Why StarkWare Faces Backlash Over Token Design
15 July 2022 - 2:52AM
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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”. Related Reading | Polygon Climbs 20% On Disney
Glee – Can MATIC Sustain Gains This Month? 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. 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. Related
Reading | Upcoming ETH Merge Sees Institutional Investor
Sentiment Turn Positive At the time of writing, Ethereum (ETH)
trades at $1,140 with a 7% profit in the last 24 hours.
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