Foresight Ventures: What is RaaS? Which Type of RaaS Will Win The Market?
Author: Ian Xu@Foresight Ventures
- This article introduces Rollup-as-a-Service, which caters to the growing and diverse needs of Dapps. RaaS enables Dapps to maintain high performance, reduce costs, and deliver better user experiences without compromising their interaction with the broader ecosystem.
- While RaaS has potential, the primary advantage of RaaS appears to be its customization options, and overall, demand for RaaS is currently limited, and its value needs further exploration.
- While Optimistic Rollups currently lead due to better compatibility and lower thresholds, Zero Knowledge rollups may eventually dominate due to superior performance and customization.
- This article compares L3 and L2 for RaaS and RaaS vs app chains, indicating RaaS may provide better interoperability and security if a strong ecosystem is built.
- This article analyzes various RaaS projects to determine the most promising approaches. It covers ZK-based projects (like StarkWare and Opside), Optimistic-based projects (such as Caldera), and Modular Blockchain solutions (like Celestia).
1. RaaS Introduction
1.1 Rollup: The Most Promising Scalability Solution
The initial intention of Layer 2 is to alleviate the congestion problem of the mainnet and provide services for Dapps with lower costs and higher TPS under the premise of ensuring security. Rollup executes high-cost transaction execution on L2 and packs transactions to L1 for verification while ensuring that the complete transaction content can be verified. Under the premise of inheriting Ethereum’s security, it has stronger comprehensive performance. Therefore, rollup has made its way out among various Layer 2 solutions and is undoubtedly the most promising off-chain scaling solution currently.
1.2 Rollup-as-a-service: One form of App-specific chain
With the gradual growth of some Dapps and the expansion of various new applications, rollup as a general-purpose scaling can’t perfectly meet these projects’ pursuit of user experience and cost structure. The high traffic and high-performance requirements (such as AAA games focusing on player interaction) make these applications need more customized scalability solutions.
App-specific chain is one of the best solutions for these Dapps.
The concept of an App chain is not strange. Different projects can customize the design of blockchain according to their own application scenarios and needs, allowing Dapps to enjoy the resources of a chain exclusively. While ensuring not to break away from other ecosystems, they can achieve lower operating costs and higher performance, bringing a better user experience.
For example, Cosmos, based on Tendermint consensus, provides Dapps with a low-cost environment to build a sovereign L1 public chain. At the same time, based on the IBC communication protocol, different app chains can more easily achieve cross-chain assets/information. You can refer to the IBC packet lifecycle given by Cosmos official👇
Talking about scalability without considering the ecosystem is meaningless.
The feasibility of the App chain solution is definitely based on strong interoperability and ecosystem support. For example, Cosmos gradually improves its own ecosystem through the sovereign L1 public chain and cross-chain advantages brought by IBC in the ecosystem.
Based on the above understanding, another thought of the app-specific chain is to achieve Dapp’s pursuit of customized functions, high performance, and low cost through customized roll-up. Some RaaS based on the second-layer network can also make the project’s interaction more convenient, and have a positive impact on the ecological layout.
2. The Value of RaaS
The trend of multiple chains and rollups in the crypto world seems inevitable. The emergence of RaaS projects like spring bamboo shoots has laid the foundation for the development of new Dapp forms. But under such consensus, I still want to ask a realistic question in the opposite direction:
It is indeed attractive to allow anyone to quickly launch a rollup, but besides being in the right direction and cool, does it really create enough value for those in need? This question can be further divided into two points:
- Whether there are enough projects in the market that have sufficient motivation to use RaaS;
- Whether RaaS has created considerable value for the project parties.
This question essentially discusses the demand and the value brought by RaaS. Sufficient projects have demand or RaaS can provide attractive improvements.
In terms of demand, as some Dapps continue to grow, project parties do indeed urgently need to seek:
- Lower cost
- Higher performance
- Special functions
Referring to the data given by L2fees, L2 rollup has achieved the ultimate in cost optimization, which is a huge improvement compared to the Ethereum mainnet. Looking at the RaaS test data of Caldera Chains again, there is no qualitative change in cost, more like a 99–100 optimization. At the same time, the implementation of EIP4844 and danksharding will further reduce the cost of L2 rollup, and the difference brought by RaaS in cost and efficiency will also further narrow.
