StarkEx is a Layer-2 scalability engine that is live on the Ethereum Mainnet. StarkWare developed StarkEx, a scalability engine for crypto exchanges. StarkEx enables exchanges to offer non-custodial trading in large volumes with reduced costs and high liquidity. StarkEx currently supports ETH, ERC-20, and ERC-721 tokens, and it can easily support tokens on other EVM-compatible blockchains.

What is StarkEx?

StarkEx is a framework that facilitates the development of application-specific and permissioned scaling solutions. StarkEx is a scalable engine specifically engineered to address the unique requirements of applications, including gaming and DeFi. StarkEx is the Validium L2 scaling engine on the Ethereum mainnet that has been tailored to accommodate specific permissioned Dapps. Projects like dYdX, ImmutableX, DeversiFi, and numerous other collaborators use it to deploy their ideas, primarily for trading use cases. The majority of protocols are constructed on this specific L2, which is responsible for the generation of actual trading volume and the execution of transactions. StarkEx introduces scalable non-custodial trading to cryptocurrency exchanges using the STARK zero-knowledge proof technology.

Background of StarkEx

StarkEx is a mature platform deployed on the Ethereum Mainnet since June 2020 and introduced on a SaaS business model. It is a product of Starkware, a ZK-rollup company founded in 2018 by Eli Ben-Sasson, Michael Riabzev, Uri Kolodny, and Alessandro Chiesa. Eli co-invented STARK, FRI, and Zerocash and is a Zcash founding scientist. He has been exploring cryptography and zero-knowledge proofs of computational integrity since receiving his Ph.D. in Theoretical Computer Science from Hebrew University in 2001.

Uri Kolodny is a serial entrepreneur who co-founded many technological firms, including OmniGuide and Mondria. Michael co-founded StarkWare and developed and implemented the zk-STARK system for zero-knowledge computational integrity. Alessandro co-founded StarkWare, co-invented the Zerocash protocol, and authored Libsnark, the leading open-source tool for concise zero-knowledge proofs.

Starkware is a pioneer in zero-knowledge-based rollup design. Examples of applications deployed on StarkEx include dYdX (perpetual trading), Immutable and Sorare (NFT minting and trading), DeversiFi (spot trading), and Celer (DeFi pooling). Over 50 million StarkEx transactions were resolved on public and private Ethereum testnets before the deployment of the Mainnet.

Starkware Products: StarEx, StarkNet and ZK-STARK

STARKs (Scalable, Transparent Argument of Knowledge) is a proof system that facilitates computation verification and validation. It enables the processing of an extensive computation, the generation of a proof for the computation’s correctness, and the subsequent verification of the proof in a few steps. StarkWare offers two solutions for scaling Ethereum with STARKs: StarkEx and Starknet.

StarkEx

StarkEx is an application-specific Ethereum scaling solution intended to reduce costs and increase the speed of transactions for incorporated dApps. The StarkWare team is responsible for administering StarkEx, which launched its mainnet in June 2020. StarkEx enhances Ethereum’s efficiency by consolidating numerous transactions into a single block. It employs a technology known as zero-knowledge rollup, which offers mathematical evidence that the transactions are legitimate. Depending on the specific application’s requirements, StarkEx can conduct transactions at a rate of 15,000 to 50,000 per second (tps).

StarkNet

The StarkWare team also designed Starknet, which launched its alpha mainnet in November 2021. Unlike StarkEx, Starknet is outside the StarkWare staff’s supervision. Starknet is a decentralized scaling solution for Ethereum Layer 2 that operates analogously to public networks such as Ethereum without permission.

Using the zero-knowledge (zk) technology, Starknet enhances the user experience on Ethereum and reduces utility costs. It employs Cairo, a native programming language. The protocol’s support for account abstraction is a notable feature. This function enables users to administer their accounts by utilizing a smart contract. The Starknet ecosystem currently has a total value locked (TVL) of $251.95 million.

