Starknet, an Ethereum Layer 2 scaling solution using ZK-rollups, experienced a significant outage lasting approximately 2 hours and 44 minutes, with some reports suggesting up to 4 hours.
The disruption followed the Grinta upgrade (v0.14.0), which aimed to enhance decentralization with a multi-sequencer Tendermint consensus system, a redesigned fee market based on EIP-1559, and pre-confirmations for faster transaction feedback. The outage was caused by the sequencer failing to recognize Cairo0 code, halting block production and transaction processing.
A blockchain reorganization from block 1,960,612 was implemented, requiring users to resubmit transactions submitted between 2:23 AM and 4:36 AM UTC. This marked Starknet’s second major outage in two months, following a 13-minute disruption in July 2025, raising concerns about the reliability of Ethereum L2 networks.
The Starknet team restored full functionality, with most RPC providers back online, and promised a detailed post-mortem. Despite the outage, the STRK token showed resilience, with a minor price dip of about 4.5% to $0.12, later recovering slightly.
The Starknet outage on September 2, 2025, lasting approximately 2 hours and 44 minutes (with some reports suggesting up to 4 hours), has several implications for its market position as an Ethereum Layer 2 (L2) scaling solution.
As the seventh-largest Ethereum L2 with around $548 million in total value locked (TVL), this second major outage in two months raises concerns about reliability, user confidence, and competitive standing in the rapidly evolving L2 landscape. Below are the key implications and their potential impact on Starknet’s market share.
Erosion of User and Developer Confidence
The outage, caused by a sequencer failure to process Cairo0 code post-Grinta upgrade (v0.14.0), disrupted transaction processing and required users to resubmit transactions from 2:23 AM to 4:36 AM UTC. This marks Starknet’s second significant disruption in two months, following a 13-minute outage in July 2025.
Repeated incidents could undermine trust among users, developers, and decentralized application (dApp) builders who rely on Starknet for high-throughput, low-cost transactions. Loss of confidence may drive users and developers to competing L2 solutions like Arbitrum ($12 billion TVL) or Optimism ($6 billion TVL), which, despite their own past outages, hold larger market shares (Arbitrum commands ~45% of L2 market share in 2025).
Starknet’s TVL of $548-$629 million is significantly lower than peers, and further reliability issues could stunt growth or lead to capital migration to more stable networks like Base or zkSync. The outage triggered a 3-4.5% price drop in Starknet’s native token, STRK, which traded at $0.1232 post-incident.
While the token showed resilience with a slight recovery, recurring outages could amplify bearish sentiment, especially as investors weigh operational risks against Starknet’s decentralization roadmap and Bitcoin staking integration (SNIP-31). A declining token price and shaken investor confidence could reduce staking participation, limiting Starknet’s ability to attract capital and maintain TVL growth.
Competitors with stronger token performance (e.g., Arbitrum, despite its own price volatility from $1.15 to $0.25 in 2024) may appear more attractive, potentially eroding Starknet’s market share in the L2 ecosystem. The L2 market is highly competitive, with Arbitrum, Optimism, and emerging players like Base dominating TVL and transaction volume.
Starknet’s zk-rollup model offers faster finality and lower dispute costs, appealing for niche use cases like AI and gaming, but its centralized sequencer remains a single point of failure, unlike Arbitrum’s progressive decentralization plans. The Grinta upgrade aimed to advance decentralization but exposed vulnerabilities, raising questions about Starknet’s readiness to compete with more mature L2s.
If Starknet fails to address sequencer centralization and ensure uptime, it risks losing ground to competitors. For example, Arbitrum’s 45% L2 market share and $12 billion TVL dwarf Starknet’s $548-$629 million TVL. Users and developers prioritizing reliability may shift to these networks, reducing Starknet’s ecosystem growth and market share.
Starknet’s response to the outage—restoring services, committing to a detailed post-mortem, and maintaining transparency—could mitigate damage if executed well. Its zk-rollup architecture, leveraging STARK proofs, remains a technological advantage for scalability and privacy, positioning it for high-frequency applications.
Additionally, recent initiatives like Bitcoin staking integration (approved with 93.6% community support) and the SN Stack for appchain development could attract new users and developers. Successful resolution of technical issues and clear communication could restore confidence, potentially increasing adoption.
Starknet’s focus on non-EVM compatibility and high transaction throughput (~460 TPS) positions it to capture niche markets like AI-driven dApps or gaming, potentially growing its market share if reliability improves. However, this depends on delivering on its decentralization roadmap and preventing future outages.
The outage highlights systemic challenges in Ethereum’s L2 ecosystem, where even advanced solutions like Starknet face operational risks during upgrades. As Ethereum sees renewed investor interest, L2 reliability is critical to sustaining ecosystem growth. Starknet’s issues could fuel skepticism about L2s’ ability to deliver both speed and stability, impacting the broader narrative around Ethereum scaling.
If outages become a recurring theme across L2s, users may explore non-Ethereum chains like Solana or Sui, which prioritize high throughput and faster block times. Starknet’s market share could be indirectly affected if Ethereum’s L2 narrative weakens, pushing capital to alternative ecosystems.
While the immediate market impact was limited (a 3-4.5% STRK price dip), repeated incidents could erode user and developer trust, driving them to competitors like Arbitrum or Optimism, which hold significantly larger TVL and market share. Starknet’s $548-$629 million TVL and 7th-place ranking among Ethereum L2s leave it vulnerable to losing ground unless it addresses reliability concerns.
However, its zk-rollup advantages, Bitcoin staking integration, and transparency in addressing the outage provide opportunities to regain trust and grow market share, particularly in niche sectors. To maintain and expand its position, Starknet must prioritize sequencer decentralization, robust testing for upgrades, and clear communication to rebuild confidence in its ecosystem.
