StarkWare is undergoing a significant reorganization and cutting staff as it attempts to pivot away from its primary role as an Ethereum scaling provider. The move comes amid a staggering financial downturn for its flagship network, Starknet, where revenue has plummeted by more than 99% from its peak.
The company is splitting into two independent business units to move beyond pure infrastructure and begin developing its own revenue-generating products. This strategic shift was detailed by CEO Eli Ben-Sasson during a company-wide town hall, according to a transcript of the address.
The urgency of the restructuring is underscored by the volatility of the Layer 2 ecosystem. Starknet revenue, which reached a peak of nearly $6 million in a single month in late 2023, dropped to approximately $48,000 through the first half of April 2026, according to DefiLlama data. While the network’s Total Value Locked (TVL) remains above $200 million, the collapse in transaction fee income has forced a rethink of the company’s business model.
The ‘Revenue Vacuum’ and the EIP-4844 Impact
The revenue collapse at StarkWare is not an isolated incident but reflects a broader systemic shift in how Ethereum Layer 2 (L2) networks operate. A primary catalyst was the implementation of EIP-4844, known as the Dencun upgrade, in March 2024. This update fundamentally changed how L2s post data to the Ethereum mainnet, drastically reducing the costs for users but simultaneously slashing the fee revenue that infrastructure providers like StarkWare relied upon.
During the town hall, Ben-Sasson described the current market state as a “winter,” noting that he has seen several such cycles since entering the field in 2013. He specifically pointed to a “vacuum in leadership across blockchain” that has impacted the industry’s largest assets, including Bitcoin and Ethereum.
To combat this, Ben-Sasson told employees that the company must “take our technological superiority… and convert it into meaningful revenue, meaningful usage.” The goal is to transition from being a tool for other developers to creating proprietary products that drive direct demand.
A New Focus on High-Moat Applications
As part of the reorganization, StarkWare is launching a dedicated Applications unit. This team will be led by researcher Avihu Levy, whose appointment follows his recent work on “Quantum Safe Bitcoin” (QSB). This proposed method aims to make Bitcoin transactions resistant to quantum computing attacks without requiring a soft fork of the protocol.
The QSB approach utilizes hash-based proofs to replace traditional signature schemes. Still, the technology involves significant trade-offs: it requires extensive off-chain computation and carries a high cost—estimated between $75 and $200 per transaction, compared to the roughly $0.33 cost of a standard Bitcoin payment.
While QSB presents an alternative to BIP-360—a long-pending proposal to add quantum resistance at the protocol level—Ben-Sasson did not explicitly name Bitcoin or quantum safety as the primary targets for the new Applications unit. He stated only that the unit would prioritize “things that can be done by no other team, in no other way,” focusing on products with “immense potential revenue” and minimal reliance on external Layer 1 networks or third-party application teams.
Revenue Comparison: The Starknet Decline
| Period | Monthly Revenue | Trend |
|---|---|---|
| Late 2023 (Peak) | ~$6,000,000 | Baseline Peak |
| April 2026 (H1) | ~$48,000 | >99% Decrease |
What So for the Ecosystem
The shift at StarkWare signals a maturing phase for the blockchain industry. The initial “infrastructure era,” where companies focused on building the fastest or most scalable pipes, is giving way to a “product era,” where the ability to generate sustainable cash flow is paramount. For StarkWare, the focus is moving from broad experimentation to high-conviction, high-revenue projects.
The reorganization affects several key stakeholders:
- Employees: Staff reductions are accompanying the split into two independent units to lean out operations.
- Ethereum Developers: The pivot suggests a decreased emphasis on being a pure scaling utility for the Ethereum ecosystem.
- Bitcoin Users: If the Applications unit pursues QSB, it could provide a high-cost but secure alternative for those concerned about quantum threats.
Despite the revenue plunge, the network maintains a level of utility, with Total Value Locked remaining above $200 million, suggesting that while the “toll booth” model of revenue has failed, the underlying assets and trust in the technology persist.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice.
Further details regarding the specific products the Applications unit will develop are expected to be shared with staff next week. A spokesperson for StarkWare declined to provide additional comments on the restructuring at this time.
We aim for to hear from you. Do you believe the shift from infrastructure to applications is the only way for L2 projects to survive? Share your thoughts in the comments below.
