Starknet Protocols: Key Features and MEV Opportunities

Starknet is an Ethereum Layer 2 (L2) designed to deliver high transaction throughput and low costs while maintaining Ethereum's core principles. Starknet uses Zero-Knowledge (ZK) technology, specifically ZK-STARK proofs, to verify transaction validity off-chain before committing them to the Ethereum mainnet.

You can build a wide range of dApps on Starknet just as you would on Ethereum or other Layer 1 blockchain. Starknet hosts numerous dApps and protocols that offer impressive features and present various MEV opportunities.

This article explores some protocols and dApps built on Starknet and the MEV opportunities they present.

Top Protocols on Starknet

By building on Starknet, you can access a scalable, cost-effective blockchain that leverages Ethereum's benefits while allowing you to innovate beyond limits. You can find the top projects on Starknet by total value locked (TVL) on DeFi Llama:

Nostra

Nostra is a comprehensive DeFi protocol on Starknet that integrates multiple financial services into a single platform. Nostra is on a mission to power flexible crypto actions and provide an excellent user experience. Key features of Nostra include:

• Staking: Liquid-stake your $STRK to earn yield and receive Nostra Staked STRK (nstSTRK) tokens. Use nstSTRK in DeFi apps across Starknet and other dApps on Ethereum.
• Lending and Borrowing: With Nostra, you can lend your crypto assets to earn interest or use your deposits to borrow other assets. It supports stablecoins like USDT, USDC, and DAI, as well as volatile assets like ETH and WBTC.
• Liquidity Pools: You can deposit your crypto into Nostra's liquidity pools to earn swap fees and yield.
• Swapping: You can swap and trade various tokens on Starknet. Nostra uses AVNU's DEX aggregator to tap into Starknet's liquidity network, ensuring you get the best available prices.
• Bridging: Nostra supports seamless bridging of assets across more than 20 blockchains, allowing you to transfer your crypto quickly and securely with minimal fees.
• UNO Stablecoin: Nostra also offers the $UNO stablecoin, a fully collateralized, Starknet-native USD stablecoin. UNO provides a stable asset for transactions, earning yield, and hedging against volatility.

Ekubo Protocol

Ekubo is a next-generation Automated Market Maker (AMM) on Starknet, designed for super-concentrated liquidity, extensibility, and providing users with low fees and high returns. Key features of Ekubo include:

• Swapping: You can efficiently swap your tokens with the lowest gas fees. Ekubo also offers Dollar-Cost Average (DCA) orders, allowing you to place orders that execute over time for more efficient and programmatic entry and exit from positions.
• Liquidity Pools: You can provide liquidity to Ekubo's pools to earn returns, benefiting from optimized liquidity usage and reduced gas costs.
• Extensions: You can leverage Ekubo's efficient and secure core AMM protocol to create new order types, trading strategies, oracles, and many more using extensions.

zkLend

zkLend is a native lending protocol on Starknet that provides secure and user-friendly lending and borrowing services that are efficient and decentralized. Key features of zkLend include:

• Deposits: You can deposit assets into zkLend's lending pools to earn competitive interest based on real-time supply and demand.
• Borrowing: You can borrow against your deposits, using them as collateral for secure and efficient access to funds.
• Flash Loans: zkLend supports flash loans for complex and time-sensitive transactions, allowing you to execute loans without upfront collateral requirements.

Nimbora

Nimbora is a Starknet-based infrastructure enabling users to earn and borrow on Layer 1 protocols with significantly reduced costs. Key features of Nimbora include:

• Earning: You can deposit into Nimbora's pools to earn interest on your assets. Nimbora leverages multiple strategies to maximize yield opportunities and returns.
• Borrowing: You can use your deposits as collateral to borrow other assets from Nimbora's pools. Nimbora helps you discover the best borrowing rates on Ethereum, enhancing your investment strategies for maximum efficiency.

