Starknet got an overwhelming vote approval to become an independent layer 1 (L1) chain, but suffered a massive DeFi activity blow. The Ethereum L2 saw its total value locked (TVL) drop by 3.7x (73%) from $158M to $42M on 22nd October.
The crash was triggered by Extended, a decentralized perpetual futures exchange, which migrated from Starknet to Circle-backed Arc blockchain. The platform had a strategic partnership with Circle and sought higher performance.
Extended migrated $120M in TVL, suggesting that it was the sole driver of Starknet’s DeFi activity.
Similarly, Starknet’s stablecoin liquidity dropped by 75% from $147M to $37M over the same period. The bridged volumes also crashed, underscoring the dominance the Extended had in the L2.
That said, Starknet plans to transition from an Ethereum L2 to an independent L1. The Starknet team, led by Eli Ben-Sasson, first floated the idea in early October.
Ben-Sasson argued that Ethereum’s post-quantum plan is too slow and may undermine the chain’s security plans amid increasing double threats from advanced AI models and quantum breakthroughs.
A formal proposal for the same was put to a governance vote on 15th October. The proposal got massive 93% support, urging Starknet to research ways to become an L1.
Following the vote, Sasson said StarkWare and the Starknet Foundation will allocate resources to begin the research. He added,
STRK will remain the token of the network. Any path to transition to an L1 will be brought to a community vote. This is a huge shift and a milestone, but the AI and quantum challenges ahead require it.
Despite the overwhelming vote approval, however, STRK’s price chart was surprisingly negative.
In early October, the L1 proposal sent STRK rallying by over +120% from $0.05 to $0.12. However, what followed was intense profit-taking, triggering a 58% loss and effectively reversing October’s gains.
In fact, the pullback slipped below the EMA (exponential moving average) band. Simply put, STRK flipped bearish and shed another 7% on 22nd October. Unless the broader market sentiment improves, STRK could stay below the EMA bands for a while.