Token release revision failed to stop Starknet’s declining activity

The activity of the Starknet network continues to fall despite revisions to its controversial token unlocking program.

Active users fell below 100,000 addresses for the second time since Starknet announced its weather offer on Valentine's Day, falling to 43,000 on March 1, according to StarkScan data.

Meanwhile, it dropped to 1.90 transactions per second from a high of 12.3 seen on Airfall Day.

Ethereum's Layer-2 network began releasing 700 million STRK tokens to 1.3 million eligible wallets on February 20, increasing the number of daily users to more than 380,000.

Starknet has faced public backlash over its planned opening of 1.3 billion tokens to early investors and contributors on April 15, less than two months after the token launched.

Starknet responded by adjusting its token schedule. Now, 64 million tokens will be released on April 15th, with the rest gradually released until March 2027.

Anchit Goel, head of listing at Bitrue – one of the crypto exchanges that STRK listed on Air Day – tells Cointelegraph that the initial plan will increase the token supply and pile on “selling pressure” from early investors and contributors.

“This change will ensure a more stable token value and reduce the risk of rapid price fluctuations,” Goel said.

The weather pushed STRK to a high of $7 on Binance, but it has fallen to $1.87 at the time of writing, according to CoinGecko.

Although the Starknet Foundation's revised token release program allayed some of the community's concerns about a possible massive token dump, it wasn't enough to stop the network's leaking participation metrics.

StarkWare did not respond to Cointelegraph's comment.

X factors

Two of Starknet's main backers are Three Arrows Capital (3AC) and bankrupt Alameda Research. Market watchers stressed that investors should consider that the bankruptcy proceedings of the two firms will increase the selling pressure in the market.

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According to blockchain data, 3AC Liquid Teneo is the eighth largest owner of the STRK account, with 134.18 million tokens worth around $256 million.

Unlike 3AC, there is no record of Alameda-linked wallets accepting STRK tokens, including FTX, according to data platform Spot On Chain.

Decentralized mission

According to the project's token allocation strategy, Starknet Foundation has allocated 18 percent to the community through discounts and offerings.

The rest of the tokens are controlled by the StarNet Foundation and investors, which can tip the network's governance and voting power to one side.

Stilianos Kampakis, Tokinomics auditor at blockchain security firm Hacken, told Cointelegraph that centralization is a common issue with early projects.

“You start with investors and insiders. Then, token allocation can become increasingly decentralized,” says Campakis.

Amidst the discussions on token allocation and centralization, the project's Token Generation Event (TGE) approach is also being explored.

In the year Held in November 2022, the TGE was held a year before the general public had access to the cryptocurrency, sparking criticism that it favored insiders or early investors.

This is a very funny thing. They released the token in 2/2024 but chose the time to release TGE token as 11/2022 so they could sell 15.1% tokens early which normally should be locked for 1 year. #STRK #Starknet https://t.co/te6W0NJqG8

— Will NG X (@WillngX) February 15, 2024

Bitrue Goel argues that it is not uncommon for modern projects to hold a TGE before the exchange of details, as it allows projects to develop their technology and form partnerships before going public.

“However, given the current volatile nature of the cryptocurrency market, this delayed launch may contribute to uncertainty and lower investor confidence,” Goel added.

hunters and gatherers

Starknet's latest offering airdrops join the largest and growing list of projects in history that use token distribution instead of initial coin offerings.

“I still think the ICO is the easiest way to raise money, but the regulation killed it,” says Kampakis.

He added: “As we go forward, the airdrops will increase.

As previously reported by Cointelegraph, the Starknet distribution event may have been overrun by “airdrop hunters.”

Users are eligible for the airdrop by holding 0.005 Ether (ETH) and having been active for at least three months and making five transactions worth $100 or more since November 15, 2023.

Starknet has designed its eligibility criteria to exclude the “Sybil” feature, which creates multiple accounts to use Weather Provisions.

But it seems that some airdrop hunters have bypassed Starknet Sybil's limits.

Blockchain analytics platform Lookonchain received more than 1.4 million tokens (valued at about $3 million) in 1,361 wallets in a single individual weather event.

Meanwhile, other members of the public who contribute to maintaining the network have complained that the requirement prevented them from receiving airdrops.

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Of the 1,000 top contributors on X, 414 have not received any reward, says Moody Salem, founder of Ekubo, a decentralized exchange based on Starknet.

“These are all active, productive individual Starknet users.”

At least 450.5 million STRK tokens have been claimed out of the more than 700 million allocated for Weather, according to Voyager, a data platform for STRKnet.

Starknet has a total supply of 10 billion tokens, with 900 million (9%) STRK tokens allocated to our staging area.

While the Starknet Foundation is expected to host future airdrops that may involve community members, less than 200 million tokens will be distributed under the event schedule.