Bankless Discusses Layer 2: Starknet Leaves Ethereum, Who Will Pay for the Security of an Independent L1?
Original Title: ROLLUP: AI Threatens Crypto Security | Tom Lee Stops Buying ETH | Ethereum L2s Shut Down | Zcash ETFs
Original Authors: David Hoffman, Ryan Sean Adams | Bankless
Editor's Note: In early October, Blast and Abstract announced shutdowns in succession. The former had attracted substantial capital through yield and points mechanisms, yet ultimately exited because operating costs exceeded revenue; the latter, leveraging the brand influence of Pudgy Penguins, attempted to build a consumer-facing on-chain ecosystem but similarly failed to find a sustainable business model. Meanwhile, StarkWare CEO Eli Ben-Sasson proposed that Starknet is considering transitioning from an Ethereum L2 to an independent L1, aiming to achieve full quantum-resistant security by 2027.
On the October 9 episode of Bankless ROLLUP, hosts David Hoffman and Ryan Sean Adams discussed these events together. They broke down Starknet's potential transition into a set of more fundamental structural questions: When the L2 business model begins to face scrutiny, why would a project still be willing to bear the security costs of an independent L1? Does quantum security represent a necessary adjustment to technical architecture, or could it also become a rationale for tokens to regain a valuation premium?
First, the L2 business model is shifting from a liquidity competition to a test of economic sustainability. In the past, TVL, user numbers, and ecosystem growth were key metrics for measuring L2 development, and projects could rely on token incentives and fundraising to drive expansion. But the exits of Blast and Abstract demonstrate that capital and user scale do not necessarily translate into sufficient network revenue. Whether adopting a DeFi yield incentive approach or a consumer application route, blockchains must continuously pay for infrastructure, development, and operating costs. This means the market may increasingly focus on whether on-chain activity can generate real revenue, and whether a network has the operational capacity to function without relying on long-term subsidies.
Second, Starknet is re-evaluating its dependence on Ethereum for security. A key advantage of L2s is the ability to leverage Ethereum's underlying security without having to fully establish an independent consensus system. But this dependence also means that certain critical security upgrades must align with Ethereum's technical roadmap and implementation timeline. Starknet's STARK proof system and account abstraction architecture provide some flexibility for upgrading to quantum-resistant cryptography, but its settlement, data availability, and cross-chain mechanisms still involve Ethereum. Becoming an independent L1 could give Starknet more autonomy in scheduling security upgrades, but it would also mean redefining underlying consensus, validator incentives, and security responsibilities. As technical autonomy increases, economic responsibility may increase alongside it.
Third, who ultimately pays for independent security. Bankless host David Hoffman raised the point that if Starknet leaves Ethereum, it would need to consider how to pay for its own network security costs through STRK, and might even face greater token issuance needs. What needs to be distinguished here is that Starknet already has a mechanism to pay staking rewards through new STRK issuance, and the transition does not mean building inflationary incentives from scratch. The real question is whether an independent L1 needs to expand its existing security budget, and whether the additional spending can be covered by revenue such as fees. If it can only rely on continuously increasing token supply, security autonomy may come with higher dilution costs borne by holders. At present, this is still an economic projection put forward by the host based on a potential transition, not a plan Starknet has already finalized.
Fourth, the relationship between technical necessity and token valuation logic. Starknet's use of quantum-resistant security as an important reason for exploring an independent L1 has a corresponding technical background. But Ryan Sean Adams also offered another market interpretation: as traditional L2 valuation logic comes under challenge, could an independent L1 positioning help STRK gain a new token premium? This does not mean the security upgrade is only meant to drive the token price, nor is there evidence that Starknet has made valuation adjustment a transition goal. More accurately, technical security and token economics may both influence the project's long-term positioning, but the two do not automatically prove each other. Becoming an L1 does not mean the token will necessarily appreciate, and gaining greater security autonomy does not mean the network will necessarily have stronger value capture capability.
If this discussion is compressed into one judgment, it is this: Starknet is considering a shift to L1, and what truly needs to be proven is not only whether an independent network can achieve quantum-resistant security faster, but also whether this independence has a sustainable economic foundation. Next, the market needs to observe its formal technical roadmap, consensus mechanism, security budget, and STRK issuance arrangements, and cannot judge the value of the transition based solely on the quantum security narrative or short-term coin price changes.
