How to Use Layer-2 Solutions to Save on Ethereum Fees: StarkWare
Over 7,000 decentralized applications (dapps) are currently operating on the Ethereum (ETH) network. However, the Ethereum network was not originally designed for such a workload. Ethereum dapps have suffered from the chain’s scalability issues, which have caused transaction speeds to slow down and gas fees to skyrocket.
Layer-2 scaling solutions are being deployed to address these issues. Starkware is one of the most promising ones.
What is Starkware?
StarkWare, founded in January 2018 by Eli Ben-Sasson, Uri Kolodny, Michael Riabzev, and Alessandro Chiesa, is a developer of layer-2 scaling services that allows for high throughput and reduced transaction fees on layer-1 blockchains.
Layer 1 (L1) is the base protocol (the Ethereum blockchain), while Layer 2 (L2) is any protocol built on top of Ethereum.
In addition to improving scalability, Starkware also brings increased privacy to Ethereum using its STARK technology, which includes products like StarkEx and StarkNet.
StarkEx is a layer-2 scaling engine built with Cairo and SHARP that helps scale cryptoasset exchanges and non-fungible token (NFT) platforms via ZK-Rollups (Zero-Knowledge Rollups). It can handle spot and derivative trading, payments, and NFTs minting. DiversiFi, dYdX, Sorare, and Immutable X have all deployed StarkEx on their platforms.
According to Starkware's website, StarkEx has USD 1.1bn in total value locked (TVL), settling USD 426bn worth of trades and facilitating about 123m transactions. These transactions were processed for minimal fees.
StarkNet is a decentralized and trustless layer-2 STARK-based ZK-Rollup that allows developers to create and run smart contracts on its platform. Decentralized applications can be deployed independently on StarkNet just like on Ethereum for extremely low fees with increased speed and high throughput. StarkNet also aims to be interoperable with the Ethereum main chain and other layer-2 solutions, enabling liquidity for the general layer-2 crypto market.
Beyond scalability, the technology behind Starkware's products is aimed at retaining security even when quantum computing becomes mainstream. This addresses concerns raised about the security of public-key cryptography employed in many cryptoassets when faced with an attack of the immense power of quantum computing. Starkware uses lightweight cryptographic hash functions, which makes its products fast and quantum-secure.
How does Starkware work?
To understand how Starkware works, we need to first explore how the technology behind its two major products work, these being StarkEx and StarkNet.
StarkEx and StarkNet are based on ZK-STARKs (Zero-Knowledge Scalable Transparent Arguments of Knowledge) and ZK-Rollups.
ZK-STARKs enables users to share and prove the authenticity of a data computation publicly without revealing the contents of the data. It's like allowing third parties to verify your banking information without revealing it to them. ZK-STARKs are an improvement of the so-called zk-snarks, as the latter requires a trusted third party to set up the proof system, hence, leaving a possibility for that trusted third party to compromise the privacy of the system.
ZK-STARKs, on the other hand, remove the need for a trusted third party to set up the proof system, enabling the sharing of data to be decentralized and trustless.
One of its benefits for blockchain systems includes improving scalability by taking smart contracts computation and storage off-chain for the STARK system to generate proofs with leaner cryptographic hash functions. These proofs are then sent on-chain to the blockchain network for verification -- in turn, increasing transaction speed and reducing costs for users.
ZK-Rollups are layer-2 scaling solutions utilized by StarkEx for increasing throughput and speed on the Ethereum network. ZK-Rollups bundle/rollup hundreds of transactions off-chain into a single transaction and generate a SNARK (succinct non-interactive argument of knowledge) proof that is posted to the main chain for verification. This reduces the number of transactions being processed on the Ethereum main chain and, in turn, reduces gas fees.
However, the ZK-Rollup utilized on Starkware generates a STARK proof instead of SNARK that is sent to the main chain for validation.
How does Starkware differ from other Ethereum layer 2 scaling solutions?
Starkware's difference compared to other Ethereum layer-2 solutions is seen in the combination of ZK-Rollups and its invented ZK-STARKs.
The three layer-2 scaling solutions utilized by most Web 3 platforms are Plasma, Optimistic Rollups, and ZK-Rollups. Plasma and Optimistic Rollups both scale the Ethereum network using fraud proofs. However, fraud proofs usually take a very long time to confirm withdrawal requests from users. Their computation is complex and comes with big data sizes.
ZK-Rollups -- zk-SNARKs in this case -- address this challenge, through validity proofs that allow instant withdrawals and reduce data size. Although it comes with a downside.
Before now, typical layer-2 ZK-Rollups are unable to execute smart contracts, which facilitate decentralized applications. However, the emergence of Starkware's STARK is beginning to change the outlook.
ZK-SNARKs reduce data size and use elliptic curve cryptography for privacy, Starkware solutions use cryptographic hash functions, which makes it quantum-resistant and trustless. But its STARK-based proofs usually have larger proof sizes, making them more expensive to verify.
Who is already using Starkware?
Numerous notable dapps are already using StarkWare’s scaling solutions to provide a better product for their users.
DiversiFi: a decentralized exchange that allows you to invest, trade, and swap tokens on Ethereum without paying the expensive gas fees required by the network. DiversiFi makes use of the innovative StarkEx scaling solution to provide high-speed, low-latency, and gas-free self-custodial trading.
dYdX: one of the most popular decentralized exchanges (DEXes) in the crypto market, offering autonomous derivatives trading. dYdX offers layer-2 perpetual smart contracts via the StarkEx scalability engine, enabling traders to enjoy reduced gas and trading fees, more trading pairs, reduced minimum trade size, instant trade settlements, higher leverage, and lower liquidation penalties.
Sorare: a fantasy football NFT gaming platform on the Ethereum network that allows users to buy, sell, trade, and manage a virtual football team with digital players. StarkEx allows instant offers, rewards, claims, and transfers on Sorare while also reducing gas fees.
To learn more about how to reduce Ethereum gas fees using an L2 solution, check out the first piece of our layer-2 scaling solution covering Arbitrum.
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