StarkEx and StarkNet

StarkEx and Starknet are both scalability solutions that are based on STARK. Both offer scalability, minimal gas costs, and security; however, their interoperability patterns and operating requirements differ. StarkEx may be the optimal solution for an application primarily self-contained and aligns with the APIs that StarkEx offers. Starknet may be more appropriate for a protocol that necessitates synchronous interaction with other protocols or has requirements that exceed those of StarkEx.

In contrast to StarkEx, where applications are responsible for transmitting transactions, Starknet sequencers batch transactions and sends them to be processed and verified. (StarkWare is presently accountable for operating Starknet’s sequencers to decentralize them in the future.) Starknet supports the rollup data availability mode, which entails writing the rollup’s state to Ethereum in conjunction with the STARK proofs.

StarkEx Features

StarkEx offers a scaling solution that includes high throughput, low gas fees, Ethereum-level security, self-custody, and rapid integration, among other features and benefits. StarkEx facilitates the execution of any arbitrary logic by smart contracts for specific use cases, including trading and NFTs.

Data Availability: Rollup, Validium

This feature executes transactions off-chain on a sidechain, such as StarkEx, instead of on-chain execution, like Optimistic Rollups, under the Validium protocol. The ZK rollup reduces the bridging time between L1 and L2 to minutes, as opposed to a week, as in the Optimistic Rollup.

Volition

StarkEx does not limit users to a specific data availability option, meaning that users can choose between two options (Rollups or Validium) to conduct transactions tailored to their security requirements and gas fees.

Massive Scale

The key to StarkEx’s substantial scaling potential resides in the asymmetric allocation of computation between its off-chain Prover and the on-chain Verifier. The off-chain Prover handles extensive batches of transactions and produces a STARK proof. The on-chain verifier evaluates the STARK proof through a series of computational procedures. This facilitates extensive off-chain scaling, wherein we execute substantial computations, the integrity of which is then upheld on-chain with minimum processing requirements.

Self-custody

StarkEx facilitates self-custodial decentralized applications and utilizes advanced anti-censorship methods to guarantee that users’ assets consistently remain under their control.

ZK-STARK

ZK-STARK stands for Zero-Knowledge Scalable Transparent Argument of Knowledge. StarkWare developed ZK-STARKs, which use contemporary algebra and fresh cryptographic proofs to safeguard the privacy and integrity of blockchain computations. ZK-STARKs allow blockchains to send computations to a single off-chain STARK prover, which uses an on-chain STARK Verifier to check the integrity of those computations.

Benefits of ZK-STARK

ZK-STARKs provide unique benefits:

Scalable

ZK-STARKs demonstrate quicker proof generation and verification for larger witness sizes. The scalability of zk-STARK is contingent upon three critical factors:

• the complexity of the prover
• the complexity of the verifier
• the complexity of the communication

These dimensions and other factors collectively determine the efficiency and pace of zk-STARK’s operation. The computational resources and time necessary for the prover to produce a proof are called prover complexity. Verifier complexity is the amount of time and computational resources required for the verifier to validate the prover’s proof. Communication complexity is the quantity of data exchanged between the prover and the verifier during proof verification. ZK-STARK is intended to be simple in terms of communication.

Transparent

ZK-STARKs generate public parameters using publicly verifiable randomization, which reduces reliance on centralization and enhances transparency. zkSTARK eliminates the necessity for a trusted preparation phase by employing publicly verifiable randomness to generate the parameters used in the proof system. The system is rendered more transparent, and the absence of a trusted configuration phase in zkSTARK eliminates the risk associated with compromised participants.

Post-Quantum Security

Quantum computing is a paradigm that utilizes the principles of quantum mechanics to process information in a manner that is impossible for classical computers. This is known as post-quantum security. This property enables quantum computers to execute specific categories of calculations exponentially faster than classical computers. zkSTARKs are engineered to be impervious to attacks from quantum computers, which can compromise specific cryptographic schemes. zkSTARKs offer a more effective defense against the menace of quantum computing advancements.

What is the STRK token?

STRK is the mechanism for paying fees to enable network operation, maintaining and securing the network by allowing staking for consensus and deciding on Starknet’s values and technology objectives by voting for governance proposals.

