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StarkEx is a Layer 2 scaling engine running on the ETH mainnet, developed by StarkWare, designed specifically for Cryptocurrency exchange. It enables exchanges to conduct a large number of non-custodial transactions at lower costs and higher Liquidity. Currently, StarkEx supports ETH, ERC-20, and ERC-721 Tokens, and can easily accommodate other EVM-compatible Blockchain Tokens.

Introduction to StarkEx

StarkEx is a framework designed to help develop specific applications and licensed scaling solutions. It is a scalable engine designed specifically for the unique needs of applications, especially in the gaming and Decentralized Finance (DeFi) fields. StarkEx is a Validium Layer 2 scaling engine on the Ethereum mainnet, optimized for specific licensed Dapps. Projects such as dYdX, ImmutableX, and DeversiFi are using StarkEx to implement their ideas, mainly focusing on trading applications. Most protocols are built on this specific Layer 2, which is responsible for generating actual volume and executing trades. By adopting STARK Zero-Knowledge Proof technology, StarkEx provides scalable non-custodial trading functionality for Cryptocurrency exchanges.

StarkEx Background

StarkEx is a mature platform, which has been running on the ETH mainnet since June 2020, and adopts a Software as a Service (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 is a co-inventor of STARK, FRI, and Zerocash, and also the founding scientist of Zcash. Since obtaining a Ph.D. in theoretical computer science from the Hebrew University in 2001, he has been devoted to research in cryptography and Zero-Knowledge Proof.

Uri Kolodny is a serial entrepreneur who co-founded several technology companies, such as OmniGuide and Mondria. Michael is a co-founder of StarkWare, responsible for developing and implementing the zk-STARK system for zero-knowledge computation integrity. Alessandro is also a co-founder of StarkWare, participated in the invention of the Zerocash protocol, and wrote Libsnark, a leading open-source zero-knowledge proof tool.

Starkware is a leader in the field of zero-knowledge-based rollup design. Application instances deployed on StarkEx include dYdX (perpetual trading), Immutable and Sorare (Non-fungible Token minting and trading), DeversiFi (Spot trading), and Celer (DeFi pools). Prior to its official deployment on the Mainnet, StarkEx processed over 50 million transactions on public and private ETH testnets.

Starkware Products: StarEx, StarkNet, and ZK-STARK

STARK (Scalable Transparent Argument of Knowledge) is a proof system designed to support verification and confirmation of computations. It is capable of handling complex computations, generating proofs of correctness for computation results, and completing proof verification in a few steps. StarkWare offers two STARK-based Ethereum (ETH) scaling solutions: StarkEx and StarkNet.

StarkEx

StarkEx is an ETH extension solution designed for specific applications, aimed to reduce costs and increase the transaction speed of integrating DApps. The StarkWare team is responsible for managing StarkEx, which officially launched on the Mainnet in June 2020. StarkEx improves the efficiency of ETH by merging multiple transactions into one Block. It utilizes a technology called zero-knowledge rollup to provide mathematical proof of transaction validity. Depending on the specific application requirements, StarkEx can achieve transaction processing speeds of 15,000 to 50,000 transactions per second (tps).

StarkNet

The StarkWare team has also developed StarkNet, which launched its alpha mainnet in November 2021. Unlike StarkEx, StarkNet is not directly supervised by the StarkWare team. StarkNet is a Decentralization ETH 2nd layer scaling solution, similar to public networks like Ethereum, and requires no permission.

Through zero-knowledge (zk) technology, StarkNet improves the user experience on ETH network and drops the cost of use. StarkNet uses a native programming language called Cairo. An important feature of this protocol is support for account abstraction, allowing users to manage their accounts through Smart Contracts. Currently, the Total Value Locked (TVL) in the StarkNet ecosystem is $251.95 million.

