L2 Wars — Why we chose to build on StarkNet?

AMA Recap — 25th May 2022

We co-hosted our first AMA with ZK Daily! During the AMA, we talked about a range of topics; right from building on L2, the StarkWare vision, how to engage and build a community with fair representation, and opportunities during the bear market for all.

ZKX and ZK Daily organized this Twitter Space and we were joined by:

  1. Eduard Jubany Tur, Founder of ZKX — a permissionless swap protocol on StarkNet
  2. Brian, Co-founder at zkLend — a money market protocol
  3. Motty — Founder at Braavos wallet
  4. Bran — Co-founder at Starkswap — an automated market maker

An overview of the questions asked during the AMA -

1. Aslee | ZK Daily: Why did you choose to build on StarkNet, and what is the competitive advantage of StarkNet compared to other layer 2 scaling solutions?

Eduard |ZKX: I think it's all about credibility and consistency of delivery. StarkWare has ZK-Rollups that have achieved high performance in various market conditions. As you know, StarkEx is a private rollup functioning with DeversiFI, ImmutableX, dYdX, and other projects that have proven reliable and are working well. This strongly signals that StarkNet could be one of the leading ZK-Rollups across the ecosystem. It's a matter of the ideals and vision of StarkWare to build tools for developers that will cater to a wider audience and expand the reach of web3 across the markets. For us, it's a mix of sound technology and unit economics that can be unlocked by using this technology.

Brian | zkLend: I think the technical capability and the execution have given us a very high level of confidence regarding the timeline and the product quality being launched. In addition, we see that the StarkNet ecosystem is attracting brilliant builders across DeFi, Gaming, NFTs, and social apps. So we see this as a core competitive advantage that we can attach ourselves with. Being a money market protocol, it's a primitive money lego of the network where it is an equal ecosystem infrastructure piece.

Our growth relies on the scaling of the network, so that's being built on with more builders, more users, and more TVL. We have this network effect as our core competitive advantage. Moreover, it's being built on StarkNet, and layer 2 unlocks the privacy and hyper-scaling layering. So with layer 3 being talked about, these are the things that institutions will be looking into and apply to us building Apollo.

2. Aslee | ZK Daily: So, what are the technical challenges you are facing while building in CAIRO?

Motty | Braavos: Actually Braavos is the second protocol that we build on top of StarkNet. The first one is mySwap, a classic AMM, and we started building that when CAIRO was version 4 or version 5. It was even more rudimentary than what we currently have, but I think the beauty here is the exponential growth that we see both in CAIRO's capabilities and CAIRO the language. There has been massive progress in the past 6–7 months, along with the community itself, with people building libraries and tools for CAIRO.

I can give a couple of anecdotes, so people will understand the path that the builders on CAIRO went through. For example, there was no classic math library for Cairo when we started. These are some of the things that you get natively from other languages. On the other hand, CAIRO is evolving rapidly, and new capabilities are being added frequently, which is very interesting. We need to adapt our contracts and software to a rapidly evolving environment.

Bran | Starkswap: The number of developers joining the ecosystem is growing exponentially. There's much more knowledge sharing and conversation between people solving similar issues. And as more & more people join, it's getting easier to stay up to date with things and have more resources to consult with when you do run into problems. In terms of the current challenge, it is a fact that everything is still being updated like the mainnet is on Alpha, the bridge opened last week, and added the gas fees in the previous version. So we constantly have to adjust certain things because it's rapidly changing.

Another issue, I think, is overall tooling. The equivalent tooling stack in Ethereum is not yet available on CAIRO. There are tons of amazing efforts to bring everything up the pace, but it's still not yet there. But that's getting better and better with time.

3. Aslee | ZK Daily: How do you align with the StarkWare vision, and what is the support from its ecosystem?

Eduard | ZKX: Upon our initial conversation with StarkWare, we understood that they are interested in a bigger vision of DeFi, as there is a massive pool of global internet users. Globally in crypto, we have about 200 to 300 million users. Out of those 200–300 million users, only a small portion of these users, about 10 to 20%, actually use DeFi. So the space for growth is still massive. The vision alignment here is to improve the overall user experience and architecture to be more accommodating, friendly, and accessible for all users who are not using DeFi.

