Starknet’s TVL Drops Nearly 50%, What’s Going On?

The total value locked (TVL) in Starknet, a layer-2 scaling solution for Ethereum using ZK-Rollup, is down nearly 50%, L2Beat data on August 21 shows.

At this pace, the contraction in Starknet’s TVL is among the fastest in the layer-2 scene and stands at around $98 million. As of August 16, Starknet had a TVL of over $203 million and remained in the top 10 of the most popular layer-2 scaling options in Ethereum.

Starknet TVL
Starknet TVL: L2Beat

StarkNet’s TVL Dropping

Starknet uses zero-knowledge (ZK) in its rollups, meaning while the platform bundles transactions before confirming them on-chain, using zero-knowledge translates to better privacy. StarkWare, the team behind Starknet, also notes that the layer-2 solution is not ZK-EVM, meaning users must deploy all general-purpose smart contracts built using Cairo, a language designed specifically for ZK-Rollups solutions.

StarkNet’s activity has been rising steadily over the past year. However, general transaction processing speed (TPS) has been relatively lower than Ethereum’s. For instance, as of August 21, StarkNet had a TPS of 4.8 versus 10.9 in Ethereum though layer-2 is more scalable.

Ethereum’s TPS remains steady while, with rising activity, StarkNet’s has been increasing over the past few months, an indicator that the platform can adjust throughput as activity spikes. Overall, the layer-2 solution processed over 9.2 million transactions in the past 30 days, significantly lower than Ethereum, which, on average, processes over 1 million transactions daily, despite a drop in on-chain activity.

Starknet Activity
Starknet Activity: L2Beat

What could have triggered the sharp decline in StarkNet’s TVL is not immediately clear. As of August 21, there has been no reported hack on dapps deploying on layer-2 or a weakness reported directly impacting the platform.

However, there could be a correlation between the sharp drops in Ethereum prices with the contraction in the layer-2 platform’s TVL. Last week, Ethereum and crypto assets prices plunged. As witnessed in past months, price drops tend to adversely impact on-chain activity.

Ethereum price on August 21| Source: ETHUSDT on Binance, TradingView
Ethereum price on August 21| Source: ETHUSDT on Binance, TradingView

Decentralizing the Feeder Gateway

On August 20, Starknet decentralized its feeder gateway, a centralized portal through which users could query the layer-2 sequencer and understand the network’s state. With the feeder gateway decentralized, three nodes in Papyrus, a Starknet full node developed by StarkWare; Pathfinder, a Rust-based Starknet full node; and Juno, a Starknet full node written in Go, will take over, allowing for a more robust, fool-proof means of accessing the sequencer, according to an official announcement.

StarkWare developers said this decentralization would “significantly augment reliability and security.” Accompanying this update, StarkNet also improved the platform’s functionality by enhancing full nodes to support their JSON RPC protocol, simplifying interactions with the Starknet state. The goal is to streamline processes and further enhance user experience.

Feature image from Canva, chart from TradingView

#Starknets #TVL #Drops #Whats