StarkEx and StarkNet

StarkEx and StarkNet are both extension solutions based on STARK technology. They both offer scalability, low gas fees, and security, but differ in terms of interoperability modes and operational requirements. StarkEx may be more suitable for primarily self-contained applications and is compatible with the API provided by StarkEx. On the other hand, StarkNet may be more suitable for those who need to interact synchronously with other protocols or have requirements beyond StarkEx's protocol.

Unlike StarkEx, where applications are responsible for sending transactions, in StarkNet, the sequencer batches transactions and sends them for processing and verification. (StarkWare is currently operating the sequencer for StarkNet in order to achieve decentralization in the future.) StarkNet supports the rollup data availability mode, which writes the rollup state together with the STARK proof to Ethereum.

StarkEx Features

StarkEx provides an extension solution with high throughput, low gas fees, comparable security to Ethereum, self-custody, fast integration, and many other features and advantages. StarkEx enables Smart Contracts to execute arbitrary logic for specific use cases such as transactions and Non-fungible Tokens (NFTs).

Data Availability: Rollup and Validium

This feature allows transactions to be executed on Sidechain (such as StarkEx) instead of on-chain like Optimistic Rollup, following the Validium protocol. ZK Rollup significantly reduces the bridge time between L1 and L2 from one week to a few minutes.

Volition

StarkEx does not restrict users to specific data availability options. Users can choose between Rollups and Validium according to their security needs and gas costs, for customized transactions.

Large-scale Expansion

The great scalability potential of StarkEx comes from the asymmetric computation allocation between off-chain validators and on-chainvalidators. Off-chain validators are responsible for processing a large number of transaction batches and generating STARK proofs, while on-chainvalidators evaluate the STARK proofs through a series of computation programs. This makes it possible to achieve large-scale off-chain expansion, perform a large number of computations, and maintain its integrity on-chain with minimal processing requirements.

Self-hosted

StarkEx supports self-custody Decentralization applications, utilizing advanced anti-censorship technology to ensure that users always have control over their assets.

ZK-STARK

ZK-STARK is an abbreviation for 'Zero-Knowledge Scalable Transparent Argument of Knowledge'. StarkWare has developed ZK-STARKs, which use modern algebra and novel cryptographic proofs to protect the privacy and integrity of blockchain computations. ZK-STARK allows the blockchain to offload computation tasks to a separate off-chain STARK prover, which is then verified for integrity by on-chain STARK verifiers.

Advantages of ZK-STARK

ZK-STARK offers some unique advantages:

Scalability

When dealing with larger witness sizes, ZK-STARK can generate and proof of validation more quickly. The scalability of zk-STARK depends on three key factors:

• Complexity of the Prover
• Complexity of validators
• Complexity of Communication

These factors, along with other relevant factors, collectively determine the efficiency and running speed of zk-STARK. The computation resources and time required for proof generation by validators are referred to as validator complexity, while the complexity for validators' proof of validation refers to the time and resources required. Communication complexity refers to the amount of data exchanged between proof generators and validators during the proof verification process. ZK-STARK aims to simplify this communication process.

Transparency

ZK-STARK generates public parameters through publicly verifiable randomization, reducing reliance on centralization and enhancing transparency. zk-STARK utilizes publicly verifiable randomness to generate the parameters required for the proof system, eliminating the need for a trusted setup phase. This makes the system more transparent and eliminates the risk of compromise by participants.

Post-Quantum Security

Quantum Computing is a new paradigm for processing information using the principles of Quantum Mechanics, a processing method that classical computers cannot achieve, known as post-quantum security. Quantum Computers can perform certain types of calculations at an exponential speed, far exceeding the capabilities of classical computers. zkSTARK is designed to resist attacks from Quantum Computers, which may compromise certain cryptographic schemes, thus providing a more effective protection against the advancements in Quantum Computing technology.

What is STRKToken?

STRK is a mechanism for paying fees that supports the operation, maintenance and security of the network, achieves Consensus through stake, and governs the values and technical goals of Starknet through voting.