Vesu

Vesu is a fully open, transparent, immutable, and user-friendly lending protocol built on Starknet. Vesu allows you to supply and borrow crypto assets without intermediaries, offering a decentralized public infrastructure that is free for everyone. Key features of Vesu include:

• Earning: You can deposit assets into Vesu's lending pools to earn returns and yield. Vesu ensures maximum capital efficiency by aggregating assets to serve as shared liquidity for all borrowers in the same pool.
• Borrowing: You can use your deposited assets as collateral to securely and efficiently borrow other assets, gaining access to funds without relying on intermediaries.

mySwap

mySwap is a concentrated liquidity AMM on Starknet, designed to provide an exceptional user experience and APR for users and liquidity providers based on the Uniswap v2 model. Key features of mySwap include:

• Swapping: You can swap your tokens with low gas fees and minimize slippage. By concentrating liquidity within specific price ranges, mySwap facilitates efficient trades and maximizes your returns.
• Liquidity Pools: You can earn higher returns on mySwap by concentrating your liquidity within specific price ranges, allowing for more efficient trades and optimized yield.

MEV Opportunities on Starknet Protocols

Starknet processes transactions using a First-Come-First-Serve (FCFS) model, preventing front-running. However, there are other MEV (Maximum Extractable Value) opportunities you can explore:

Arbitrage

Arbitrage involves taking advantage of price differences for an asset across different exchanges or markets. You can profit by simultaneously buying low in one market and selling high in another, provided the transaction fees don’t consume all the profit. Arbitrage benefits traders, helps balance prices across protocols, and improves market liquidity.

For example, suppose Ethereum (ETH) is priced at $1,900 on Nostra and $1,920 on Ekubo. You can purchase ETH on Nostra and immediately sell it on Ekubo, pocketing a $20 profit per ETH (minus transaction fees). However, performing precise calculations to ensure your arbitrage remains profitable is important, as transaction fees and market fluctuations can impact your potential gains.

There are various forms of arbitrage that extend beyond the basic concept:

• Cross-Layer Arbitrage: Conducting arbitrage across multiple blockchain networks or layers. For example, you buy ETH on Ekubo (Starknet), bridge to Ethereum, and sell it on Uniswap (Ethereum).
• Pool to Pool Arbitrage: Taking advantage of price discrepancies between different liquidity pools within the same or different protocols. For example, you buy a token from Nostra's liquidity pool and sell it in Ekubo's pool, where the price is higher.
• Atomic Arbitrage: Executing a series of transactions within a single block to ensure all steps are completed simultaneously, minimizing risk. For example, you can use flash loans to buy and sell assets within the same transaction to capture price differences.
• Triangular Arbitrage: Involves trading between three different assets to take advantage of discrepancies in their exchange rates. For example, you sell STRK for ETH, ETH for NSTR, and then NSTR back to STRK.
• Statistical Arbitrage: Using statistical models to identify and exploit pricing inefficiencies. For example, you use historical data to predict and trade assets based on expected price movements.

To ensure profitability, each type of arbitrage requires a deep understanding of the markets and precise calculations, including transaction fees and market volatility.

Liquidation

Liquidation occurs when borrowers fail to maintain their collateral ratios and their assets are sold off. By monitoring lending protocols like zkLend and Vesu for undercollateralized loans, you can execute liquidations and earn a portion of the collateral as a reward. This process helps keep the lending platform solvent and protects lenders' funds.

Conclusion

Starknet's growing DeFi ecosystem presents exciting opportunities for users and developers. Its FCFS model reduces traditional MEV strategies like front-running, but searchers can still profit through arbitrage and liquidations.

As Starknet evolves, we can expect more innovative protocols and MEV opportunities. Whether you're seeking better yields, developing new dApps, or exploring MEV strategies, Starknet offers many possibilities.

If you want to discuss MEV on Starknet or have valuable insights to share, join our MEV discussion group.