Initially, Starknet fees were only paid in Ether (ETH) for the use of STRK as a transaction fee. STRK and ETH are the current methods of payment for network transaction fees. The receiving sequencer converts a portion of the fees paid in STRK to ETH to cover Ethereum L1 gas costs. These costs are required to be paid in ETH due to the Ethereum protocol guidelines.

Due to the introduction of staking mechanisms, users could secure their STRK tokens to support network operations and receive rewards. To provide coverage for staking purposes, staking STRK is necessary for certain services essential to the security and functionality of Starknet. Multiple providers for sequencing, data availability provisioning, STARK-proving services, and temporary L2 consensus may exist before L1 finality.

A minimal token support threshold may be necessary for proposals to enhance Starknet. Voting, either directly or through delegation, will be required to implement changes to the protocol that are critical to its security, functionality, and upkeep.

Fund Raising and Investors

StarkNet has 33 investors, including Sequoia Capital and Paradigm as the lead investors. Other notable investors include Tiger Global, Greenoaks, Coatue, Multicoin Capital, Vitalik Buterin, ConsenSys, and Polychain Capital. To date, StarkNet has raised more than $250 million. The company raised $100 million in May 2022, increasing its valuation to $8 billion from $2 billion. Sequoia Capital led the round, preceded by a $50 million Series C funding round headed by Alameda Research and Founders Fund in November 2021. DVCV and Wing VC led StarkNet’s Series B funding round on March 24, 2021, which resulted in a $75 million investment. StarkNet secured $30 million in the Series A round in September 2018, with Paradigm as the lead investor.

Distribution and Supply

StarkWare initially generated ten billion Starknet tokens in May 2022, minted on the blockchain on November 30, 2022. The distribution of the ten billion tokens that are currently in existence has been or is intended to be as follows:

All tokens allocated to investors and early contributors are subject to the following lock-up schedule, where percentages are based on the total token supply, to align long-term incentives with Starknet community interests:

• Starting April 15, 2024, up to 0.64% (64 million tokens) will be unlocked on the 15th of each month until March 15, 2025, totaling 7.68% (768 million tokens).
• Starting April 15, 2025, up to 1.27% (127 million tokens) will be unlocked on the 15th of each month until March 15, 2027, totaling 30.48% (3.048 billion tokens).

How Does StarkEx Work?

StarkEx is a scalable engine specifically engineered to address the unique requirements of applications, including gaming and DeFi. There are two distinct methods for implementing the layer two solutions: ZK -Rollup or Validium data availability. When StarkEx is in “rollup mode,” Ethereum is updated to reflect changes in user balances. The data is published in “validium” mode to the Data Availability Committee (DAC), a group of trusted administrators. An external component and an on-chain component comprise this system. The external or off-chain component maintains the status, executes the transactions, and transmits the status update to the on-chain component. Additionally, this component is accountable for the system’s state and assets and confirmation transfer. The following are the procedures that StarkEx employs:

Validating

The operator (e.g., an exchange) processes user transactions transmitted to the StarkEx service. StartEx validates the transactions in two stages: sequential validations and parallel stateless validations such as value ranges and formatting. The response latency is 100-200 milliseconds for up to 1,000 transactions sent in parallel.

After the gateway confirms that the transaction has passed initial validation, the user can be certain that the transaction will be executed and that the transaction is complete. Users can present the transaction as a whole in the application’s interface without waiting for finalization onchain.

Batching

StarkEx validates and batches all transactions according to more intricate criteria. Because the antecedents of a transaction frequently determine its validity, this validation stage is sequential rather than parallel. Each validated transaction is grouped into a batch by the StarkEx service, which updates the pertinent balances. The observable latency of this validation phase can be a few minutes or as high as four hours, depending on when the transaction is inserted, at the end or commencement of the queue.

Generating Proof

The StarkEx service generates a STARK proof that attests to the validity of the transactions in the batch and transmits it on-chain after batching the transactions.

On-chain verification

An on-chain verifier smart contract receives the STARK proof after generating proof of the validity of the intended transactions on-chain. A commitment to the new balance states is stored on-chain after the proof is verified.

