The Impact of Rollup-as-a-Service on Scalability with AltLayer

11 min readMar 20, 2024

Opening Remarks

In the landscape of Ethereum scaling solutions, rollups have emerged as a pivotal innovation, offering a promising avenue for easing the network’s scalability challenges. By aggregating transactions off-chain and efficiently adding them to the Ethereum blockchain, rollups not only improve the number of transactions the network can handle but also keep the security and integrity of the main layer. This process has played a big role in boosting Ethereum’s ability to handle a wider range of dApps. As for today, eight out of ten of the top Ethereum scaling solutions are rollups.

Among the range of rollup technologies, two primary categories stand out: optimistic rollups and zero-knowledge (zk) rollups. Each offers distinct approaches to transaction validation, catering to different needs within the developer community and dApp ecosystem.

The emergence of Rollup-as-a-Service (RaaS) providers marks a significant milestone in this domain, simplifying the deployment of custom rollup solutions. This advancement enables projects to leverage the benefits of rollups — customization, scalability, and efficiency — without the necessity for in-depth blockchain infrastructure expertise.

As we examine the current state and future prospects of Ethereum scaling, the role of rollups and RaaS providers is undeniably central to fostering innovation and accessibility within the blockchain space. This paper will take a close look at these developments, offering insights into how rollups work, why they matter, and what they could mean for the future of Ethereum. Specifically, we’ll focus on AltLayer and its role in this evolving landscape, highlighting its innovative solutions and contributions to making Ethereum more scalable and accessible for everyone.

The Rise of Rollup-as-a-Service (RaaS)

Rollup-as-a-Service (RaaS) is emerging as a pivotal solution for developers looking to harness the scalability and efficiency of blockchain technology without the complexities traditionally associated with deploying on Ethereum’s Layer 1 or even Layer 2 networks.

Let’s take it from the top. Nowadays, developers looking for deploying dApps have few options, each with its own set of trade-offs:

Deploying on Layer 1 blockchain: Provides strong security and a rich ecosystem but faces high costs and scalability issues due to limited transaction space.
Deploying on a Layer 2 solution: Offer lower fees and better scalability, but as they grow in popularity, they may encounter rising costs and uncertain market adoption.
Appchain Deployment: Creating an application-specific blockchain provides customization and flexibility but raises security and liquidity challenges.
Own Rollup Deployment: Launching a dApp on a custom rollup brings scalability, security, and customization without the block space competition, potentially leading to sustainable revenue through transaction fees. However, launching your own rollup might not fit every type of dApp. Some might benefit more from tapping into the bigger liquidity pool offered by an existing Layer 1 or Layer 2.

The Role of RaaS

RaaS platforms empower developers to launch their own rollups by providing:

Technical Support: Simplifying the deployment process with tools and services tailored to project needs, including data storage, transaction monitoring, and no-code deployment options.
Scalability and Cost-Effectiveness: Enabling scalable, efficient blockchain solutions without requiring in-depth technical knowledge, thus promoting innovation within the ecosystem.
Value Capture: Offering a mechanism for projects to generate revenue through transaction fees, which can be shared with the RaaS provider.

AltLayer falls into this group but goes even further by introducing Restaked Rollups. In theory, this marks a step forward in tackling the challenges of decentralisation, security, and interoperability that come with application-specific rollups. Here’s how they achieve this:

Decentralising Sequencing: Offering a democratic, secure framework that aligns with decentralised Web3 principles.
Ensuring State Correctness: Leveraging Ethereum’s trust network to address security concerns.
Achieving Faster Finality: Mitigating Ethereum’s slow transaction finality time, crucial for latency-sensitive applications.

In summary, by providing developers with the tools to deploy custom, efficient, and secure rollups, these services are paving the way for a more scalable, user-friendly blockchain ecosystem, tailored to the diverse needs of the developer community and their dApps.

AltLayer Project Overview

AltLayer is a decentralised Rollup-as-a-Service (RaaS) platform. It enables developers to create scalable Layer 2 solutions with its flexible, modular design, AltLayer works seamlessly across different chains and virtual machines, it has formed partnerships with major players like EigenLayer and Celestia, and has achieved an evolving and expanding ecosystem, building a network of integrations and services designed to support dApp developers.

Foundational Support and Strategic Partnerships

AltLayer is guided by Dr. Yaoqi Jia, who used to direct Parity Asia and helped start Zilliqa, where he was the CTO. The team includes seasoned experts in blockchain and top-notch researchers who have experience with Parity, Zilliqa, and Synthetix.

AltLayer successfully secured $14.4M in a strategic funding round, with Polychain Capital and Hack VC leading the charge. This round saw significant contributions from prominent figures, including Balaji Srinivasan, former CTO of Coinbase; Sean Neville, co-founder of Circle and architect of USDC; Gavin Wood, co-founder of Ethereum and CEO of Parity Technologies; and Ryan Selkis, founder of Messari.

Furthermore, AltLayer’s collaborations with major names like EigenLayer and Celestia, along with its growing ecosystem, establish a network of integrations and services aimed at empowering dApp developers.

Core Features and Design

AltLayer’s Rollup-as-a-Service platform features three main components:

Restaked Rollups

At the heart of AltLayer’s breakthroughs are its restaked rollups, featuring three key services known as Actively Validated Services (AVS):

Vital: This service involves operators checking blocks and the states committed by the rollup sequencer. If anything seems off, they can challenge these with fraud proof, ensuring accuracy and trustworthiness.
Mach: This protocol accelerates the finalisation process for rollups. It enables operators to use Ethereum-based assets as a guarantee for any claims regarding the rollup’s state, leading to quicker settlements.
Squad: This service brings decentralised sequencing into the mix, backed by economic incentives. By decentralising this process, it addresses and mitigates issues like short-term system downtime, unfair transaction ordering (MEV), and other concerns that arise from having a single sequencer control the rollup.

