What Is Starknet? A Complete Guide

After helping Ethereum scale and bring more apps and people to its ecosystem, Starknet is now aiming to do the same with Bitcoin. With a mission of becoming Bitcoin’s execution layer, Starknet wants to usher in a new era of user-friendly Bitcoin DeFi. 

This guide will walk you through what Starknet is, how it works, its native token STRK, and the role it could play in the future of BTCFi.

TL;DR

• Starknet is a zk-STARKS-powered Layer 2 solution that already helps Ethereum scale and is now working towards becoming Bitcoin’s execution layer.

• Once Starknet goes live on Bitcoin, it's expected to expand Bitcoin DeFi, bringing more apps, protocols, and people to this ecosystem.

• Starknet and Xverse integration will allow you to acquire STRK, the native token of Starknet, and explore everything Starknet-powered DeFi will have to offer. 

What Is Starknet?

Starknet is a validity rollup-based Layer 2 solution that uses zero-knowledge Scalable Transparent Arguments of Knowledge (a.k.a. zk-STARKS). This allows it to prioritize privacy, scalability, and security for DeFi.

Though it was originally developed as an L2 for Ethereum, Starknet has set its sights on Bitcoin next. Through the partnership with Lombard Protocol, it is about to become Bitcoin’s execution layer, opening new possibilities for Bitcoin DeFi.

Moreover, Starknet aims to bring you DeFi products and services on the most prominent blockchain ahead of the possible launch of covenants on Bitcoin, which help define how BTC can be spent. 

This way, you could get a taste of what more user-friendly, trustless Bitcoin DeFi can look like.

How Does Starknet Work?

Starknet is a multilayered system that works by bundling individual transactions into one off-chain computed STARK proof (instead of processing every one of them directly on Layer 1). Subsequently, this proof is submitted as a single transaction to the main blockchain, which was originally Ethereum and is anticipated to include Bitcoin in the future.

This leads to a significantly higher throughput without clogging up the network, faster transactions, and lower fees for you. At the same time, it helps retain the powerful security of the underlying blockchain.

To do this, Starknet uses the Cairo Virtual Machine, which helps generate STARK proofs.  Cairo acts as a virtual CPU and serves as a unified Algebraic Intermediate Representation (AIR), which articulates the network’s computations.

STARK Proofs

Starknet deploys StarkWare Industry’s trustless zk-STARK proofs–first introduced in 2018– for verifiable computation. They’re designed to transmit only critical information about the block and the proof to the blockchain, where it is verified with less computational effort. 

Compared to the older zk-SNARKs, zk-STARKs don’t require trust in a centralized party during their setup. However, Starknet itself is not yet fully decentralized.

Using two key components–sequencers and provers–a zk-STARK mathematically validates transactions, creates a STARK proof, and then interacts with the mainnet, where it records transactions.

Technical Architecture

Starknet’s STARK-based L2 architecture consists of several major components:

Sequencers

Once transactions are submitted to Starknet (as they would on the mainnet), they first go to a gateway, where they're validated, and then the sequencer orders, executes, batches them, and produces blocks, before passing the process to the prover. 

Sequencers operate similarly to Ethereum's validators and Bitcoin miners and provide transaction capacity. It allows validity rollups to process more transactions while maintaining the security of the underlying network. Starknet aims to make its sequencers more decentralized.

Provers

Further guaranteeing the validity of transactions in a block, provers check the work of the sequencers and confirm whether the first line of verification did everything right by generating proofs.

If everything is correct, these proofs are sent to the underlying blockchain, where they're validated once again and added to the chain. Meanwhile, the system is designed so that it can distribute all the work among many provers, helping to process your transactions faster. 

Nodes

Starknet nodes audit the network, maintaining its state. However, contrary to Bitcoin and Ethereum, they don't need to process all transactions. At this stage, nodes can keep track of the network's state by replaying old transactions, relying on L2 consensus, or checking proof validation on the base chain.

Each of these methods has its own hardware requirements and trust assumptions. For example, if your hardware is able to replay all transactions, you can get the role of the sequencer on the Starknet network.

Starknet OS

Next, the Starknet operating system (SNOS) is designed to verify the validity of blocks. This program is responsible for updating Starknet’s state on the underlying blockchain, meaning that this is the final gatekeeper that decides whether a transaction was executed correctly. 

For example, this system prevents an ill-intended sequencer from producing the proof for a malicious block.

Cairo Programming Language

Cairo is Starknet's native coding language, intended to make development more accessible to programmers. 

Designed specifically for STARK proving, even on untrusted machines, it’s ideal for seizing the benefits of algebraic proof systems and helping to make computation and verification more efficient.