StarkEx Application and Data Availability

StarkEx provides developers with applications to integrate their own StarkEx with their applications. StarkEx is employed by prominent industry players, including Sorare, Dydx, Immutable X, Opera, and DeversiFi. When the developer commences working with StarkEx, they are granted their L1 StarkEx contract and a StarkEx instance on the testnet. However, users must be aware that they can retrieve their funds at any time if the application is not functioning correctly and that they have control over their funds.

In light of this, StarkEx provides two distinct approaches for implementing layer two solutions: ZK -Rollup or Validium data availability. StarkEx applications must maintain constant availability of user data to ensure self-custody, redundancy, and trustlessness. Data availability guarantees that the state stored in the users’ vaults is fully synced with the state maintained by StarkEx, and the complete balances tree is perpetually accessible, ensuring users may verify their custody of cash if StarkEx ceases to operate.

Data Availability Mode

StarkEx accommodates the following data availability modes: ZK-Rollup and Validium, which StarkEx Perpetual and StarkEx Spot endorse. The Volition mode, which allows the utilization of both ZK-Rollup and Validium vaults within your application, enables users to select the vault range for each asset they possess. also allows for data storage. However, it is less popular than the previous option, as only StarkEx Spot exclusively supports it.

Zero-Knowledge Rollups

Zero-knowledge rollups, or ZK-rollups, employ advanced cryptography and mathematics termed “zero-knowledge proofs” to authenticate the legitimacy of each transaction. ZK rollups are the favored Ethereum scaling solution among advocates of decentralization and security. StarkEx and zkSync exemplify Layer 2 solutions employing zero-knowledge rollups. In the StarkEx ZK-Rollup, the Cairo program guarantees that the necessary data for reconstructing the L2 balances Merkle Tree is disseminated on-chain as calldata.

While a ZK-rollup is happening, the operator creates a validity proof (SNARK or STARK) for the state root. This shows the rollup smart contract on Ethereum that the received state root came from a valid set of transactions. This renders it impossible for the operator to transmit an invalid state root. ZK-rollups employ two forms of validity proofs: SNARK and STARK. ZK Sync, Scroll, and Polygon ZkEVM utilize SNARKs, whereas StarkNet and StarkEx employ STARKS.

ZK-Rollup operates without the necessity of trust. All requisite data for reclaiming user funds during an escape event is accessible and transparent on the blockchain. Despite this advantage, the drawback of this mode is that every vault modified in the batch incurs a gas fee. In batches when numerous vault states alter, the expense of a state update event predominantly pertains to data availability rather than proof verification.

Validium

The alternative data availability mode is Validium. A cryptographic proof verifies that the computation was executed accurately in this data mode. In the utilization of Validium vaults, users’ balances remain undisclosed on-chain. Instead, they are dispatched to several reputable and reliable entities, such as the Data Availability Committee (DAC) members. A state update reflecting the revised balances of all client accounts post-transaction batch processing is deemed genuine and accepted on-chain only if a quorum of committee members endorses the state update. They formally confirm that they know all the updated vault balances and that the availability verifiers have mandated the new status.

In contrast to ZK-rollups, which incur gas fees, payment for on-chain data is unnecessary. During the update of the on-chain state, most gas is expended on proof verification. Confidentially, users’ balance information is maintained off-chain by a committee of trusted entities rather than on-chain. The disadvantage of this option is that employing a DAC necessitates faith in the committee members.

About The Data Availability Committee (Validium only)

A DAC comprises a collective of individuals or organizations. The DAC members pledge to deliver redundancy and trustlessness in data storage for StarkEx-powered applications, ensuring constant data availability. DAC members are autonomous third parties that consent to receive and retain each state update on behalf of the operators. A DAC member pledges to publish the state updates on-chain if an operator (or StarkWare) becomes offline, ensuring that users can consistently access their funds, which is essential for self-custody. The DAC comprises Consensys, Chainstack, StarkWare, and numerous other esteemed entities.

Conclusion

StarkEx is a collection of critical tools a project can utilize to attain cost-effective off-chain computing. The L2 solution offers scalability, reduced gas prices, and security yet possesses distinct operational requirements and interoperability frameworks.