In this sense, what Bankless is discussing is no longer just whether Starknet should leave Ethereum, but a repricing the entire L2 industry is facing: as the trade-offs among shared security, independent operation, and token value become increasingly clear, what a blockchain needs to prove will not just be that it can run, but why it is worth paying for it over the long term.
The original content is as follows (the original content has been edited for easier reading and comprehension):
TL;DR
· L2 competition is shifting from liquidity scale to business sustainability. The successive shutdowns of Blast and Abstract show that TVL, user growth, and ecosystem incentives cannot replace sustained network revenue.
· Starknet is exploring a pivot to an independent L1, with the core aim of gaining autonomy over底层 security upgrades. Breaking away from Ethereum could accelerate the deployment of quantum-resistant technology, but it would also mean taking on more independent consensus and security responsibilities.
· The security costs of an independent L1 must ultimately be borne by the network's economic model. Bankless hosts believe Starknet may need to increase STRK issuance to pay for security incentives, but the specific plan has not yet been determined.
· The key question for STRK is not whether inflation exists, but whether the transition pushes up the security budget. Starknet already pays staking rewards through new token issuance, and it remains to be seen whether an independent L1 would further increase supply dilution pressure.
· Quantum security provides a technical rationale for Starknet's transition, but it cannot by itself prove its economic viability. Whether greater security autonomy can offset new operating costs still depends on the final technical architecture and revenue sources.
· Starknet's L1 narrative may bring new valuation expectations, but a token premium is not an inevitable result of technical upgrades. The Bankless hosts raised this market speculation, and whether it holds still depends on STRK's value capture ability.
· The real test of Starknet's transition is whether it can create a sustainable balance between security benefits and token economics. If independent security relies mainly on new issuance while real network revenue cannot grow in tandem, the L1 positioning will also struggle to independently support long-term valuation.
Main Content
In the first week of October, three things happened in succession in the Ethereum L2 ecosystem.
Blast announced it was shutting down, Abstract decided to end operations, and Starknet publicly discussed the possibility of becoming an independent L1.
In the view of Bankless hosts David Hoffman and Ryan Sean Adams, these events precisely reflect the two pressures facing the L2 ecosystem: on the one hand, the commercial value of independently operating a blockchain is being tested; on the other hand, new cryptographic security risks are prompting some projects to reassess their dependence on Ethereum.
What makes Starknet special is that it may voluntarily give up some of the advantages of being an L2 in exchange for greater security autonomy. But the hosts believe this choice still comes with an unavoidable question: if it becomes an L1, how will Starknet pay for its own security?
01 | Blast and Abstract Shut Down in Succession, L2 Business Models Face a Reality Check
On October 2, Blast announced the gradual shutdown of its network.
Blast was once one of the most closely watched projects in the Ethereum L2 competition. With native yield and a points incentive mechanism, it attracted approximately $2.3 billion in total value locked (TVL) at its peak.
These mechanisms were once seen as an effective way for L2s to acquire liquidity. Users who moved funds onto the network could not only participate in on-chain activities but also earn yield or points rewards.
But as the incentive effects weakened, Blast failed to establish revenue sources sufficient to support long-term operations. The project team acknowledged in its announcement that the ongoing cost of maintaining Blast had exceeded the revenue generated by the L2, and that no credible path to economic sustainability was in sight.
As a result, Blast decided to shut down and asked users to withdraw their assets back to Ethereum through the regular interface by October 26 where possible. After that, users can still withdraw through the bridge contract on Ethereum, but the process will be more complicated.
Shortly after, on October 6, Abstract also announced it was ending operations.
Unlike Blast, which relied on yield and points to attract liquidity, Abstract positioned itself as Consumer Crypto — crypto applications aimed at ordinary consumers.
It was backed by Igloo, the parent company of Pudgy Penguins, and hoped to bring more non-crypto-native users into the on-chain ecosystem through NFT brands, gaming, entertainment, and consumer applications.
According to information disclosed by the project, Abstract had attracted over 400,000 users and deployed more than 144 applications. But stagnant growth, insufficient liquidity, a limited DeFi ecosystem, and a lack of institutional participation ultimately made independent operation unsustainable.
It plans to shut down its network on December 15.
Igloo CEO Luca Netz also said the company invested and lost tens of millions of dollars in supporting Abstract, but ultimately decided not to continue financing the network by issuing a new token.
