By
Steve Muchoki
May 10th, 2024
During the token generation event, 728 million STRK tokens were given to around 1.3 million addresses.
Starknet’s STRK token recently suffered a significant drop in value after it was listed for trading. This decline in value has been accompanied by criticism surrounding a token generation event that occurred in 2022.
Based on an analysis of the Binance chart on TradingView, the price rose to as high as $7.6 yesterday before it dropped to and closed at around $1.9, which represents more than a 70% drop. With trading volume still at more than $1.8 million as of the time of writing, the price has continued to plummet, dropping by more than 20% so far in the last 24 hours. All these can also be traced to concerns by users about the STRK underlying tokenomics, complaints about eligibility, and anti-Sybil measures.
Market Impact and Investor Concerns
The decision to release tokens nearly two years before their public announcement has caused surprise and questioning in the cryptocurrency market. Typically, a vesting period begins after tokens become available for trading on exchanges or closer to their actual trading date. This helps ensure a fair distribution process. However, in the case of STRK, the early issuance of tokens has raised concerns about the concentration of tokens in the hands of core contributors and investors.
In April 2024, a significant portion of the token supply, specifically 13.1%, is scheduled to be unlocked. This has made investors and market participants uneasy. The potential impact on the market from such a large unlock, valued at over $2.6 billion based on current prices, has sparked further debate and uncertainty about the future of STRK.
Token Issuance and Selling Pressure
During the token generation event, 728 million STRK tokens were given to around 1.3 million addresses. These addresses were chosen based on specific criteria related to their participation in the blockchain and community. This token distribution was considered the largest one this year, and it led to the trading of Starknet’s STRK tokens at a price of $1.80 earlier.
Eli Ben-Sasson, a board member of the Starknet Foundation, acknowledged this selling pressure that occurred after the tokens were available for trading and mentioned that the team is aware of some minor issues that may need to be addressed. He reassured the community that they would do their best to resolve these concerns in the future, stating:
“When you go and you try to distribute to 1.3 million addresses, it’s gonna be challenging, and we are a very capable team technologically, and we have the best interests in getting it right… Things that should be fixed and cannot be fixed ‘til Tuesday—we will do our best to try and fix them later on.”
According to information shared by the Starknet team on their X platform, as of Tuesday, over 100,000 wallets had claimed millions of tokens. This influx of claimed tokens contributes to the overall market dynamics surrounding STRK. The increased number of tokens in circulation has further impacted the trading environment and influenced how STRK is perceived in the market.
Over 100k users claimed STRK, lesssss goooo!
Source: @_token_flow pic.twitter.com/ZYNRDcAMkd
— Starknet 🦇🔊 (@Starknet) February 20, 2024
When it comes to distributing tokens, 50.1% of STRK’s total supply is reserved for the Starknet Foundation, while 24.68% will be given to early contributors and investors. StarkWare will receive the remaining 32%. These tokens will gradually unlock over 31 months starting in April, but there are many concerns about these allocations and their impact on the token value within Starknet’s ecosystem.