Initially, the cost of Starknet was paid only in Ether (ETH), with STRK being used as the transaction fee. Currently, STRK and ETH are the payment methods for Money Laundering on the network. The receiver sorter will convert a portion of the fees paid in STRK into ETH to cover the gas fees on the Ethereum L1, which must be paid in ETH according to the Ethereum protocol.

With the introduction of the stake mechanism, users can stake their STRKToken to support network operations and receive rewards. To ensure the effectiveness of the stake, certain services crucial to the security and functionality of Starknet require stakeSTRK. Before L1 finality, multiple providers may be responsible for ordering, data availability, STARK proof services, and temporary L2Consensus.

To enhance Starknet, it may be necessary to set a minimum Token support threshold. Voting, whether direct or delegated, is crucial for implementing changes to the security, functionality, and maintenance of the protocol.

Financing and Investors

StarkNet has attracted 33 investors, with Sequoia Capital and Paradigm as the main investors. Other notable investors include Tiger Global, Greenoaks, Coatue, Multicoin Capital, Vitalik Buterin, ConsenSys, and Polychain Capital. So far, StarkNet has raised over $250 million. In May 2022, the company successfully raised $100 million, increasing its valuation from $2 billion to $8 billion. Sequoia Capital led this round of financing, while in November 2021, Alameda Research and Founders Fund led a $50 million Series C financing. On March 24, 2021, DVCV and Wing VC led StarkNet's $75 million Series B financing. StarkNet raised $30 million in its Series A financing in September 2018, led by Paradigm.

Allocation and Supply

StarkWare first minted 10 billion Starknet Tokens in May 2022, and on November 30, 2022, the minting was done on the Block on-chain. The allocation of the existing 10 billion Tokens is as follows or is planned as follows:

All Tokens allocated to investors and early contributors will follow the Lock-up Position plan below, with percentages based on the total Token supply to ensure long-term incentives remain aligned with the interests of the Starknet community:

• Starting from April 15, 2024, up to 0.64% (64 million Tokens) will be unlocked on the 15th day of each month until March 15, 2025, totaling 7.68% (768 million Tokens) unlocked.
• From 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 StarkEx Works

StarkEx is a specially designed scalable engine aimed at meeting the unique needs of applications (such as games and Decentralized Finance (DeFi)). There are two main ways to implement layer 2 solutions: ZK-Rollup and Validium data availability. When StarkEx is in "rollup mode," the ETH network will be updated to reflect changes in user balances. Data is then released to the Data Availability Committee (DAC) in "validium" mode, which is a team composed of trusted operators. The system consists of off-chain and on-chain components. The off-chain component is responsible for maintaining state, executing transactions, and transmitting state updates to the on-chain component. Additionally, this component is responsible for system state and asset management as well as confirming transfers. The procedures adopted by StarkEx are as follows:

Verification

The operator (such as exchange) is responsible for processing user transactions sent to the StarkEx service. StarkEx's transaction verification is divided into two stages: sequential verification and parallel stateless verification, including checks for numerical range and format. For up to 1000 transactions sent in parallel, the response latency is typically 100-200 milliseconds.

Once the gateway confirms that the transaction has passed the preliminary verification, users can rest assured that the transaction will be executed and completed. Users can display the transaction in the application interface as a whole without waiting for the final on-chain confirmation.

Batch Processing

StarkEx will verify and batch all transactions according to more complex standards. Since the antecedents of transactions often determine their validity, this verification stage is sequential rather than parallel. Each verified transaction will be grouped by the StarkEx service into a batch and the relevant balances will be updated. The observable latency of this verification stage may range from a few minutes to four hours, depending on when the transactions are inserted, whether at the beginning or end of the queue.

Generate Proof

The StarkEx service will generate a STARK proof to verify the validity of transactions in a batch, and upload the proof to the on-chain after batch processing the transactions.

on-chain verification

After the on-chain verification, the Smart Contract will receive a validity proof for the transaction generated on-chain. Upon successful verification, the new balance state commitment will be stored on-chain.

