Introduction

One type of company that we have been closely following is Rollup-as-a-Service providers ("RaaS"). Simply put, RaaS providers help application developers quickly launch Rollup by selling "off-the-shelf" products such as sorting, indexing, and analysis.

In this article, we will provide a quick overview of the products offered by RaaS providers, how they differentiate from each other, how they generate profits, and share some of our internal insights on the RaaS industry.

RaaS Service/Product Offering

Although RaaS services/products are still in their early stages, we have noticed that most RaaS providers sell similar packages of services and products. Through conversations with RaaS founders, I have learned that this package of services includes the following:

Service

Similar to the scripts used by traditional B2B companies, RaaS providers typically start with sales services (note: surprisingly, the traditional "service-to-product" strategy is very effective in the cryptocurrency field).

As part of the service offering, RaaS providers often act as technical advisors, helping you evaluate Rollup stacks (such as OP Stack, Arbitrum Orbit) and decide which stack is best suited for your application.

This service is very valuable, so it is worth a detailed introduction. The main customers of RaaS providers are startups who want to launch applications on their dedicated Rollup. For them, the most important thing is to build applications and increase the number of users. Spending months developing familiarity with the Rollup framework is not something they want to spend time on, nor should they. Because the entire business of RaaS providers is based on an understanding of the Rollup framework and the development of developer tools around it, they are fully capable of helping startups evaluate available framework options.

For example, they can help start-ups answer the following questions: What are the trade-offs between different frameworks and DA layers? Are there customized content that can improve Rollup applications? What are the trade-offs of increasing customization (such as increased integration complexity)? By providing guidance based on experience with actual customers, they can save application teams months of development time.

Infrastructure Products

Sorter: Running a sorter is a high-risk job - if the sorter fails, your Rollup will be unusable, which will make users very unhappy. RaaS providers offer highly reliable hosted sorting services through redundancy measures. If your sorter fails, they can ensure a fast failover process so that your Rollup can continue to run, minimizing downtime. In addition, you will also need to pay for the DA cost of the first layer, and the offset sorter cost will accumulate on your Rollup. For smart contract Rollups on Ethereum, the 7-day withdrawal period means that you always need at least one week's worth of ETH to pay for the DA cost. RaaS providers can help you manage these complexities, and some may even provide the liquidity you need for DA costs on the first layer.

RPC: Unreliable RPC endpoints can also lead to poor user experience, as we saw in the airdrops of Optimism and Arbitrum. If users conduct transactions, large queries, or contract calls through your RPC node, RaaS providers can ensure that new nodes are automatically launched to meet demand.

Developer Tools

Internal Tool: As RaaS customers are both operators of Rollup and operators of applications, they have access to security infrastructure to help them protect multi-signature keys used for software upgrades. Some providers also offer control panels for viewing analytics, activity monitoring, and alerts to notify you in case of issues.

Other tools: It is difficult to cover all content in this category, but at least, Rollup operators need data indexing tools to query on-chain information, standardized interfaces to perform operations such as token minting and burning or other transactions, and access to offline oracles.

User interface tools: At a minimum, Rollup users will need a way to bridge with your Rollup, multiple wallet options (including account abstraction infrastructure), and a blockchain explorer that matches with layer 1 applications.

RaaS GTM Strategy

Currently, there are at least six RaaS providers in the market, and they are all competing for startups (to a large extent). We have observed that RaaS providers typically use three GTM methods to differentiate their products.

Vertical integration (such as Eclipse)

Rollup framework and RaaS sales-related products are closely integrated, making vertical integration a natural choice. In addition to economic incentives, there are strategic reasons for RaaS operators and frameworks to pursue vertically integrated products.

From a framework perspective, RaaS products can bring them closer to customers. Through this closeness, they can create a tighter feedback loop to guide product decisions. They may even intentionally extend RaaS support to third-party frameworks and introduce the best components to deliver products.

Like any emerging and highly competitive technology category, one of the major challenges facing the Rollup framework is finding a profitable strategy that won't hinder adoption. RaaS products are the most direct way to achieve these two goals. RaaS solutions can promote the adoption of the framework by addressing important pain points. At the same time, the selectivity of RaaS allows you to profit without adding any burden to customers who choose to operate their own Rollup.

This method's main challenge is resource limitation. Building RaaS business in parallel with constructing the Rollup framework may exceed your capabilities.

Collaboration with frameworks (such as Conduit)

RaaS providers that collaborate with specific frameworks, such as OP or Arbitrum, bind themselves to those frameworks. By aligning with existing frameworks, RaaS providers can gain significant distribution advantages.

For example, by partnering with Optimism, Conduit is able to leverage Optimism's brand as the default option for startups choosing Optimism as their framework. Other providers, such as Slush, are aligning with emerging Rollup frameworks like Starknet to gain distribution advantages in another ecosystem.

除了提高分销能力，这种方法还允许您将所有资源投入到构建一个真正优秀的产品上。考虑最近的一个案例研究，Aevo 将其 RaaS 解决方案切换到 Conduit。他们之所以这样做，是因为 Conduit 正在运行最新版本的 Optimism，这极大地改进了他们的产品。通过专注于单一框架，Conduit 可以确保客户始终在最新版本的代码库上运行。

The disadvantage is that a single framework is unlikely to support all use cases, so you may be limiting your market to some extent (at least until you expand to support other frameworks).