These two shutdowns have made a long-standing problem more prominent: the ability of an L2 to attract users and capital does not mean it can generate enough revenue to sustain network operations.
Whether relying on points incentives to attract DeFi capital or building user gateways through consumer brands, projects ultimately need to prove that the network itself has sustained economic demand.
For an L2, operating costs do not disappear just because it relies on Ethereum. Transaction sequencing, proof generation, data publishing, development and maintenance, and ecosystem operations all require continuous expenditure.
If revenue cannot cover these costs, subsidies and early-stage financing will ultimately be difficult to sustain indefinitely.
Bankless hosts accordingly argue that L2 competition has entered a phase where business models are being tested. However, the failures of Blast and Abstract do not directly prove that all L2s lack sustainability.
02 | Starknet wants to become an L1, and what it truly wants to escape is Ethereum's security upgrade cadence
Just after two L2s announced shutdowns, Starknet proposed the opposite direction.
On October 8, Starknet officially stated that it is actively considering becoming an independent L1 and has set 2027 as the target year for achieving full quantum-resistant security. Previously, StarkWare CEO Eli Ben-Sasson also discussed this idea during TOKEN2049.
The direct backdrop driving this discussion is the long-term threat that AI and quantum computing may pose to existing public-key cryptographic systems. Ethereum researcher Justin Drake previously warned that as AI's mathematical research capabilities improve, the industry needs to prepare in advance for a cryptographic security migration. However, existing public evidence has not yet proven that AI already has the practical ability to crack mainstream digital signature algorithms such as ECDSA.
For Starknet, the logic of security upgrades has its technical basis. The STARK proof system adopted by Starknet mainly relies on hash functions rather than the elliptic curve cryptography structures used by some zero-knowledge proof systems. Therefore, it has certain advantages in responding to known quantum computing attacks.
In addition, Starknet adopts native Account Abstraction, allowing smart contract accounts to define their own signature verification logic. This means that users can theoretically gradually switch to quantum-resistant signature schemes without waiting for the entire network to migrate uniformly.
But the problem is that Starknet is still currently an L2 built on top of Ethereum. It needs to rely on Ethereum for settlement, data availability guarantees, and cross-chain asset and message interactions. Even if Starknet itself completes some cryptographic upgrades, the parts that depend on Ethereum are still affected by the latter's underlying security system.
In Starknet's previously announced quantum-resistant upgrade roadmap, the parts involving Ethereum bridging and data availability need to remain aligned with Ethereum's upgrade progress. Therefore, the potential value of becoming an L1 lies in this: Starknet could more autonomously decide how its underlying security system upgrades and when to implement it.
David Hoffman acknowledged on the show that from a technical perspective, quantum safety is indeed a legitimate reason for Starknet to consider transitioning. But that does not mean the transition is already decided. Currently, Starknet has not yet published a complete independent L1 consensus design, final security model, migration plan, or new token economic proposal. 2027 is also only a target proposed by the project, not a guaranteed completion date.
03 | The Cost of Leaving Ethereum: Who Pays for Starknet's Own Security Costs?
Compared with quantum-resistant technology itself, the discussion between the two Bankless hosts quickly turned to a more realistic question: why would Starknet give up the security guarantees Ethereum already provides?
David Hoffman believes that one of the most important economic advantages of an L2 is being able to rely on Ethereum's underlying security without having to fully build an independent consensus security system.
Of course, this does not mean an L2 can use Ethereum for free. An L2 still needs to pay for data publication and other related fees, and also needs to maintain its own operating infrastructure. But compared with an independent L1, an L2 can to some extent leverage the validator network and economic security foundation Ethereum has already established. If Starknet becomes an L1, it will need to answer a series of questions again: who verifies transactions and maintains consensus? What economic rewards do validators receive? How much staked capital is needed to form reliable security guarantees? Are these expenditures ultimately borne through transaction fees, token issuance, or other mechanisms?
Based on this, David Hoffman suggested on the show that Starknet may need to issue more STRK to pay for the security costs of an independent network. This judgment points out the economic issue that must be faced in transitioning to an L1, but one fact needs to be added: Starknet did not wait until transitioning to an L1 to begin paying security incentives through STRK issuance.
Starknet has already established a STRK staking mechanism, and validators and delegators can receive rewards through new token issuance. The mechanism disclosed on its official website also includes BTC staking, and the related rewards are likewise paid in STRK and increase overall token issuance. Therefore, the more accurate question is: if Starknet further operates independently, will new consensus and security needs raise the existing level of token issuance?