A solution that can significantly reduce the transaction fee is attractive, but most RaaS can’t do this. Considering the migration, overall ecology, interoperability, security, and other costs, do project parties really have enough motivation to use RaaS? For most conventional Dapps or users who are not so sensitive to performance and cost, perhaps general-purpose scaling is enough.
L2 rollup already has the ability to provide ultra-high TPS. Referring to the data provided by Caldera, RaaS based on Op has almost no advantage in block time. Although ZK RaaS can provide more customized data storage and compression, there is not much demand for such services. RaaS based on the second layer network can indeed achieve faster speed and lower cost by settling transactions on L2, thereby improving user experience.
As mentioned above, facing the imperfect ecosystem and other migration/development costs, do project parties still have enough motivation to use RaaS?
In terms of value creation, some RaaS can indeed provide features that are currently difficult to implement or designs that are inefficient in general-purpose scaling. For example:
- The first element of the current L2’s ZK circuit design is compatibility, in order to serve all Dapps, the circuit design sacrifices efficiency to a certain extent and does not optimize for specific Dapps. The value of RaaS can be clearly demonstrated: customizing the design of the ZK circuit for specific Dapps or providing more efficient storage structures and data compression services to achieve higher performance;
- Implementation of privacy functions. Although ZK rollup is friendly to privacy, due to considerations of decentralization and security, users’ transaction data still needs to be published to L1 as a history log after compression, allowing all users to verify. Therefore, the current general-purpose scaling rollup cannot achieve privacy. RaaS can customize the implementation of privacy functions on the basis of rollup or even rollup of rollup, creating value for projects with strong privacy needs.
Therefore, the current value of RaaS is customization > pure cost and efficiency. (Not excluding the cost and efficiency improvements brought by customization)
To answer the initial question: Does RaaS really create enough value for people in need?
I think the current demand for RaaS is limited, and general-purpose scaling can meet more than 90% of needs. Although customized rollups have begun to play an irreplaceable role in some niche areas, they are not mainstream after all. The value created by RaaS is limited and needs to be further explored on the basis of considering the ecosystem, interoperability, and other comprehensive factors.
3. Exploring the Ultimate Form of RaaS
Since the emergence of the L2 rollup, the exploration of RaaS has never stopped, and various Rollup-as-a-service implementation solutions have appeared on the market so far. Referring to the ecosystem layout on Messari, you can roughly see the implementation paths of different RaaS. So the key questions are:
- What solutions make sense?
- What kind of RaaS will eventually win the market?
3.1 OP or ZK？
The discussion about optimistic or zero knowledge has never stopped. Although ZKrollup theoretically has stronger performance, much faster finality time than optimistic rollup, and higher security, optimistic rollup has better compatibility and a lower threshold.
In the existing RaaS projects, most projects are primarily based on optimistic rollups. I think the main reasons are:
- Ecosystem always comes first. RaaS based on optimistic has better compatibility, greatly reducing the threshold for project parties to migrate/develop, allowing more project parties to deploy quickly, quickly build a more prosperous ecosystem, and occupy the first-mover advantage.
- Lower threshold, not dependent on computing power support. RaaS based on optimistic also verifies the validity of transactions through fraud-proof, so the requirements for machine performance and reserves are lower in terms of computing power. This is also a limiting factor for many RaaS that can’t start with ZK**.**
- Easier to scale. The development threshold of RaaS based on optimistic is lower, unlike ZK RaaS which pursues performance and more underlying customization, which requires providers to deeply participate in development. At the same time, limited by the computing power to generate ZKP, ZK RaaS is difficult to deploy on a large scale like optimistic RaaS.
Although optimistic rollup has obvious advantages in ecological layout, RaaS based on ZK also has obvious strengths.
- True customization, better performance, and lower cost. In the design of rollup customization, RaaS based on ZK can bring greater value to the project in terms of functions and performance, which is difficult to achieve with general-purpose scaling. It can be seen as a change from 0 to 1. RaaS based on optimistic is more about making changes from 90 to 99 in terms of cost and efficiency.
