. Its technology has the potential for broad adoption, and the ongoing decentralization through on-chain voting enhances its appeal. However, like any investment in cryptocurrency, it carries risks due to market volatility and evolving technology.