Bitcoin became a core part of Starknet’s ecosystem on Tuesday, as the Ethereum layer-2 network began using the asset as a way to secure itself, according to a press release.
Starknet users can now participate in the process of validating transactions by delegating Bitcoin to the network in order to earn rewards, StarkWare, the network’s developers, said. Previously, Starknet users could only stake its native STRK token.
The company also said that RE7, a London-based investment firm, is building a Bitcoin-denominated yield product on Starknet. The Starknet Foundation is planning on using 100 million STRK to encourage Bitcoin-related activity on the network, StarkWare added.
If Bitcoin has a flaw, it’s that the asset is being “too much hodled,” StarkWare co-founder and CEO Eli Ben-Sasson told Decrypt, using a misspelling of “hold” that’s emerged as rallying cry for steadfast cryptocurrency investors in recent years.
Ben-Sasson said that Bitcoin is “pristine capital,” but the asset’s use has been limited so far within the realm of decentralized finance, or DeFi, because centralized exchanges have historically had superior scale, good user experiences, and dirt-cheap prices.
As Bitcoin’s use in borrowing becomes more commonplace, Ben-Sasson said that Starknet is “perfectly aligned to make Starknet the financialization layer and the execution layer for Bitcoin,” a scenario that Ben-Sasson thinks will be winner-takes-most.
This year, crypto exchange Coinbase has leaned into a service that connects its customers with the lending protocol Morpho on its Ethereum layer-2 network Base. Nearly $1 billion worth of loans have originated through the arrangement, according to a Dune dashboard.
StarkWare emphasized that Bitcoin staking on Starknet does not require users to relinquish custody of their assets, arguing that its approach doesn’t make security tradeoffs.
Although StarkWare is positioning Starknet as a Bitcoin layer-2, the network’s staking feature has design elements that don’t fully align with Bitcoin maximalists, who often believe that all other cryptocurrencies are inferior and should be viewed as “shitcoins.”
Those that stake Bitcoin on Starknet receive STRK, Starknet’s native token, as a reward, for example. Other projects trying to bring programmability to Bitcoin, such as GOAT Network, pay out rewards primarily in Bitcoin but still use a native token for incentives as well.
As of Monday, STRK had a market capitalization of $498 million, according to crypto data provider CoinGecko. The asset’s price had fallen 74% over the past year to $0.122. In 2024, STRK hit an all-time high of $4.41, one month after its debut.
The Israeli-based firm said last June that it was raising $1 million to enter the Bitcoin-scaling space. At the time, it came out in support of restoring the OP_CAT, a command within Bitcoin’s programming language that some think could unlock innovation.
Starknet uses a specific zero-knowledge proof system that Ben-Sasson introduced in 2018. Ethereum co-founder Vitalik Buterin has said the form of advanced cryptography could be key to balancing privacy against regulatory compliance.
Ben-Sasson said that he’s been interested in using zero-knowledge proofs to scale Bitcoin since he discovered it in 2013, but Ethereum was the easiest blockchain to start with.
“I think there’s a much higher need for this stuff on the Bitcoin side,” he said. “We’re not leaving Ethereum, but definitely our main goal in 2025 and 2026 is to service Bitcoin the best possible way that we can.”