- Higher security. ZK’s RaaS can be trustless, while services based on op require trust in the challenger to work normally and prevent the sequencer from doing evil.
- Better interoperability and finality time. RaaS based on OP needs to carry out a 7-day fraud-proof verification, while the trustless feature of ZK gives it a faster finality time, and the 7-day verification period makes OP-RaaS face challenges in cross-rollup construction.
In the short term, the ecological advantage of RaaS based on optimistic is unshakable, but from the perspective of long-term demand and value creation, I believe that RaaS based on ZK is likely to gain a larger market share in the future.
3.2 Layer 2 or Layer 3?
Depending on the use case and implementation objectives of different RaaS, the most suitable implementation plan should be chosen. In my opinion, the biggest difference lies in the cost and user experience (interoperability).
By positioning Layer 2 (L2) as the settlement layer and arranging RaaS as Layer 3 (L3), lower transaction costs and faster cross-rollup interactions can be achieved, thereby enhancing the overall user experience. Although L2 RaaS based on Ethereum has successfully inherited the security of the main network, its cross-chain cost and speed are far inferior to multi-layer network designs.
Therefore, L3 > L2
- For more information about Layer 3, you can refer to an article I wrote previously:
3.3 RaaS or L1 app chain: Balancing between Ecosystem and Cost
Cosmos and Polkadot were the first to propose an app-specific chain solution. So, between app-specific chain and RaaS, which is more suitable for providing customized services for dapps?
- For L1 app chains, apart from the Cosmos ecosystem based on the IBC communication protocol mentioned in the first section, applications can establish parachains on Polkadot and carry out cross-chain information exchange based on XCM. However, due to considerations of security and cost, in actual applications, we can see that most projects are only based on the Tendermint or Substrate consensus engine to develop customized L1 app chains, and rarely use cross-chain communication. This leads to relative independence among these cross-chain ecosystems, to a certain extent, it does not fit my ultimate vision of the app chain, where different app chains should together form a prosperous ecosystem with strong interoperability.
- For structures like StarkNet that further extend RaaS based on Layer 2 networks, they have a greater advantage in terms of interoperability. Different dapps maintaining their rollups can conduct low-cost cross-chains, and because they can settle in Layer 2 networks, the speed and user experience will be better. However, all these interoperability premises are based on RaaS being able to build a sufficiently strong ecosystem.
- Depending on the design of RaaS, DA based on Ethereum’s RaaS mostly inherits the security equivalent to Ethereum L1, which is higher than the security and decentralization level of L1 app chains. For RaaS based on the DA layer or side chain, the security is guaranteed by these Layer 2 networks.
- For L1 app chains, transaction costs converge to the native token of the dapp project itself, which can achieve extremely low operating costs;
- For RaaS, L2 RaaS has a relatively high cost because it needs to interact directly with the Ethereum mainnet, while L3 RaaS based on Polygon, StarkNet, etc., can settle on L2, hence, they have relatively lower costs.
4. RaaS Project Analysis: Who Will Win the RaaS Market
There are many RaaS projects currently being developed or already deployed, including but not limited to StarkNet L3, Opside, Caldera, Celestia, Dymension, Sovereign, Stackr, Eclipse, Altlayer, Saga…
Below are some representative ones for analysis.
4.1 ZK Series
Including but not limited to Sovereign Labs, Fractal, StarkNet, Opside, ZKsync
StarkWare: Customized L3 Based on ZKRollup
Referring to the old graph, the StarkWare team first proposed the design of Ethereum’s multi-layer network in the article “Fractal Scaling: From L2 to L3”. However, the introduction of multi-layer networks is not just for further expansion, but more about allowing project owners to control more chain resources by stacking customized rollups on the basis of L2 general-purpose scaling, providing a user experience that L2 rollup cannot reach.
Although from a computational point of view, a ZKP can be generated for a bunch of ZKPs to prove their validity, but data cannot be compressed and then further compressed. Because data availability must be ensured, allowing anyone to verify the validity of the proof, rollup needs to send the full or compressed transaction content to L1.
Therefore, the application scenarios of StarkWare’s app-specific chain must be pursuing high performance or specific features.
