Why StarkWare Faces Backlash Over Token Design

Reynaldo Marquez

2 years ago

3 mins read

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Ethereum second layer scalability company StarkWare confirmed the rumors about the upcoming launch of the StarkNet token. The asset is aimed at enabling the project to operate a decentralized ecosystem and to create an effective mechanism to “direct its evolution”.

The StarkNet is an Ethereum second layer scalability solution based on Zero Knowledge (ZK) Rollup technology. This provides decentralized applications (dApps) with “unlimited” scalability without compromising security, decentralization, and composability.

The StarkNet Token was designed to power and incentivized the key elements on this network. The announcement claims these are StarkNet’s users, operators, and developers.

In that sense, the company has implemented a fee structure and token minting mechanism to prevent “speculative manipulation”, with “largely automated” processes, and a track record of efficient functionality across other blockchains.

The announcement is very explicit about the important roles of Operators and Developers. Thus, these components of the StarkWare ecosystem will receive a portion of the StarkNet token.

For example, smart contract developers will be rewarded with a portion of the fees paid by users for leveraging L1 and L2 smart contracts. This process will be automated, according to the design explained above.

The more a project or smart contract provides value to the StarkWare and the StarkNet ecosystem, the more developers will be rewarded with a “larger portion of tokens allocated for this purpose”. The company clarified that the token allocation mechanism is “yet to be determined”, but they will make a big emphasis on preventing “gamification” and be transparent about this process.

Furthermore, the company said that the StarkNet token won’t have a fixed supply. On the contrary, the supply “will increase over time”. The minting schedule is also to be determined by the StarkNet community.

#StarkNet Alpha was launched on Ethereum Mainnet in November 2021.
✨
Now it’s time to advance its decentralization as demanded of an L2 on Ethereum.
✨
Here’s our decentralization proposal, introducing the StarkNet Token, and the StarkNet Foundationhttps://t.co/zk33gANsin pic.twitter.com/YTd0Uj5NbW

— StarkWare (@StarkWareLtd) July 13, 2022

StarkWare Token Allocation Disincentives “Speculation”?

The company claims it has minted ten billion StarkNet tokens. As seen below, these tokens will have the following allocation: 32.9% for “Core Contributors”, 50.1% to be granted by StarkWare to the recently created StarkNet Foundation, and a 17% for StarkWare investors.

StarkWare StarkNet Token Ethereum — Source: StarkWare via Medium

The StarkNet Foundation token allocation will be split with 18% destined for Community Provisions and Community Rebates. These tokens will reward key community members and users “who performed work for StarNet”.

The latter is key in the entire allocation for the StarkNet tokens, the project is set at rewarding work and preventing people from speculating and “gamifing” the mechanism. As the announcement said there will be “no shortcuts to receiving tokens”. StarkWare said the following on its lockup and vesting periods:

To align long-term incentives of the Core Contributors and Investors with the interests of the StarkNet community, and following common practice in decentralized ecosystems, all tokens allocated to Core Contributors and Investors will be subject to a 4-year lock-up period, with linear release and a one-year cliff.

Some members of the crypto community disagreed with the token allocation claiming users and operators, allegedly two major components of the ecosystem, will not receive proper compensation. For StarkNet users, the company recommends the following in light of the upcoming token launch:

If you are an end user, use StarkNet — but only as it serves your needs today. Use it for those transactions and applications that you value, not in expectation of any future reward of StarkNet Tokens.

At the time of writing, Ethereum (ETH) trades at $1,140 with a 7% profit in the last 24 hours.

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

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