Strongly inspired by the Rust programming language, Starknet's language is built on STARK technology, an evolution of PCP (Probabilistically Checkable Proofs) that transforms computational claims into constraint systems. Cairo's final purpose is to generate these mathematical proofs that can be verified efficiently and with certainty.

Native Account Abstraction

Account abstraction (AA) is the solution developed to address the security and user experience limitations that stood in the way of blockchain reaching a wider audience. 

It’s a software layer that enables ‘smart’ crypto accounts with a smoother, Web2-like user experience.

On Starknet, account abstraction is native, which means that every account is a smart contract by design. This allows wallet builders to provide you with advanced UX features.

What Is the Role of the STRK Token in the Starknet Ecosystem?

The role of the STRK token in the Starknet ecosystem is threefold. It’s used for payment of fees, governance, and staking. 

• Transaction fees: Like with other blockchain networks, on Starknet, you pay fees to submit and process transactions.

• Governance: STRK can be used to participate in the protocol’s community governance. This is done by ‘wrapping’ STRK and turning it into vSTRK (voting STRK).

• Staking (planned): STRK token is planned to be used as part of a future staking mechanism in the upcoming Proof-of-Stake (PoS) network. Meanwhile, on a similar note, BTC staking on Starknet is targeted for Q3 2025.

Starknet Vs. Other Rollup Layer 2s: A Detailed Comparison

What Are the Advantages of Starknet?

Starknet stands out with its native account abstraction, transparent zk-STARKs, and the upcoming Bitcoin support. 

As such, it is a rare combination in the current Layer 2 environment. Thanks to its unique architecture, it improves scalability, security, and privacy for blockchain applications.

By processing transactions off-chain and submitting proofs to the main chain, it substantially reduces network congestion and usage fees. 

Additionally, Starknet aims to become Bitcoin’s execution layer, enabling superior, trustless DeFi capabilities, even before important upgrades like covenants.

Xverse and Starknet: A Seamless Gateway to Bitcoin DeFi 

With the Starknet integration on Xverse, you’ll gain access to all the above benefits of Starknet’s Layer 2 protocol and experience a next-level version of Bitcoin DeFi. That means lower costs, higher speeds, better user experience, and a host of new DeFi opportunities.

Together, Xverse and Starknet are ushering in the next era of Bitcoin DeFi, transforming at the core how you interact with and utilize your Bitcoin assets. 

Using Xverse, you’ll be able to comfortably farm yield, stake, borrow, lend, and perform other Bitcoin DeFi services in the Starknet ecosystem.

Download Xverse wallet today and get ready to explore a more powerful, unified Bitcoin DeFi experience with Starknet.

FAQs

Who is behind Starknet?

Starknet was developed and launched by StarkWare Industries, a software company known for its zero-knowledge proof-related work. StarkWare had previously launched StarkEx, a proprietary scaling engine on Ethereum.

To fulfill the vision of Starknet’s decentralization proposal, its creators set up the Starknet Foundation in 2022. This organization provides independent community governance, structure, and support for the Starknet project.

Does Starknet have a coin?

Starknet has its native STRK token. The STRK token powers the Starknet ecosystem by enabling you to pay transaction fees, participate in governance, and more. STRK staking is also coming to the network. Starknet integration with the Xverse wallet will also allow you to buy STRK on this app.

Is Starknet L1 or L2?

Starknet is a Layer 2 scaling solution that uses zk-STARK rollups to transfer the processing of transactions off-chain. It helps increase their speed and decreases their cost. It was originally developed for Ethereum but is expanding its support to Bitcoin.

Instead of processing every transaction on Layer 1, Starknet groups them into a single cryptographic proof using its zk-STARK technology. Then, it submits the proof to the base chain as one transaction, reducing congestion on the mainnet, facilitating faster transaction speeds, and lowering the costs.

Is Starknet secure?

Yes. Starknet is considered to be a secure network, as its security model is based on zero-knowledge STARKs. It verifies computations without revealing sensitive data. As such, zk-STARKs are considered to be cryptographically stronger and more future-proof than zk-SNARKs.

Moreover, all transaction data is last verified on Ethereum or, in the future, on Bitcoin, making sure any malicious actions are rejected on the main chain. Additionally, the use of sequencers,  provers, and Starknet OS within the architecture strengthens transaction integrity and auditability, creating a multilayered defense system.

What is Starknet used for?

Starknet’s role is to scale blockchain applications and bring advanced DeFi capabilities to both Ethereum and Bitcoin. It does this by enabling fast, low-cost, and secure smart contract execution off-chain, as it maintains the underlying security of Layer 1 at the same time. Starknet's ecosystem already consists of DeFi, entertainment, infrastructure, and other dApps.