- High performance: High-performance-demanding games can exclusively use ZK circuit resources to provide a better user experience;
- Privacy: For some projects with privacy needs, privacy functions can be implemented on a customized basis on top of rollup or rollup of rollup;
- Compatibility expansion: Providing an EVM-compatible environment, or even compatibility with more programming languages, brings positive value to the ecosystem itself;
- Low cost: Greatly reduce operating costs by sacrificing a certain degree of decentralization and security through Validium.
The L3 solution based on StarkNet’s Validium theoretically can intuitively reduce costs, and interoperability is also guaranteed.
However, from the perspective of customization, it can be further inferred that this app-specific chain based on ZKrollup, while providing considerable performance improvement, also raises the development cost and participation threshold for project parties. Therefore, RaaS providers need to be deeply involved in the development, and the speed and scale of expansion in the commercialization process are limited.
Opside: Another Three-Layer Network Structure Designed for App-specific Chains
Refer to the diagram below, compared to StarkWare, ZKsync’s L2 rollup-based app-specific L3 design, Opside proposes a three-layer network designed specifically for high TPS applications. It designs a sidechain as L2 based on a PoS+PoW consensus and connects the app-specific chain as L3 to the sidechain.
Opside interacts with data through the ZK-bridge it has developed, and unlike traditional sidechains, the proof of legality is completed through zkp instead of multi-signing, thus it has higher security. Meanwhile, Opside integrates the app-specific rollup into the consensus of the L2 sidechain through native rollup, that is, it motivates third parties to maintain the rollup on the L2 sidechain from the perspective of consensus.
Interoperability is crucial to RaaS, and the native rollups in Opside share a world state tree and global message queue. Therefore, the interaction of assets and information between app-specific rollups will be very efficient and cost less. Cross-chain asset interaction only needs to directly call the contract method of the target rollup in an L3 rollup contract. However, compatibility and the development of the ecosystem remain a challenge for ZK-based rollups.
The tradeoff brought by ZK’s trustless and faster finality time is that the commercial scale of RaaS is limited by computing power, requiring hardware support to generate ZKP, which is also one of the reasons why most RaaS do not adopt ZK. In addition, the design of the sidechain as L2 poses a challenge to the security of RaaS providers.
4.2 Optimistic Series
Including but not limited to Caldera, Eclipse
Caldera: Maximizing User Experience Based on Op Stack
Caldera is an Op stack-based RaaS, that provides project teams with high throughput, low latency, and customizable functionalities of L2 rollup. Its current testnet allows anyone to create an L2 rollup in a very short time. The user experience is very smooth; you can try it out here: https://dashboard.caldera.xyz/
The design based on the Op stack gives Caldera a great advantage in compatibility. With full EVM compatibility and the team’s optimization of user experience, it significantly lowers the barriers to migration/development. Also, Caldera’s RaaS is not limited by the computing power of the underlying hardware, enabling more project teams to deploy quickly, thus building a more prosperous ecosystem.
Referring to the structural diagram in Caldera’s official documentation, Caldera Chains can not only launch L2 rollup-as-a-service on Ethereum but also provide services on any EVM-compatible L1, ensuring the validity of transactions by sending fraud proofs to L1. On the data availability layer, Caldera also made innovations, decoupling the Data Availability Layer from the Settlement Layer. Customized rollups can send transaction contents to Ethereum, or a dedicated DA layer, such as Eigenlayer or Celestia. This design optimizes Caldera’s scalability and transaction costs to a greater extent.
Although Caldera has done a lot in interoperability and cross-chain bridges, optimistic rollups require a 7-day fraud-proof time, making it a challenge to build interoperability among rollups. At the same time, optimistic RaaS cannot achieve trustlessness; one must trust that at least one challenger exists to prevent the sequencer from misbehaving.
Additionally, in customization, Caldera and other Optimistic RaaS focus more on low cost and high TPS, and it’s hard to bring as much value in functionality and performance to projects as ZK-based RaaS. Looking at the current general-purpose scaling rollups, they can achieve quite a considerable block time, tps, and transaction costs. The data and RaaS are not significantly different, indicating a 0–1 improvement. Therefore, it’s worth questioning whether the cost and throughput improvements brought by Op-based RaaS are what the current market needs.