StarkEx Application and Data Availability

StarkEx provides developers with tools to integrate their StarkEx into applications. Many well-known industry participants such as Sorare, Dydx, Immutable X, Opera, and DeversiFi are using StarkEx. When developers start using StarkEx, they will receive their own L1 StarkEx contract and a StarkEx instance on the test network. However, users should note that they can always withdraw their funds and have control over their funds if there are issues with the application.

Therefore, StarkEx provides two different methods for implementing Layer 2 solutions: ZK-Rollup or Validium data availability. StarkEx applications must ensure the continuous availability of user data to ensure self-custody, redundancy, and trustlessness. Data availability ensures that the state stored in the user's custody is fully synchronized with the state maintained by StarkEx, and the complete balance tree is always accessible, allowing users to verify their fund custody status when StarkEx ceases operation.

Data Availability Mode

StarkEx supports two data availability modes: ZK-Rollup and Validium, both of which are supported by StarkEx Perpetual and StarkEx Spot. The Volition mode allows the simultaneous use of ZK-Rollup and Validium vaults in applications, enabling users to choose the appropriate vault scope for each asset they own and supporting data storage. However, the popularity of the Volition mode is not as high as the former, as it is exclusively supported by StarkEx Spot.

Zero Knowledge Summary

ZK-Rollups utilize advanced cryptography and mathematical techniques called 'Zero-Knowledge Proofs' to validate the validity of each transaction. ZK-Rollups are the preferred Ethereum scaling solution for advocates of decentralization and security. StarkEx and zkSync are representative second-layer solutions that adopt ZK-Rollups. In StarkEx's ZK-Rollup, the Cairo program ensures that the data required to reconstruct the L2 balance Merkle tree is propagated on-chain as calldata.

During the ZK-rollup process, operators will generate validity proof (SNARK or STARK) for the state root. This proves to the aggregated Smart Contract on the ETH chain that the received state root comes from a valid set of transactions, preventing operators from submitting invalid state roots. ZK-rollups use two types of validity proof: SNARK and STARK. ZK Sync, Scroll, and Polygon ZkEVM use SNARK, while StarkNet and StarkEx use STARK.

ZK-Rollup operates in a trustless manner, and all the data needed to recover user funds in the event of an escape can be accessed transparently on-chain. However, a downside of this mode is that each vault modified in a batch incurs gas fees. In batches where multiple vaults change state, the cost of state update events is mainly related to data availability, not proof verification.

Validium

Validium is another data availability pattern. In this pattern, cryptographic proofs are used to ensure the accuracy of computation. In the Validium vault, users' balances are not publicly available on-chain, but are sent to multiple reputable and reliable entities, such as members of the Data Availability Committee (DAC). Only when the committee members reach the required number and support the state update, the updated balance state reflecting all customer accounts after the transaction batch will be considered valid and recorded on-chain. They will formally confirm their understanding of all updated vault balances, and the availability validators have approved the new state.

Unlike ZK-rollups that require payment of gas fees, Validium does not require on-chain data payment. During the on-chain state update process, most of the gas fees are used for proof verification. User balance information is maintained by a trusted off-chain entity committee, rather than on-chain. The drawback of this option is that using DAC requires trust in committee members.

About Data Availability Committee (Validium only)

The Data Availability Committee (DAC) is a collective of multiple individuals or organizations. DAC members commit to providing redundant and trustless data storage for StarkEx-based applications to ensure data availability. DAC members are independent third parties who agree to receive and retain each state update on behalf of operators. If the operator (or StarkWare) goes offline, DAC members pledge to publish the state updates on-chain, ensuring continuous access to user funds, which is crucial for self-custody. DAC members include Consensys, Chainstack, StarkWare, and several other well-known entities.

Conclusion

StarkEx is a series of key tools that projects can leverage to achieve efficient off-chain computation. The Layer 2 solution offers good scalability, gas cost drop, and security, but also has its unique operational requirements and interoperability framework.