Not dependent on frameworks (such as Caldera)

Framework-agnostic RaaS providers support RaaS products and services for various Rollup frameworks (such as OP, Arbitrum).

If a framework-agnostic provider can become a startup's first point of contact, you can see that the underlying framework may just facilitate technical choices for various use cases, rather than being a signal for brand alignment.

Framework-independent methods allow RaaS providers to offer more choices to customers during onboarding. By running multiple frameworks in production, they can see which components are most valuable and incorporate these lessons learned into the guidance provided to new customers.

Similar to vertical integration methods, the main challenge of this method is related to resource limitations. Each framework requires significant investment to support, and attempting to support too many frameworks may result in immature products.

RaaS Business Model

Currently, it seems that RaaS providers have two sources of revenue: (i) sorting fees and (ii) infrastructure and tools. Based on our observations, service components are usually provided for free.

Sorting Fees

RaaS providers run sorters to sort transactions for applications. In return, they charge a certain fee.

We see two ways in which RaaS providers charge sorting fees: one is to charge a share of revenue, a certain percentage of the revenue that the end users of the application and transaction fees pay is shared; the other is to charge a simple monthly SaaS fee for hosting the sorter.

The cost dynamics is an interesting issue, let's talk about it briefly. For RaaS providers, running a sorter has fixed costs and variable costs that vary with the number of transactions. As mentioned above, some providers also bear the risk of providing DA costs on behalf of their clients on Ethereum. Ideally, as an RaaS provider, you can charge monthly SaaS fees to pay for fixed operating costs, and also charge revenue shares to pay for variable costs and generate revenue from rapidly growing applications. The latter is very important - if you cannot generate revenue from your clients' growth, the economic benefits of operating a sorter product will not be good. If you have capital, it can be easier to justify the rationality of this revenue-sharing component in order to provide these DA costs on behalf of your clients.

However, whether RaaS providers can charge a share of revenue in a stable state will depend on the pricing influence of applications on RaaS providers. At present, it is too early to determine who has pricing influence. (If we must say, it is similar to the operation mode of the payment industry. Our feeling is that large applications will have pricing influence on RaaS providers, while small applications will not.)

Infrastructure, Tools, and Others

RaaS providers can charge SaaS fees for various critical infrastructure services. By owning customer relationships, they have an advantage over existing providers and can capture the highest value services while offering bundled sales discounts (for example, using our RPC service instead of Alchemy's service, we will provide discounts for other services). In addition, RaaS providers may have cost advantages over existing providers because their architecture allows them to easily scale to support new chains.

Due to resource limitations, RaaS providers often need to collaborate with external companies to meet all of their clients' needs. For example, Conduit recently launched its integration plan, and Caldera has also announced many similar partnerships. As a distribution channel for these partners, RaaS is well positioned to establish a marketplace or reseller business model, similar to AWS and its third-party "plugins".

Other Ideas

There are a few things that I want to discuss but are not suitable for the previous chapters, so I have decided to put them all in this packet capture section.

RaaS and Framework

Although RaaS providers and frameworks are currently in a relatively friendly relationship, I believe that they will inevitably compete, especially in order to dominate the ranking market. If competition intensifies, I believe that RaaS providers are most likely to benefit from it. Here are some reasons:

As we have already begun to see, most of these startups are turning directly to RaaS providers to outsource the complexity of deploying Rollups. If this continues, RaaS providers will have top sales channels and therefore customer relationships. If things do develop this way, RaaS providers may view the underlying framework solely as a technology choice that facilitates various use cases.

However, frameworks may also counterattack RaaS providers. In this regard, here are some issues we are discussing:

Can the framework charge the application for using its framework? (Although the network effect adopted by the framework is very powerful, I think it is difficult to achieve profitability solely based on the framework itself. However, this is still an interesting question worth considering).

RaaS providers need to invest a lot of resources (mainly development time) for each framework they support. At this point, it is unlikely that an RaaS provider can support every framework in the market and design customized products for them. So, can frameworks compete with RaaS providers by providing key services that solve their unique pain points? For example, the ZK Rollup framework can provide better pricing for proofs by aggregating demands from Rollup and routing them to a group of proof systems and operators.

MEV across Rollups

The current consensus is that Rollup will have significant MEV, and cross-Rollup MEV will become a honey pot. Based on this assumption, most people believe that the shared sequencer is most likely to capture this value. I believe that this assumption is still a very open question, and I even question the outcome of this assumption.

If cross-chain MEV does become an important part of the market, RaaS providers will have to decide whether to integrate with shared sorters from partners or launch their own shared sorter products. Let's assume that in the future, RaaS providers will run sorters for most new Rollups, and this service will account for the majority of their revenue (and also provide a view of the memory pool for each Rollup using their service). In that case, I believe RaaS providers are more likely to launch their own shared sorter products rather than partnering with external suppliers.

In addition, RaaS providers can leverage their observation of all these memory pools to offer order flow auctions and utilize their control over sorters to provide block top auctions for settlement. This will enable searchers to view valuable transactions, fill them, and settle them simultaneously on supported chains.

Conclusion

There are many other interesting questions about RaaS providers, but for the sake of brevity, we will stop here. One thing is clear to us, and that is that RaaS providers are a very exciting business in the cryptocurrency industry. This is an area that we closely follow.