As part of that, account abstraction is a big first step where you can allow all of these users to log in with their Gmail or Facebook accounts. That creates a more familiar experience for the user while still keeping in line with the tenets of decentralization and web3. Moreover, StarkWare is pushing the L3 narrative, which means there will be a need for different assumptions of trust and security according to each of the different applications being built. Over time, some folks might want to deploy directly on StarkNet, and some might want to deploy on their version of the ZK-Rollup connected by recursive proofs to StarkNet. There might be other assumptions that require fewer trust assumptions, and there can be more off-chain to on-chain connections. This is an important aspect here — How do we bridge the off-chain and the on-chain worlds? We know that this is something that the StarkWare team thinks a lot about because it will be a key aspect in the future to bring on the next wave of growth and users.

Now talking about the second part of your question, StarkWare is doing a great job supporting builders in the ecosystem. They support projects through connections, partnerships, and introductions. So overall, we feel that the value provided to the builders is really on point.

Brian | zkLend: I think we can leverage the synergy of the ecosystem in 3 different ways.

  • Firstly, because of our position as a money market protocol, we want to support the borrowing and lending of StarkNet native protocol tokens along with BTC, ETH, other major stablecoins, and blockchain tokens. This will attract more activity, more transaction volume, and a deeper liquidity pool for the whole ecosystem.
  • Secondly, I think StarkNet is emerging to become a gaming network with many on-chain games coming on board and many NFT ideas as well. We want to explore and experiment with how we can do lending and borrowing not just with tokens but also with NFTs. It will be interesting to explore if we can provide a borrowing or lending channel for them and help them leverage their existing resources and attach a DeFi component to it. Also, some of these NFT projects like Realms are making a metaverse of land for gaming. We can potentially look to develop a game NFT loan market for them where they can lend their NFTs to other users during the game and share the profit afterward.
  • Lastly, what we see in the market right now is the crypto derivatives market. I think the demand is both from the retail and institutional sides. We want to explore partnerships with protocols like ZKX to explore derivative financing in our future roadmap. It is an ambitious undertaking, but we want to venture into more exotic missions once the core product is completed and operational.

4. Aslee | ZK Daily: How does Starkswap differentiate from other AMMs in the market?

Bran | Starkswap: We support swapping not only volatile assets but also stable assets, which is a differentiator that we are building. But broadly, we aim to develop a multitude of products, not just a swap, and create a DeFi hub. To take that to the next level, we are trying to build a value exchange space for an AMM and implement more next-generation features such as order books or something related to privacy.

5. Aslee | ZK Daily: Can you share some specific features of the Braavos wallet?

Motty | Braavos: I know 80% — 90% of the adopters in the crypto market still use centralized solutions and haven't come into the decentralized realm. At Braavos, we are strong believers in decentralization and self-custody. We acknowledge that centralized solutions provide a better experience, and part of what we want to do at Braavos is to create the same user experience (from the classic web to the classic centralized solution into the decentralized and self custodial wallet), and StarkNet, with speed and low gas fees, allows us to do that. The great thing is that we have the account abstraction model, which are smart contracts representing the user's wallet, which opens a wide range of possibilities for us to create a better user experience for the end-users.

For your second question about the exchange, part of our plan is to integrate the various exchanges on StarkNet and touch upon DeFi features. Our current focus is on StarkNet, and we want to bring the StarkNet users the best experience possible. Once we achieve that, we will move on to other chains, or maybe StarkNet will take over the realm of L2 dominance.

6. Aslee | ZK Daily: How do you engage with the community and ensure fair representation in a DAO?

Eduard | ZKX: The biggest innovation in the history of corporations are the bearer shares, how they enabled a more liquid form of ownership of the value chains and the assets, and how the shares could be traded over time. Now taking a cue from that, in the last few years, we have seen the rise of governance shares, and these shares allow you to govern and have representation within a DAO and its underlying assets and activities. The issue we're facing across the ecosystem is that the ownership of these governance tokens tends to be concentrated towards whales and institutions, and it does not necessarily represent the actual users or value providers of these ecosystems and DAOs. We have heard from some of these DAO operators that they're trying to find solutions so that there's more skin in the game from the holders of these tokens, and the growth of the overall DAOs and protocols.

We want to change this and build a governance model that provides representation to everyone involved with a protocol and provides value to the protocol. Their governance share will reflect their overall stake and position within these open source systems. Our idea here is what we call Liquid Governance, where we separate the token from actual governance and representation within the protocol. You can lock your token, represent yourself, and vote and participate in the DAO.

This representation is not permanent. It goes away once you leave the protocol. At the same time, it allows the protocols building on StarkNet to have a more modular DAO governance system that includes all the different stakeholders and users that interact with the protocol itself. We are very keen on implementing this for ZKX initially, then making it open-source and accessible to the entire community. Thus, they will have different ways to govern their protocols within StarkNet through CAIRO smart contracts for governance. Over time, when we evolve towards these liquid governance models, they will be open, fair, and representative of the entire community.