These services tap into Ethereum’s trusted network through restaking to tackle the challenges of decentralisation and security in app-specific rollups. By dividing the services into three modular parts, restaked rollups provide a versatile structure that improves rollup features.

2. Versatile Rollup Stack

AltLayer makes blockchain development flexible and user-friendly, supporting various rollup stacks, data layers, and connections. Its easy-to-use dashboard allows anyone to set up and launch their blockchain projects without needing much technical know-how, opening up blockchain to more people. The platform’s modular design lets users customise it to their needs, ensuring it can grow and change with the demand. AltLayer also focuses on security and supports multiple virtual machines, making it a versatile choice for developing blockchain applications.

3. Easy Deployment with a No-Code Interface

AltLayer is breaking down the complex world of blockchain with a simple, no-code dashboard. This easy-to-use tool lets anyone, coder or not, set up their own blockchain setup in just a few minutes. Whether it’s choosing how many sequencers to use, setting gas limits, or adding middleware like bridges and RPC providers, the dashboard makes customization straightforward and flexible. Now, with just a few clicks, users can launch a tailored execution layer quickly, opening up blockchain development to a much broader audience.

Flash Layer & Persistent Rollups

AltLayer introduces two types of rollups to tackle blockchain scalability issues: Flash Layers and Persistent Rollups.

Flash Layers are temporary, customizable roll ups created to handle sudden spikes in demand for a dApp, like during token sales or game events. Developers can quickly set up these rollups when they anticipate a lot of activity, use them to manage the load without slowing down the main network, and then close them down.

Persistent Rollups, on the other hand, are designed for dApps that require long-term, consistent support. They’re standard optimistic rollups that are tailored for specific applications and can support both EVM and WASM environments. These rollups are ideal for applications in areas like GameFi, SocialFi, and DeFi, providing a stable and scalable solution for projects with ongoing demands.

In essence, Flash Layers offer a flexible, short-term solution for handling bursts of blockchain activity, while Persistent Rollups provide a solid foundation for applications with continuous needs.

Tokenomics

The ALT token is the main currency of its platform, with 1.10 billion tokens currently in circulation, representing 11% of its total supply of 10 billion. It serves several purposes: it’s used as a financial stake that can be reduced if misuse occurs, allows holders to vote on decisions affecting the protocol, rewards operators within the platform’s ecosystem for their contributions, and is used to pay for services within the network.

The project features minor daily releases. The next significant release is scheduled for July 25th, when 5% of the total supply will become available. Beginning in the third quarter of 2024, there will be a significant acceleration in the release schedule.

Competitors

The RaaS industry is experiencing fast expansion, with a few innovative projects at the forefront. Within this competitive landscape, projects such as Conduit, Caldera, and Gelato are establishing their unique niches. AltLayer sets itself apart by prioritising versatility, offering exceptional support for a wide range of protocols and functionalities, thus securing a unique position in the RaaS market.

Within this niche, AltLayer has garnered significant attention, capital, and market share, marking it as a leading contender among its peers.

Below is a brief overview of a few leading competitors:

Bullish Fundamental Factors

In 2023, rollups significantly enhanced Ethereum’s scalability, leading to a major increase in TVL, with AltLayer solidifying its position as a leader in the Rollup-as-a-Service market, promising broad adoption.
Supports both WASM and EVM virtual machines, widening application development opportunities.
Launched “Turbo” in September 2023, a specialised rollup stack for GameFi, aimed at delivering scalable, low-latency gaming environments.
In January 2024, partnered with Babylon Chain to incorporate Bitcoin’s security into rollup verification, pioneering a decentralised security layer.
Set to benefit from Ethereum’s EIP-4844, aimed at reducing rollup costs and expanding technology access.
Has a strategic roadmap filled with exciting plans and key events for the current year.

Secured significant backing and formed key partnerships, including a collaboration with EigenLayer to address Ethereum scaling challenges through “restaked rollups.”
Utilises Celestia for data availability, focusing on cost reduction and efficiency improvements.
Partnered with RISC Zero to integrate “on-demand” Zero-Knowledge proofs into optimistic rollups, bolstering security.
Collaborated with Hyperlane for permissionless interoperability, enhancing communication and services within the AltLayer ecosystem, broadening opportunities for developers and projects.

Bearish Fundamental Factors

Only 11% of AltLayer’s total token supply is currently in circulation, which could lead to inflationary pressures if the market cap doesn’t grow in tandem with the token supply, especially if demand growth lags.
Its high Fully Diluted Valuation ($4.8 B) might be seen as a sign of overvaluation, raising concerns about its current market valuation.
AltLayer is competing with other rollup projects, adding to the challenge of standing out in a crowded space.
For AltLayer’s solutions to have a significant impact, they need to be widely adopted by both developers and users. Persuading the blockchain community to switch from familiar platforms to AltLayer could be difficult.
The complexity of AltLayer’s technology means that maintaining smooth operation and security as the project grows could be challenging.

Closing Remarks

AltLayer distinguishes itself as a highly adaptable RaaS solution. With robust investment and strong integration capabilities, it emerges as the market’s top RaaS choice. However, it’s crucial to carefully consider potential supply issues and demand sustainability as the cryptocurrency market evolves.

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