4.3 Modular Blockchain
Including but not limited to Celestia, Dymension
Celestia: Building Modular Blockchain Based on DA Layer
Celestia is essentially a data availability layer. A scalable blockchain hierarchical architecture is built on a DA layer based on the Tendermint consensus. Through rollmint (a kind of application blockchain interface implementation), dapps can build their rollup and deploy it to Celestia, with data stored in the DA layer and state root and proof uploaded to L1 for verification. Celestia optimizes the DA layer through data availability sampling (DAS), where each light node in the network only needs to sample and download a small portion of block data. Hence, the more nodes, the more transactions each block can contain, achieving the purpose of scaling the DA layer.
This brings to mind the familiar Validiums: a scalability solution that verifies computation results using ZK algorithms, does not upload data to L1, and relies on validators for data custody. Since the data exists off-chain instead of being directly published to Layer 1, Validium reduces gas costs. However, from the perspective of decentralization and security, Data Availability depends on a third-party committee, so Validiums are not widely used.
From the implementation perspective, the dapps in the entire ecosystem are essentially building their Validium, maintaining sequencer and prover, with Celestia providing a unified data storage space. Similar to Validiums, this implementation method lowers the operational cost of dapps but also sacrifices a certain degree of decentralization and security. Compared with other solutions inheriting Ethereum’s security, the security of dapp chains on Celestia relies on nodes and the DA layer.
Additionally, Celestia currently does not support fraud-proof. Therefore, nodes need to re-execute all transactions based on a pessimistic assumption to ensure their validity. At the same time, rollmint only supports a single sequencer, leaving a lot of room for improvement in terms of efficiency and decentralization.
However, as a DA layer, Celestia’s potential extends far beyond this. For instance, the optimistic RaaS solution Eclipse uses Celestia as its consensus and DA layer.
5. Conclusion and Outlook
RaaS can intuitively bring improvements in cost and performance, but inferring from performance, these optimizations do not have strong appeal; greater value still needs to be tied to customized features. Currently, the market demand is limited, but with the future development of crypto, larger traffic will lead to a linear increase in dapp’s pursuit of low cost and high performance, and customized rollup services are clearly a viable solution.
To answer the question raised at the very beginning, what is my understanding of the ultimate form of RaaS? What kind of RaaS will capture the market?
From the product itself
The advantage of OP-based RaaS lies in rapidly building an ecosystem and forming barriers, but the minor improvements brought purely from cost and efficiency are not enough to attract projects, hence there is no long-term value. On the other hand, ZK-based RaaS can solve pain points with customized features, but the demand is still not mainstream.
The design of a multi-layer network structure enables L3 RaaS to have lower costs and stronger interoperability. Moreover, strong interoperability is the foundation for building a thriving RaaS ecosystem. Therefore, a ZK-based multi-layer network design can combine the advantages of customization and low cost, and we can see its longer-term value.
I believe that in the long run, ZK-based multi-layer network RaaS will become the market’s ultimate choice.
Market and Demand
A RaaS with sufficient scalability can meet the needs of all projects for customized rollups while ensuring performance. At the same time, the real rise of RaaS heavily depends on the construction of the ecosystem. Therefore, a pattern where multiple RaaS coexist clearly doesn’t make sense.
I believe that the endgame will definitely be one or very few RaaS dominating the entire market.
About Foresight Ventures
Foresight Ventures is dedicated to backing the disruptive innovation of blockchain for the next few decades. We manage multiple funds: a VC fund, an actively-managed secondary fund, a multi-strategy FOF, and a private market secondary fund, with AUM exceeding $400 million. Foresight Ventures adheres to the belief of “Unique, Independent, Aggressive, Long-Term mindset” and provides extensive support for portfolio companies within a growing ecosystem. Our team is composed of veterans from top financial and technology companies like Sequoia Capital, CICC, Google, Bitmain, and many others.
Disclaimer: All articles by Foresight Ventures are not intended to be investment advice. Individuals should assess their own risk tolerance and make investment decisions prudently.