This differs from simply assuming that "becoming an L1 necessitates inflation."
From a tokenomics perspective, if an independent L1 requires higher validator rewards and fee revenue is insufficient to cover these expenses, the project may need to maintain security incentives through higher token issuance. New tokens mean existing holders bear the potential cost of supply dilution. Conversely, if the network can cover its security budget through sufficient fee revenue, a reasonable staking mechanism, or other funding sources, the pressure for additional inflation may be reduced.
Moreover, after leaving Ethereum, some costs originally paid to the underlying network may also change. Therefore, independent security expenditure cannot simply be equated to adding a fixed fee on top of existing L2 costs.
The ultimate economic impact depends on what consensus mechanism, data availability solution, and incentive structure Starknet chooses. The project has not yet disclosed these details.
This is also the most valuable point in the Bankless discussion: the security autonomy of an independent L1 does not come without a cost, and that cost needs to be reflected in an economic model that can operate sustainably over the long term.
04 | Quantum security is a technical rationale, while the L1 premium remains market speculation
After discussing security costs, Ryan Sean Adams raised a more controversial question: beyond quantum security, is Starknet also seeking a new token valuation logic?
The host observed on the show that certain quantum-security-related tokens performed relatively strongly that week, including STRK. He thus suggested that quantum security may be becoming a technical narrative that the market is willing to reprice.
At the same time, the high-growth expectations the market previously assigned to L2 projects are facing challenges. Early investors may have been willing to pay a premium for Ethereum scaling demand, ecosystem growth, and future fee revenue. But as the number of L2s increases, competition intensifies, and projects like Blast and Abstract exit, the market is beginning to place greater emphasis on whether tokens can capture real economic value.
Against this backdrop, Starknet's shift from L2 to L1 may not just be a security architecture adjustment, but could also change how the market understands STRK. Ryan Sean Adams therefore suspects whether the project hopes to move from the highly competitive L2赛道 to an L1 narrative with an independent underlying security system, in pursuit of a new token premium.
However, it must be emphasized that this is the Bankless host's market speculation, not a motivation officially acknowledged by Starknet. Moreover, becoming an L1 does not necessarily mean STRK will achieve a higher valuation.
From an economic model perspective, an independent L1 could expand STRK's role in network security, staking, and governance, increasing the linkage between the token and network operations.
But at the same time, it could also increase consensus incentives and infrastructure costs.
If additional security spending is mainly sustained by token issuance, while real transaction demand and fee revenue do not grow in tandem, the economic model of an independent L1 could instead come under greater pressure.
More importantly, the security narrative itself cannot directly prove that token demand will continue to grow. Having a differentiated technological advantage and having investors willing to pay a higher price for that advantage over the long term are two different questions.
Therefore, the quantum security rationale and the token premium motive are not necessarily mutually exclusive. A project can genuinely seek greater security autonomy while also recognizing that this technological positioning may affect market valuation. But which factor is actually driving Starknet's decision requires observing the technical and economic plans formally announced in the future, rather than judging solely based on STRK's short-term market performance.
Starknet's potential transformation will ultimately be tested on two fronts.
Technically, the project needs to demonstrate which security problems currently constrained by Ethereum an independent L1 can solve, and that it can complete the upgrade according to its stated goals. Particular attention should be paid to how the underlying consensus, data availability, and cross-chain asset mechanisms obtain new security guarantees.
Economically, it remains to be seen whether Starknet will disclose specific designs for independent validator incentives, staking mechanisms, and security budgets, and whether these arrangements imply a higher level of STRK issuance.
If future plans show that an independent L1 can deliver clear security benefits while maintaining sustainable network costs, then Starknet's transformation will have a more solid technical and economic basis.
If the project remains unable to explain the cost of independent security, or if the new economic model mainly relies on continuously increasing token issuance while real on-chain demand fails to grow accordingly, then the market's revaluation of its L1 positioning may also lack sustained support.
The exits of Blast and Abstract have already shown that operating a blockchain cannot rely solely on capital investment and growth narratives over the long term. For Starknet, becoming an L1 may allow it to shed some of its dependence on Ethereum, but it also means it needs to independently prove the sustainability of its own security system and token economy.
The ultimate question is: Starknet hopes to gain greater security autonomy by leaving Ethereum, but is the market willing to bear the extra cost for that independence?
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