Brian | zkLend: I think we share the same thought, and one of the goals is to get our community engagement with committees. As part of the evolving idea when we built the Artemis and Apollo, Artemis, you will see a lot of DeFi users on it and will have a lot of active participation from early adopters and actual people using it. But for Apollo, there will be a lot of institutions where they may not be in tune with, for example, how they see the protocol evolve and really into the operations side of things.

For us, the roadmap for the token utilities is that the token will serve as a governance token for the Artemis side first. For Apollo, once we have the launch partner up and running, along with the product going live and having a stabilized pool of institutions using it, we will select institutions to be a part of the committee.

The one way forward for us once we have these committees set up, we can start to have more members coming on to it and have a voting system.

7. Aslee | ZK Daily: Wen token?

Motty | Braavos: I don't have big news here, but I can share our general goals. The goal is to have the wallet not only self-custodial but also completely decentralized. And as we know, the best way to achieve the decentralization in crypto is via distribution of tokens, so that's the goal when it will happen and what will be the exact form in which it will take place. It's still a bit too early for us to articulate. Still, I think we will want to have as many stakeholders as possible and make sure that the community and the users of the wallet are part of the ones who shape its future going forward.

Eduard | ZKX: It's a secret, but it is coming. We cannot say exactly when, but we can tell you it will be sometime this year, and there will be a fair launch component. So there's a representation for the community on StarkNet and across Ethereum. An important factor for us is how token holders will have the ability to decide on listing assets within the ZKX protocol so token creators can make proposals to list their tokens as derivatives within ZKX. So we will bring more utility towards the overall growth of the ZKX protocol and let token holders potentially enable a secondary bribes market to create incentives for these listing proposals.

Brian | zkLend: For us, the token goes hand in hand with our development progress. The token utility will enhance our protocol, and that's the only reason for us to have the token is to support the product itself. So for our product development, the MVP launch on the testnet will be in the second half of June, and the mainnet is targeted for the end of Q2, and our token will be launched in that time frame as well. For the token utility, the first is for governance, the second is for the staking rewards, and the third is for distribution rewards like booster incentives for lending and borrowing activities.

Bran | Starkswap: We haven't released too much information on our token plans. I think the product needs to stand alone from tokens. The tokens need to be used properly to incentivize the various stakeholders, get good distribution to decentralize, and involve the community to take different roles.

8. Aslee | ZK Daily: What are the opportunities during the downtrend/ bear market as you see?

Brian | zkLend: There is less market noise, so I think fewer prospective projects are coming in, and the focus shifts back to the core fundamentals. So investors and users are focusing on the winning technologies; protocol, usability, user experience, and protocol safety. The protocol that focuses on these core fundamentals will gain a lot of community focus. The bear market is also good for building. I believe this is true because we see many protocols across the whole ecosystem that have reassessed their launch plans or the product development plan to adjust to the market itself. And what happens is this results in fewer distractions to meet specific marketing timelines, and the focus goes to building relationships and collaboration with other protocols within the ecosystem. The intensity of the collaboration is increasing a lot between protocols and protocols and between protocols and platforms. I think forming partnerships and collaborations during this time is very fruitful.

Motty | Braavos: I think it's time to build and craft the product, invest in the UX, and invest in the right features. So when we get out of the bear market to the bull market, we will have a full-fledged ready solution for mass adoption. We all hope this bear market will be quick, but in the months ahead, we will utilize it to craft our products, get feedback from users, and continuously improve without the excessive urge to satisfy the market.

Bran | Starkswap: Bear markets are good for building: fewer distractions, ability to build with a long-term horizon, and collaborating with the right projects. It also gives space to not have as much noise to meet deadlines unnecesarily and the community pressure. This isn't our first bear market, at least on our team. So we're seeing them come and go, and we're confident in that. Overall, it's for the best. That kind of weeds out the people that are just there for speculation.

AMA Winners are listed below

We hope this recap was useful for those who couldn't join.

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About ZKX

ZKX is a permissionless protocol for derivatives built on StarkNet, with a decentralized order book and a unique way to offer complex financial instruments as swaps. The protocol is powered by a DAO and will provide an elevated trading experience with gamified leaderboards and unique liquid governance. ZKX's mission is to democratize access to global yields through its offerings to anyone, anywhere.

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ZKX

ZKX

An upcoming permissionless protocol for derivatives. ZKX delivers complex trading strategies as simple perpetual swaps. Powered by StarkWare.